If you canât give up your daily latte, your twice-a-month false eyelashes or weekly fresh flowers, a financial coach wonât judge you.
But that coach or counselor will stress that you wonât reach your financial goals if you donât give up most of your splurging.
âI had one client who was spending $200 a month to have people glue eyelashes on her lashes every two weeks,â said Christine Lane, an accredited financial counselor. âUntil I met her, I didnât even know that was a thing.â
âEveryone has different things that are important to them,â said Bridget Todd, head of trainer development at The Financial Gym, a credit coaching business. âA big one for people is often personal or mental wellness. Some people pay for an Equinox membership and they donât want to go to a cheaper alternative. For others, an acupuncturist or a chiropractor is important to them to feel their best. We find the non-negotiables and ask them what expenses can come out.â
See related: How to match your spending with your values in 2021
What a financial coach does
A financial coach or counselor helps clients take a comprehensive look at all of their finances, bridging the gap between a debt counselor, who focuses on reducing your debt, and a financial advisor or planner, who focuses on helping you build wealth, Todd said.
âWe focus on your entire financial life,â she said. âWe take a deep dive into the day-to-day, how youâre spending your money. We give you different scenarios: if you do this, this will happen. We allow you to improve your finances and also help you feel comfortable and live your life.â
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No matter how bad your debt or how frivolous your spending, financial coaching is a collaborative, judgment-free zone. A coach or counselor helps clients develop healthy spending habits, reduce debt, and build short-term and long-term savings. The goal is long-term financial wellness, said Rebecca Wiggins, executive director at the Association for Financial Counseling and Planning Education.
âA financial coach views the client as the expert in their own life, collaborating with them to define their goals, create solutions and an action plan that helps them achieve their goals,â Wiggins said.
Like many coaches, Lane uses a âspending, debt and savingsâ spreadsheet to open her clientsâ eyes to their true financial picture. She shows clients how much they can spend every week or month on wants without going further into debt. Entering higher or lower spending or savings numbers in the spreadsheet immediately changes the long-term picture.
âThe key is telling them what the number is,â Lane said. âI tell them, âHere are your fixed expenses and hereâs what you have left. Focus on spending no more than $200 this week.â
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Techniques to curb spending
Like many coaches and counselors, Lane asks her clients to give up all credit card spending for a set period â in her case, three months.
âI once had a woman who was $10,000 in credit card debt and was paying a ton of interest say she didnât want to give up earning her points and that sheâd already gotten two free hotel rooms,â Lane said. âI told her, âYouâre going to pay in interest so much more than those free hotel rooms.ââ
Another technique Lane uses is asking clients to set just one so-called buy day a month: all other days are window shopping, or more likely now, screen shopping.
âYou can shop any day you want, go in person, take pictures, put things on Pinterest,â Lane said. âBut thereâs only one day a month where youâre actually allowed to make the purchase. If you have anything on the list that you havenât thought of, then you donât really want it.â
See related: How to stop overspending during the pandemic
Bottom line results
Lane has worked with clients with credit card debt up to $60,000 and total debt, counting student loans, up to $200,000. Most are in their 30s to early 40s and have $20,000-$30,000 in debt.
Many can get out of debt in about two years, she said. But these reforming spenders start feeling better about their financial life and life in general much earlier, Lane said.
âGenerally after six weeks, they say a weight was lifted from their shoulders,â she said. âThey say, âIâm running more. I have a better relationship with my girlfriend.ââ
On average, their first year, clients at The Financial Gym see their credit scores go up more than 100 points, save $5,000 to $10,000, and pay off $5,000 to $10,000 in debt, Todd said.
How much does financial coaching cost?Â
At The Financial Gym, coaching rates are about $99 a month for individuals, $150 a month for couples and $250 a month for business owners, Todd said.
Fees for accredited coaches and counselors range from $50 to $150 an hour, Wiggins said. Some coaches offer packages or work on a sliding scale based on income, she added.
See related: What is credit counseling, and how can it help you?
How to become a financial coach
To become a counselor accredited through AFCPE, students take one to three years to meet the education requirements and complete the exam, Wiggins said. The most common pathway is self-study with books and materials. This pathway’s cost is $1,455, including a $50 registration fee, $675 for books and materials, and a $730 exam.
To become a certified financial coach through Sage Financial Solutions, applicants complete three modules, which can be done in as little as six months, at the cost of $1,200 and about 30 hours for the first module, $550 and 15 hours and for the second module and $750 and 22 hours plus 100 experience hours for the third module.
The Financial Gym prepares its own coaches, which it calls trainers, with a two-week training session, then an interview with several team members, shadowing current trainers, creating mock financial plans and passing an exam with a score of 80 or higher, Todd said.
