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I’ve already written here about how important it is to keep up with your credit score. But if you’ve got good credit, aren’t in a heap of debt, and are able to pay your bills on time, you can start using credit cards to your advantage.

 

Bonus Points, FlexPoints, Rewards— Oh My!

There are so many credit cards out there that offer you incentives to use them—essentially, get PAID to buy things! Most incentives come in the form of “points,” and the cash value of those points will be determined by the terms of the credit card. Most often, you’ll receive about 1 point for every dollar you spend, and that point will translate into 1-5¢ cash-back.

After you’ve earned enough points, you must then redeem them for credit on your next statement, or bill. That means that if you’ve racked up the number of points equivalent to $25, the credit card company will take $25 off of your next bill. Get a $25 purchase for free, or get $25 discounted from a larger purchase! In some cases, your rewards will translate directly as cash-value, and you can get the discount at the time of purchase (as opposed to the time of billing).

Sign-On Bonuses

Aside from making purchases, credit card companies will give you money just for signing up. When signing up with a credit card company, you could receive points worth up to $500 dollars. The American Express Gold card offers 25,000 points, equivalent to $250 to sign up. The Chase Sapphire Preferred Card offers 40,000 points as a sign-on bonus, which translates to $400. And so on.

However, if you’re counting on sign-on bonuses, make sure you’ve got enough capital in the bank to make large purchases right off the bat. Most credit card companies require that you spend around $1000-$3000 within the first few months of signing up, to prove that you are using it and will be a valuable customer to them.

Department Store Cards

If you’re looking for the best bang for your buck, take advantage of credit cards offered by department stores such as JCPenny, Lord&Taylor, and even Best Buy and T.J.Maxx. The T.J.Maxx rewards card for example, will give you $10 in rewards for every $200 you spend, which is a 5% cash-back deal. Add this to the coupons and offers you get directly to your inbox, and it could translate to significant savings. Furthermore, you can use those rewards up-front at the time of purchase, so there’s no waiting around for your bill. Stores will do this to create loyalty in their customers, on the hopes that you will keep returning to that store.

Travel Rewards

Finally, there’s the special category of travel rewards. Travel rewards are redeemable on any purchases related to travel – including airline tickets, train tickets, hotels, and sometimes entertainment. There are two ways to take advantage of travel rewards.

  1. Sign up for a card offered by a company in the travel industry [ie. an airline or hotel brand company]. Earn points or miles for purchases with that company when you travel. This works like the store loyalty incentive mentioned above.
  2. Sign up with a regular credit card company, and get EXTRA cash value on travel purchases. For example, the Chase Sapphire Preferred Card mentioned above will give you 40,000 points as a sign-on bonus. These points are worth $400 in cash, but they’re worth $500 dollars if you spend money on travel expenses.

Before You Sign Up

When you take advantage of credit card rewards, make sure you always understand the terms of the card, and whether or not there is an annual fee. Some cards waive the annual fee for the first year of use, but after that you are responsible for that fee. An annual fee of $50 or more may undercut any profit you make. Paying too much in interest will do the same. However, if you understand how much money your points will be worth, and you pay your bills on time, signing up for credit cards could earn you up to an extra $1000.