Personal finance

Having multiple credit cards and playing the rewards game can save you hundreds of dollars each year — if you’re smart about how you use the cards.

“The big fork in the road is whether or not you carry a balance,” said Ted Rossman, senior analyst at Bankrate.com and Creditcards.com. “I think you should use your credit card for everything because rewards are great. They can really add up over time. You get better buyer protections, better fraud protections.

“The one big downfall of credit cards is the high interest rates,” he added. “But if you’re paying in full and avoiding those, then yeah, credit cards are great.”

Chasing rewards can land you some substantial sign-up bonuses like the Capital One Venture Rewards credit card’s 75,000 miles or Chase Ink Business Unlimited’s $900 cash back.

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Those who use credit cards responsibly and don’t maintain balances typically save $300 to $400 each year. Rossman earned $1,701 in credit card rewards in 2022. But getting the most out of your credit cards depends on your spending habits — and finding the perks that would save you the most money.

“If your family spends a lot on groceries, get a card that gives 5 or 6% cash back on groceries,” said Rossman. “That’s a really nice inflation buster right there.

“Maybe consider a second card that’s just a solid flat rate, something like 2% cash back on everything,” he added.

The rewards that get the most attention are often travel related, he said: perks like free or discounted flights, hotels, rental cars, airport lounge access, priority passes, and TSA PreCheck, Global Entry or Clear. Redeeming rewards for merchandise, by contrast, will likely not get you the most bang for your buck.

Don’t chase rewards if you carry a credit card balance

More than 80% of Americans have at least one credit card.

Anh Tran, a certified financial planner and managing partner at SageMint Wealth in Irvine, California, recommends having two credit cards, or three if you’re a business owner: one for primary expenses, a second as a backup and a third to keep business expenses separate.

But if you’re not someone who can pay off your balance before it’s due, she doesn’t recommend you have a credit card at all.

“Paying 20% interest on a balance that you’ve accumulated and then you pay interest on top of that, I mean, that’s a really big hole that you’re continuing to dig and it’s going to be really hard to get out of if you don’t pay your credit card balance,” Tran said.

Americans own four cards on average but not being able to pay off the balance in full every month can be damaging to your credit score and wallet.

Americans’ collective credit card balances reached $986 billion in the last quarter of 2022, according to the Federal Reserve Bank of New York. Those contributing to that debt should not be using credit cards because the interest rates they’re paying outweigh any card rewards.

How much money you save using credit cards depends on your lifestyle and how you play the game. That is, of course, assuming you’re using them responsibly.

Watch the video above to learn more.

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