Some people live paycheck to paycheck and have such a tight monthly budget that there’s nothing leftover to save. Even when you can’t afford to contribute to your savings account, you can utilize cash back credit and debit cards to save anyways.
The idea behind this strategy is to make some extra money each month using what you already have and what you already spend. The most cash strapped budget still pays bills, buys food and other basic expenses. If you spend that money each month using a cash back card, you’ll actually boost your income without really changing anything.
Loosen Tight Budgets
There is nothing worse than being so broke that you spend your entire paycheck as soon as you get it and have absolutely nothing left over. As this continues month after month, it can really take a toll on your mental health. You basically feel like you’re treading water in the middle of the ocean. You’re getting nowhere and if you stop for even a second, you’ll quickly go under water.
I lived that life for years struggling to keep the bills paid while married with kids. I know how it feels and how hopeless it can feel to escape those financial problems. I’ve busted my ass at a job for years trying to get a promotion for better pay. When promotion time came, the new guy got it because he had a better resume. I got a measly 50 cent per hour raise, almost as a consolation prize.
In situations like these where nothing you do seems to make a difference, any extra money each month can be a gift from heaven. When you can reliably generate some extra cash every month, it can greatly relieve stress.
Cash Back Percentages
Most cash back cards will give you 1% back on anything you buy. Some cards will offer a higher percentage though. I have a card that offers up to 4% cash back on all purchases. Other cards will give 2% or 3% but only on specific types of purchases.
Ultimately, you may need to shop around the find the best cash back deal if you are looking to maximize your savings. Besides focusing on the cash back percentage, also consider whether a card will be convenient to use for all of your monthly purchases. Sometimes convenience may be worth sacrificing an extra 1% on each transaction.
In general, it doesn’t really matter what kind of card you use. I highly recommend cards that don’t require specific types of purchases to get better cash back rates. The less you have to think about each month using this strategy the easier it will be to utilize.
Controlling Spending Habits
This entire strategy working correctly depends on one thing – you need to spend your monthly expenses on a cash back card. Some people may not be able to pay certain bills, such as rent, with a cash back card. Other bills can be paid with a card, but you’ll get billed an additional fee to process the payment. If you do pay an additional fee to use a card, make sure that fee is less than your cash back reward.
Each month, simply put all of your purchases on the cash back card to get as much savings as possible. If you’re using a cash back debit card, you may not need to worry about transferring money or paying a bill each month. However, if you use a credit card then you will need to pay your bill in full each month before the balance posting date to avoid interest charges.
Don’t allow yourself to purchase anything that you would not normally buy. You must control your spending habits with this tactic. A single transaction that is out of the ordinary could easily wipe out any benefit you receive from the savings. When all of your spending goes on a card it can sometimes be easy to lose track of your budget. Make sure to exercise extra caution with your spending to ensure it makes you money each month instead of costing you money.
PayPal Debit Card
I’m a big fan of the PayPal debit card. It only gives 1% cash back, but all purchases qualify. While the cash back percentage isn’t great, I like this option for convenience. I do a fairly significant amount of my monthly income through PayPal so using this option is the most convenient for me. I don’t have to worry about moving money around each month to continue to get cash back savings on regular expenses.
If you run an e-commerce website, an option like this may be perfect for you too. Sales from the site go directly to PayPal, so you can then instantly spend your earnings with their debit card. Ongoing expenses like shipping materials, shipping costs and even inventory purchases can be purchased with it to get extra cash back.
The idea being this tactic is ease of use while saving extra money too. If you’re not selling anything online, you could still use this option, but you would need to manually fund the account each month through your bank account or a credit card. Cash back rewards are automatically deposited into your PayPal account each month.
CoinBase Debit Card
Anybody that is investing in cryptocurrency may have an account with CoinBase. They offer a debit card option that will give you cash back on all purchases. Funding a CoinBase account from a bank account is pretty easy too, so this option could work for anyone.
The major advantage with this option is their rates. Most of the time you can get 4% cash back on all purchases with this card. Rewards are paid in cryptocurrency to your CoinBase account, which can then be sold and moved to your bank account.
CoinBase gives you a choice of a few different cryptocurrencies for your rewards. This is the crypto you’ll be paid with, but the choice also affects your cash back percentage. Recently, you could get cash back with Bitcoin or Ethereum but only at 1%. However, other coins like XRP were paying 4%. Even if you want Bitcoin, you can get cash back in another coin and simply sell or trade for Bitcoin. At 4% cash back, if you spent $5,000 per month in bills on the card, you would get $200 in free money each month.
If you want to start long-term savings but don’t have the extra cash, this can be a perfect option to use. By using the CoinBase card for your normal monthly purchases, you’ll accumulate cryptocurrency as a cash back reward without spending any extra money. You can then hold those coins as an investment long-term. With this strategy, you’ll build a crypto investment portfolio without ever actually spending a single penny on it!
Cash Back Credit Cards
There are also normal credit cards that offer a variety of cash back deals. Some of these can be really appealing offers while others may restrict the better rewards for specific types of purchases. In general, I don’t recommend using credit cards to get cash back rewards. It’s simply too easy to make a mistake and destroy any benefits you’ve received.
If you go over your card limit, miss a payment due date or even allow your balance to receive an interest charge, you’ll likely destroy any progress you’ve made from the cash back rewards. When this happens, it makes the entire strategy pointless and can actually cost you money long-term. Since you want to be saving extra money with this tactic, you really have to be careful if you decide to use a credit card. Make sure balances are paid in full before the balance posting date so you aren’t charged interest.
Again, I strongly recommend the use of debit cards for cash back deals. That ensures you don’t spend more money than you have. You don’t have to worry about interest charges or payment due dates. If you do decide to use a credit card, do it for a very good reason, like a great cash back deal. However, make sure you keep up with the account to avoid extra fees.