Back to lattes and lashes
Laneâs client still spends $200 every month on false eyelashes, which for her are nonnegotiable. But the client gave up her weekly fresh flowers, cut back on her dog walker and improved her financial picture from overspending her income by $200 a month to saving $1,000 a month, Lane said.
âDifferent people have different blind spots,â Lane said. âThatâs an advantage of counseling; you get a really personalized look at your needs. We try to work toward their goals, not ours. Accountability without judgment is our superpower.â
âAt the end of the day, itâs just math,â Todd said. âYou have to be honest with me about what youâre willing to give up to get there.â
Case study: From $15,000 in credit card debt to zero
When Moira Sedgwick started working with a Financial Gym coach, her debt topped $250,000, with about $110,000 in student loans, $15,000 in credit card debt and a mortgage.
âThe bad surprise was how much debt was staring at me,â said Sedgwick, 39, who works as the director of The James Beard (Culinary) Awards and also consults in hospitality and event management. âI had always been messy at all of this. This was a way to stop being messy and own my finances.â
Sedgwick already was paying extra on her student loans and was thinking about saving more for retirement, but her coach told her paying down debt, especially the high interest credit card debt, was the top priority.
The next bad surprise was putting a cap on her spending. âI had only $100 a week for my fun money,â she said. âI had been spending everything that was coming in. Iâm in the restaurant world, so a lot of it was dining out. I would justify it by saying, âThis is my industry. This is my job.â
âBut no one on my job was reimbursing me. Cutting that out was a huge difference. I was getting real about how much eating out was really costing me and getting real about how much that was keeping me from my goals.â
She still does takeout on Fridays and Saturdays â that was her nonnegotiable.
Sedgwick, who didnât have a lot of financial guidance growing up, said she feels like she has a partner to guide her decisions. âI finally have a support system,â she said.
A few years in, Sedgwick has cut her credit card debt to zero and cut her student loan debt by nearly half, and paid her mortgage down to $68,000. Her credit score has improved from a respectable 740 to a nearly perfect 800. She saved up $30,000 in her emergency fund but recently used about half to buy a rental property, a longtime goal. She talked to her financial trainer first.
âI talk to my trainer before I do anything,â she said. âThatâs the only way I feel safe.â
As the extended unemployment benefits expire, many consumers are concerned. These tips will help you find ways to be sure that your debt does not rack up.
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In response to the coronavirus pandemic, major credit card issuers are offering relief to their customers.
Even though many places around the country are open, the pandemic continues to impact the U.S. economy. Workers are still at risk of being laid off or facing reduced hours or pay.
“This is a rapidly evolving situation and we want our customers to know we are here to provide assistance should they need it,” Anand Selva, chief executive officer of Citi’s consumer bank, said in a statement in Spring 2020.
At the same time, scammers are now trying to take advantage of coronavirus concerns by sending out fake emails about the virus that are designed to steal consumers’ personal and financial information or to infect their computers with malware.
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Many credit card issuers are allowing customers to opt into financial relief programs online. These programs are a convenient way to access short-term relief. But it could come with a long-term cost as many cardholders will continue to see interest accrue. With the average credit card interest rate sitting at 16.05%, cardholders might find more cost-effective relief through other options.
Here’s what issuers are currently offering:
American Express
Cardholders who are having difficulties can get assistance through American Express’s financial hardship program. Eligible cardholders have the option to enroll in a short-term payment plan, which provides relief for 12 months, or a long-term plan, which can provide relief for either 36 or 60 months.
Under both options, you will receive lower interest rates, plus waived late payment fees and annual fees. But you might not have access to certain card benefits and features.
If you enroll in the short-term plan, you might be able to continue putting new purchases on the card but with a reduced spending limit. If you are participating in the long-term plan, you will not be able to use the card.
Amex will report participating cardholders to the credit bureaus as current, assuming they comply with the program’s rules. But the program’s terms do offer some important caveats: Amex will inform the credit bureaus that you are enrolled in a payment assistance program (if you’re in the long-term plan). And under both plans, Amex will report that you have a lower credit limit.
While these factors do not have as much of an impact on your credit score as a delinquent account does, it could still signal to other lenders that you might be having some financial hardship.
Bank of America
Bank of America cardholders who have trouble paying credit card bills can request a credit card payment deferral by calling the number on the back of their card.
To qualify for payment assistance, cardholders must be carrying a balance, according to the website.
Bank of America sent an email to Preferred Rewards members in May 2020 stating that the company had temporarily suspended the annual program review process. Members whose assets dropped below the regular threshold to keep their status would continue to qualify for program benefits. It is unclear if Bank of America is still suspending this program.
