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A simple way to pocket extra cash at the end of the year is to stop paying with cash. Instead, save money by paying with a credit card with cash back. Most cashback credit cards offer 1% of your purchases back as cash once a year. Instead of cash, other credit card programs offer airline miles or other rewards like gift cards. But be aware, not all cash back credit cards are free! So these are my rules for using cash back credit cards:
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Always Payoff the Full Cycle Balance
Regardless of what type of credit card, I never spend more than I can afford. Once you carry a credit card balance, you will cancel any of your gains. If you don't have the means to payoff the full balance, I recommend sticking to cash. In fact, my credit card is set to be automatically paid by my checking account at the end of the billing cycle, so I never pay interest.
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Cash Reward Over Points or Miles
I will without hesitation opt for a cash reward credit card over points or mile rewards. For one, point values may change over time, diluting the value. Airline redemption rules may also change with time. But cash will always be cash, and also carries the most flexibility.
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No Annual Fee Credit Card
Some credit card programs offer a higher reward percentage, but often at the cost of a yearly fee. If I do the math, I could fairly easy to estimate if a higher reward would offset the yearly fee. But the thought of deterining when I break even is not worth the extra cash.
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Don't Pay Convenience Fees
Some bills offer the ability to pay via credit card for a convenience fee (often 2% or more). This is not worth it and should NEVER be done.
As long as the merchant accepts credit, I will use my cash back credit card. In other situations like restaurant bills where the total bill is split, I will offer to put it on my card and pocket my friend's cash (I use them as my ATM machine). I then use their cash at merchants who do not accept credit cards.
Generally, I get about $200 dollars back per year. Though such a small amount won't make me rich overnight, it does provide me with extra spending cash during the holidays. The more you buy, the larger your cash refund. Before you sign up, make sure you understand the rules of the credit card program.