Barclays
Barclays urges credit card account holders to request payment relief online. As of May 4, 2020, the bank is granting payment relief for two statements, but interest will continue to accrue.
Capital One
“We understand that this is a time of uncertainty for many people, and we know that there may be instances where customers find themselves facing financial difficulties. Capital One is here to help and we encourage customers who may be impacted to reach out to discuss how we might be of assistance,” the bank said in a statement.
In a March 26, 2020 update, Chairman and CEO Rich Fairbank confirmed that they are offering waived fees and deferred payments on credit cards for some cardholders.
Because each customer’s situation is different, the bank encourages customers to contact it directly. To contact Capital One customer service about an existing account, call (800) 227-4825.
See related: How to clean your credit card
Chase
Previously, Chase Bank stated that customers will be able to “delay up to three payments on your personal or business credit card” if needed, with interest continuing to accrue. The website currently does not specify how many payments cardholders can defer.
It also stated that active duty military members who are responding to a disaster might have access to additional benefits. Servicemembers can call the bank for more information.
In a letter to shareholders, the company’s CEO, Jamie Dimon, also promised to not report late payments to the credit bureaus for “up-to-date clients.”
See related: Chase offering limited-time bonus on food delivery for some cardholders
Citi
Citi customers who have been impacted by the coronavirus pandemic might be eligible for assistance. Previously, the bank was waiving payments and late fees for two consecutive billing cycles. However, Citi has ended its pandemic assistance program.
“Due to a significant and steady decline in enrollments, our formal COVID-19 assistance program has concluded and we will focus on providing assistance options to those customers financially affected by COVID-19 on a case-by-case basis. We continue to closely monitor the situation and will evaluate additional actions to support our customers and communities as needs arise,” a spokesperson for Citi said in an email.
During the bank’s pandemic assistance program, interest continued to accrue, but accounts that were current at the time of enrollment were not be reported as delinquent.
Discover
Discover will be extending relief to qualified customers who are experiencing financial difficulty caused by the spread of COVID-19.
“We encourage them to contact us by calling and are directing them to www.discover.com/coronavirus for phone numbers for each product line and other FAQs,” Discover said in a statement earlier this year. “We also can provide relief through our mobile text app, which connects a customer directly with an agent.”
Discover it Miles cardmembers can also put their miles towards their bill – including their minimum payment.
See related: What to do if you can’t pay your business credit card bill
Goldman Sachs
Apple Card customers can enroll in an assistance program. Previously, cardholders could waive payments without accruing any interest. The website currently doesn’t specify if this is still the case.
Key Bank
Cardholders can defer payments for three billing cycles. Though interest will continue to accrue, enrolled cardholders will not receive late fees, and their accounts will be reported as current, as long as accounts were not delinquent at the time of enrollment.
Synchrony
Synchrony is extending relief to customers experiencing financial hardship. The company’s website previously stated that this could include payment relief for up to three statement cycles, while interest would continue to accrue. The website currently offers no specifics about what the issuer is prepared to offer.
Truist (formerly SunTrust and BB&T)
Previously, Truist offered payment relief assistance to customers with personal and business credit cards, among other products. As of April 14, it was willing to delay payments for up to 90 days. The website currently offers no specifics about what the issuer is prepared to offer.
Wells Fargo
Previously, impacted cardholders could defer monthly payments for two consecutive billing cycles. The company’s website currently does not specify what assistance cardholders can expect to receive.
See related: Coronavirus stimulus legislation doesn’t suspend negative credit reporting
ultimate guide to coronavirus limited-time promotions for more offers designed to help cardholders maximize rewards amid the coronavirus pandemic.
Business credit cards
If you are a small-business owner and cash is not flowing and bills are piling up, the most important thing to do is contact your card issuer.
Some banks are also providing assistance in case you can’t pay your business credit card bill.
Another coronavirus complication: Scams
As consumers wrestle with the impact of the coronavirus, scammers are trying to take advantage of the situation.
In a June 2020 public service announcement, the FBI warned that the increasing use of banking apps could open doors to exploitation.
“With city, state and local governments urging or mandating social distancing, Americans have become more willing to use mobile banking as an alternative to physically visiting branch locations. The FBI expects cyber actors to attempt to exploit new mobile banking customers using a variety of techniques, including app-based banking trojans and fake banking apps,” the PSA warns.
Scammers might also be capitalizing on health and economic uncertainties during this time. In one such scam, cybercriminals are sending emails claiming to contain updates about the coronavirus. But if a consumer clicks on the links, they are redirected to a website that steals their personal information, according to the Identity Theft Resource Center (ITRC).
Identity theft in 2020: What you need to know about common techniques
Bottom line
The outbreak of a disease can upset daily life in many ways, and the ripple effects go beyond our physical health. Thankfully, many card issuers are offering relief. If you’re feeling financially vulnerable, contact your credit card issuer and find out what assistance is available. And while data security may seem like a secondary consideration, it’s still important to be vigilant when conducting business or seeking information about the coronavirus online.
What could be easier than getting a little money back on the things you buy every day? That’s how cash back credit cards work and what makes them appealing to some consumers.
Cash back cards come in a variety of flavors â bonus category, tiered rewards and flat percentage cash back cards â but they all pay you back. Flat percentage cash back cards are ideal for the âset it and forget it” crowd, but bonus category and tiered rewards cards can offer more rewards â if you’re willing to put in a little legwork to maximize your cash back in select spending categories.
Here we take a look at the different types of cash back cards and how they work, the key benefits of cash back cards, how to redeem cash back and how to choose the best cash back card for you.
See related:Â How to choose a credit card
How cash back cards work
So how do all of these cash back cards work? It’s simple: Cash back is essentially a rebate of a percentage of the purchases you make on the card. With flat-rate cash back credit cards, every purchase earns the same percentage cash back, while with category bonus cards and tiered bonus cards, different types of spending earn more cash back.
Card issuers can afford to pay cash back because merchants pay an interchange fee on each transaction. âWhen you pay a merchant $100 with a credit card, the merchant only receives about $97,â says Daniel Mahoney, a certified financial planner in Atlanta.
For example, a TV that costs $700 would net you $14 with a 2% cash back card. The merchant, meanwhile, paid a transaction fee of around $21 when you paid with your credit card.
âRewards or rebates may also be funded by deals between the credit card issuer and specific merchants,â Mahoney adds. An example of this is cash back earned through card-linked offers.
How do card issuers know what types of spending qualifies for which percentage of cash back? Merchant category codes are four-digit numbers denoting a business type, such as a gas station or grocery store. Merchant category codes are used by credit card networks to categorize and track purchases.
How to redeem cash back
There are a number of ways to redeem your cash back rewards, including as a statement credit, check or deposit to a bank account, toward travel, to purchase gift cards or merchandise or as a donation. How many options you have and what requirements must be met before you can redeem will vary from card to card and issuer to issuer.
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Statement credits are the most common cash back redemption method and, as the term implies, act as credits against your existing card balance. For example, if you earned $20 in cash back and redeemed your rewards as a statement credit, your card balance would be reduced by $20.
Statement credits give you a simple, convenient way to save money over time, but since they’re tied to your card account, they offer a bit less flexibility than “true” cash back in the form of a check or direct deposit, which you can save or spend however you like.
Generally speaking, redeeming your rewards is as simple as choosing your redemption method, specifying the amount you want to redeem and hitting submit. Some cards also offer automatic cash back redemption in the amount and via the method you specify once you’ve reached a specific earnings threshold.
While statement credits, checks and direct deposits tend to get you full value for your rewards (with $1 earned yielding a $1 credit or direct payment), other redemption methods like gift cards and donations may only net you a fraction of your rewards value.
On the other hand, pairing a cash back card with a higher-tier travel or rewards card can sometimes boost the value of your cash back rewards, as in the case of the so-called “Chase trifecta“.
Check with your card issuerâs rules on cash back redemption amounts and options, as some cards offer more restrictive redemption schemes than others. For example, while a card like the Chase Freedom Unlimited allows you to redeem your cash back as a statement credit, check or direct deposit in any amount, anytime, the Costco Anywhere Visa® Card by Citi only issues rewards annually as a certificate with the February statement.
Benefits of cash back credit cards
Along with the obvious benefit of allowing you to earn a bit of money back on most â if not all â of your spending, cash back cards offer a number of advantages for experienced and newbie cardholders alike.
To start, cash back cards can offer more simplicity than other rewards credit cards. Since you get back a percentage of your card spend, you’ll always have a pretty good sense of how much money you’re earning. Cards that earn points or miles, by contrast, often require you to calculate point values and weigh redemption options to be sure you’re getting the most out of your rewards.
âThe primary benefit of a cash back card is the simplicity,â says Roman Shteyn, owner and CEO of RewardExpert.com.
âYou donât have to think too much about how much youâre earning while using the card, and when it comes to redemption, the best cash back credit cards are pretty straightforward. Most people just deduct their cash back from their statement balance or redeem for gift cards.â
Cash back cards also stand out as a low-effort savings tool. Indeed, the typical savings account earns a measly 0.05% annual yield, while nearly all cash back cards offer at least 1% back on every purchase. Your return is even greater with cash back cards offering a flat 1.5%, 2% or more on every purchase.
And unlike the interest on your bank account, cash back comes tax-free.
âThe IRS has historically viewed credit card cash back as a nontaxable rebate on the purchase price, rather than as a taxable form of income,â says Mahoney.
Something else to think about: Cash back, if loaded back on your card, also earns its own cash back when you spend it, adds financial planner Andrew Feldman of Chicago. âItâs a fraction, but itâs still a little more cash,â he says.
Factor in that some cash back cards offer sign-up bonuses of $150 or $250, and that is even more cash for you for using the card.
See related:Â Cash back vs. points
Types of cash back cards
There are three main types of cash back credit cards: Category bonus cash back cards, which offer a high cash back rate in spending categories that change throughout the year; tiered rewards cash back cards, which offer consistent cash back in specific categories of spending; and flat-rate cash back cards, which get you cash back at the same rate on all purchases.
Category bonus cash back cards
Overview: Category bonus cash back cards offer the lure of 5% cash back from revolving spending categories. These categories are typically set by the issuer every quarter and are usually released a few months before the new quarter starts. Five percent back can be a nice haul if youâre able to max out the spending categories each quarter, but it takes a bit of work.
First, you have to register for the bonus categories every three months, and spending in the categories is capped at a set amount each quarter (typically $1,500 in purchases). Since any purchase not in the bonus category earns 1%, you may not be getting the average return you think you are.
Pros:Â These cards allow you to earn cash back at an impressive rate in a variety of different spending categories, which could be ideal for cardholders whose spending varies from month to month. If your spending habits are flexible and you’re strategic about when and where you buy, category bonus cards can offer lucrative returns.
Cons: They can be a headache to keep up with, often requiring you to manually enroll in a category each quarter and track your spending to ensure you’re maximizing your cash back in a given category. You’re also at the mercy of the issuer when it comes to which categories are eligible for bonus rewards, and categories may not line up with your spending habits or may be tough to maximize.
Top cards: Discover and Chase each offer popular category bonus cards, including the Discover it® Cash Back, Discover it® Student Cash Back and Chase Freedom Flex cards.
The Discover 2021 bonus categories have already been released and include grocery stores, gas stations, wholesale clubs, restaurants and online shopping at stores like Amazon, Target and Walmart. Chase Freedom Flex bonus categories, on the other hand, are only announced on a quarterly basis.
The U.S. Bank Cash+ Visa Signature Card is a variation on the rotating bonus category theme, but the cardholder picks the bonus categories that will earn the most cash back for the types of purchases they make most.
See related:Â Chase Freedom Flex vs. Discover it Cash Back
Tiered rewards cash back cards
Overview: Like category bonus cards, tiered rewards cards offer more cash back in select spending categories, but to maximize your earnings you have to think about which card to use with each purchase.
For example, Feldman puts all his business expenses on his tiered rewards American Express SimplyCash Plus business card and his own personal expenses on a Citi® Double Cash Card that delivers a flat 2% (1% when you buy and 1% as you pay for your purchases).
His Amex business card rewards 5% on office supply stores and wireless telephone service, 3% on gas (cardholders choose from eight categories for this tier) and 1% on everything else.
At the end of each year, Feldman calculates the rewards delivered on the total amount he spent. He says both of his cards end up delivering the same cash back on average.
âThe Amex works out to about 2%, maybe slightly under,â Feldman says. âI just donât spend enough on office supplies to max out that 5% category.â
âCould I get back another couple dollars at the end of the year by using a credit card targeted to each category of my spending?â Feldman asks. âItâs possible, but Iâd have to think about which card to use every time I made a purchase and that would make my life crazy.â
Pros: Tiered rewards cash back cards may offer a bit more consistency than category bonus cards, as bonus categories are the same year-round. You’ll know before you apply if an elevated rewards rate in a given category like travel or dining makes sense based on your spending, and you can pair a tiered rewards card with a flat-rate card to ensure you’re maximizing your earnings.
Cons: These cards tend to earn a low rate on general purchases, and people often overestimate how much they spend in a given category, like gas or airfare. You’ll have to take a close look at your spending habits to determine whether a tiered bonus category card really makes sense for you or if you’d be better off with a card that earns the same flat rate in cash back on every purchase.
Top cards: While the best choice for you will depend on how you spend, one of our top picks is the Blue Cash Preferred® Card from American Express, which offers 6% cash back at U.S. supermarkets (up to $6,000 in purchases per year, then 1%), 6% back on select U.S. streaming service subscriptions, 3% cash back at U.S. gas stations and 1% cash back on all other spending.
Supermarket purchases make up a big chunk of the average person’s spending habits, so a card that offers bonus rewards in this category should be useful to the majority of cardholders.
Flat-rate cash back cards
Overview: With simple cash back cards, also called flat-rate cash back cards, you earn a flat percentage with every purchase. Thereâs no need to track and activate bonus categories. You earn the same cash back on every purchase.
Mahoney carries the Bank of America® Travel Rewards credit card which earns 1.5 points per dollar (effectively 1.5% cash back) plus a 75% bonus for being part of the bankâs Preferred Rewards Platinum Honors program.
âThatâs effectively 2.625% cash back*,â Mahoney says (2.625% cash back referencing 1.5 points per dollar plus 75% boost for Preferred Rewards program). âThe caveat is the cash back must be used as a reimbursement for travel purchases**, but lots of things count for that, even Uber and Lyft.â
Feldman recently switched from the Capital One Quicksilver Cash Rewards Credit Card, which offers 1.5% cash back, to the Citi® Double Cash Card, which earns up to 2% cash back (1% when you buy and 1% as you pay for your purchases).
Why did he switch? â2% is better than 1.5%,â he says.
Also, âI miss the convenience of being able to log in and get my rewards in one sweep or set it up for an automatic $25 or $50,â he adds. âI like to cash in my points immediately so I donât forget about them.â
Frequent-flyer expert Gary Leff likes the Fidelity Rewards Visa and Citi Double Cash cash back cards.
With the Fidelity Rewards Visa, cardholders earn 2% on all purchases, but you need to be a Fidelity account holder with excellent credit to qualify for the card.
âMost people arenât going to beat 2% cash back, even with travel rewards,â says Leff, who blogs at View from the Wing.
Pros:Â You won’t have to track spending or enroll in bonus categories. You can simply use your card for every purchase and rest assured you’re earning cash back at a consistent rate. This makes flat-rate cards ideal for those who want to avoid the hassle of juggling multiple cards or someone who’s looking to supplement their current tiered rewards or category bonus cash back card.
Cons: While these cards offer consistent rewards on every purchase, you may be missing out on bonus rewards in a category of high spend, like groceries or dining.
Top cards:Â A top pick in this category is the Citi Double Cash card, as it offers one of the highest flat cash back rates available, charges no annual fee and can pair with a premium Citi card to make earning travel rewards a breeze. It also encourages responsible card use by only giving you the second 1% back once you’ve paid off your purchases.
Types of cash back cards compared
We ran the numbers to see how flat rate, category bonus and tiered bonus cash back earnings would break down based on an average Americanâs spending (drawn from a Bureau of Labor Statistics consumer expenditures survey):
2% flat percentage
5% category bonus*
6% tiered bonus**
$21,897*** at 2%
$14,645 at 1% ($14.65)
$16,596 at 1% ($16.59)
$6,000 at 5% ($300)
$4,464 at 6% ($267.84)
$437.90 in cash back per year
$314.65 in cash back per year
$284.43 in cash back per year
* This assumes the category bonus cardholder maxes out the $1,500 in qualified quarterly spending, which is difficult to do every quarter.
** The Blue Cash Preferred from American Express offers 6% cash back at U.S. supermarkets and other tiered rewards, so total cash back will be higher.
*** This includes expenses on food, gas and oil changes, vehicle expenses, apparel and services, entertainment and other expenditures
â CreditCards.com research, March 2020
How to choose a cash back credit card
Which cash back card is right for you depends on how much thought you want to put into which card to use where.
While some cash back cards offer outsized bonuses on specific types of purchases or in rotating bonus categories, you’ll have to remember to use the right card at the right time and place. Not only will you need to pay attention to your account to see how your issuer categorized your purchase, but you may also need to manually enroll in a bonus category each quarter to reap the benefit of certain cards.
This makes such cards less than ideal if you’re looking for more of a “no-fuss” way to earn rewards. Additionally, most tiered and category bonus cards only get you 1% cash back on general purchases. This means that unless you spend heavily in a card’s bonus categories, you could be missing out on maximizing rewards on the majority of your spending.
Flat-rate cards, on the other hand, may offer a lower rewards rate in a specific category like dining or groceries, but will help you score extra rewards on general purchases that don’t fall into a specific category, boosting your average cash back rate overall. This is why it’s also worth considering pairing a flat-rate cash back card with a tiered bonus card that fits your spending habits.
Bottom line
Whether you opt for a flat-rate, tiered rewards or category bonus cash back card, you can enjoy earning cash back on all (or nearly all) of your purchases, often with minimal effort.
You may be surprised at just how much 1% or more cash back adds up to at the end of each month. Just be sure to take a close look at your spending habits and each issuer’s terms to be sure the cash back card you’re considering is a good fit for you.
*2.625% cash back referencing 1.5 points per dollar plus 75% boost for Preferred Rewards program.
There is no doubt that COVID-19 has affected the financial security of millions of Americans.
A September 2020 NPR poll found that nearly half of U.S. households experienced job loss or pay cuts during the pandemic. Fifty-four percent with annual incomes below $100,000 suffered the most serious financial problems.
However, as the situation deteriorated for many, a subset of individuals assumed newfound control over their economic well-being. The pandemic became their trigger to make powerful changes with the way they handled money, credit, income and savings.
Here’s how just a few people refused to let severe and unexpected pandemic-related conditions get them down.
Taking financial control amid a global pandemic
Improved charging habits
Repaid debt
Starting over after a job loss
Building a better budget
Increased saving and investing
Improved charging habits
According to an October Money and Morning Consult survey, 29% of credit card holders have been charging more than they had been before the pandemic, particularly on food and self-care items.
For some, like Raul Mercado from Austin, Texas, a freelance digital marketing professional, that didn’t mean acquiring high balances, but using the cards more effectively than ever before.
Mercado’s partner has been furloughed from both of her jobs, and his pay was cut by a third in the span of one month. In response, they changed the way they had been charging. The couple decided to make their cards work for, rather than against, them.
“My partner purchased an online course called ‘Credit Cards 101,’ and we learned the best way to use credit cards,” says Mercado. “We started using credit cards that included airline miles or cash back bonuses for all purchases so we could get additional resources from spending the same amount of money. Of course, we pay back our credit cards every week so we don’t go into debt. And because of all the closures around town, we are able to save significant amounts from not going out on date nights or expensive vacations.”
Now the couple is looking forward to using the rewards when travel is once again an option. They’ll stick with their new card strategy, though, since it allows them to profit from the process.
Repaid debt
A positive aspect of the pandemic is that it made many people reevaluate how they’re handing their existing financial obligations. In fact, Experian reported an unprecedented consumer debt reduction in 2020. Outstanding credit card balances dropped by 9% from 2019, representing over $73 billion in repaid balances.
Steve Morrow, a Phoenix-based CPA and founder of the kayaking blog Paddle About, and his wife slashed their liabilities over the past 10 months. They had a combination of obligations, including a car loan, home equity loan and credit card debt.
another round of stimulus checks, he will apply it to their emergency fund. In the meantime, he’s also using this time to educate their children.
“We have two teenagers and we’ve been having a lot of conversations with them about finances,” says Morrow. “In fact, one of my sons is taking a personal finance class in high school, and it’s been great to talk to him about our experiences with credit cards.”
See related: Financial bias starts early: How to talk to your daughter about finances
Starting over after job loss
Before COVID struck, Justin Duke had been driving and delivering for such companies as Uber and Instacart. “Then it all basically stopped,” says Duke. “I lost the main source of income that I had and didn’t know if or when it would be safe to do the gig work again, or what would happen with the stimulus. I had to pivot and find a new income.”
So, Duke and his wife, who live in a rural community outside Roanoke, Virginia, turned their attention to the business of raising goats and chickens. At the start of the pandemic, selling the animals and eggs via MrAnimal Farm generated a little side cash. Today, along with working a few other e-commerce and review sites, the couple is earning three times what they had been before.
“We have a safe way to make money that we have more control over,” says Duke. “We’re financially stable and are in control! Our holiday spending this year won’t change, but the goal for 2021 is to be able to purchase a second house with the online income.”
Duke is hardly alone in his quest for earnings independence. In October, the Census Bureau reported that applications for federal employer identification numbers had surged – by July, they were up an astonishing 91%, compared to the same time frame in 2019.
Building a better budget
Insecure salaries inspired other people to reevaluate how much money was going out each month, and then make powerful changes to ensure that there was enough to meet essentials. Such was the case for Jonathan Sanchez, an Omaha, Nebraska-based personal finance blogger for Parent Portfolio, a wealth building website for families.
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“Due to the economic stress caused by the pandemic, I was furloughed from my full-time job,” says Sanchez. “This put the weight of supplying for our family solely on my wife. Initially, it was depressing for me not to be able to work as well and was hard for my wife.”
Eventually, though, he decided to use this opportunity to assess their cash flow plan to get them closer to financial independence.
“We updated our budget and became more intentional with our money,” says Sanchez. “Before, what we were doing was not budgeting but spending and thinking we should have enough until the next paycheck. We never set limits – now we do. ‘Only this much for groceries, this much for dining’ kind of thing. It helped us become more mindful. For a whole summer, I stayed home with my daughter who was in daycare, so we didn’t have that expense either, so that was like a mortgage payment!”
The couple refinanced their primary residence to reduce those payments, then purchased a house as an investment property to generate passive income. They then deleted a large portion of their student loan debt and are working toward building up a sizable savings fund.
“Now that we have a budget in place, we’re not worried about money anymore,” says Sanchez. “My wife actively looks at our budget three times a week. It’s a habit we will continue on forever!”
See related: How to stop overspending during the coronavirus pandemic
Increased saving and investing
And then there are people who have found a way to increase their net worth, despite recent economic hardship. Christen Thomas, a personal finance expert and founder of the travel advice website TravelWanderGrow, has managed to create wealth.
Thomas has always been budget-savvy, but the pandemic prompted her to take a harder look at the way she had been preparing for her financial future that extends far beyond the next 12 months.
“It’s the year I’ve moved beyond the budget,” says Thomas. “I’ve started doing much more focused research into the FIRE (financial independence, retire early) movement, and have adjusted my long-term investment strategy accordingly. This has led me to move from investing around 10% of my income to 20%. I plan to grow this rate to 50% over the next few years as I pay down my student loans more aggressively and cut certain expenses.”
Miller & Company, LLP, the pandemic switched something crucial but latent in many people. They’ve found ways to thrive, when it hadn’t been necessary before. People discovered their inner strength and knowledge that they can perservere under extremely difficult conditions. Many fought to budget their money for the first time.
“The pandemic grounded a lot of people,” says Miller. “It helped them develop character. Americans are resolved to figure it out. Ultimately, it taught millions of us how to rescue ourselves, and that even in the bad times, there is good.”
Certainly not everybody has been able to regroup and overcome financial adversity in 2020, but it’s worth taking inspiration from those who have.
The best credit cards for international travel can make traveling a more comfortable and rewarding experience, and in more ways than one.
The right rewards credit card can help you score valuable travel perks like airport lounge access and expedited airport security. Some cards even let you avoid unnecessary foreign transaction fees. The top travel cards in the market also let you earn points and miles you can redeem for free flights, hotel stays and more.
If youâre in the market for a credit card for international travel, youâll want to compare all the top cards to see how they might work for your travel style and goals. Keep reading to learn about the best credit cards for travel overseas, what they offer in terms of perks and rewards and how you can sign up.
Chase Sapphire Reserve®
Best for lounge access: The Platinum Card® from American Express
Best for flexibility: Capital One Venture Rewards Credit Card
Best for infrequent international trips: Chase Sapphire Preferred® card*
Best with no annual fee: Bank of America® Travel Rewards credit card
Students: Bank of America® Travel Rewards Credit Card for Students*
Chase Sapphire Reserve: Best credit card for international travel
The Chase Sapphire Reserve is frequently listed as the top travel credit card on the market today, and for good reason. This card gives you 3X points on travel and dining purchases plus 1 point per $1 on everything else you buy. Through March 2022, you will also earn 10 points each dollar you spend on rides with Lyft. As an added bonus, you will earn 3X points on up to $1,000 per month in grocery spending through April 30, 2021 as well.
New cardholders are also eligible to earn 50,000 points after spending $4,000 within three months of account opening. Thatâs worth $750 in travel through the Chase Ultimate Rewards portal.
Redemption options are very flexible: You can redeem rewards as statement credits toward any travel purchase, or for travel through the Chase portal to get a 50% redemption bonus (making your points worth 1.5 cents apiece). Also, you can transfer your points at a 1:1 rate to 11 travel partners, including United MileagePlus and Southwest Rapid Rewards.
In exchange for the $550 annual fee, youâll also receive excellent travel benefits like a TSA Precheck or Global Entry credit and a Priority Pass Select airport lounge membership. Furthermore, the card comes with some of the best travel protections around, including trip cancellation and interruption insurance and primary car rental insurance.
The card also offers a $300 annual travel credit that applies to most travel purchases. So, if you make at least $300 in travel purchases each year, youâll cancel out most of the cardâs fee.
if you do the math, youâll find that the Sapphire Reserve is usually the better value if you travel often, despite its higher fee.
The Platinum Card® from American Express: Best credit card for international lounge access
Frequent travelers who want superior perks should also consider The Platinum Card from American Express. This card gives you 5X points on up to $500,000 in airfare booked annually with airlines or through AmexTravel.com as well as 5X points on prepaid hotels booked through AmexTravel.com. You also get 1 point per $1 on everything else you buy as well as 75,000 points when you use your card for $5,000 in purchases within six months.
Amazingly, you can also earn 10 points per dollar on eligible purchases at U.S. gas stations and U.S. supermarkets (on up to $15,000 in combined purchases) in the first six months.
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While you may not want to go solo with the Platinum card due to its more limited acceptance in foreign countries, youâll find that the card is a great choice for getting comfortably to your destination. The Platinum card is piled with perks, including access to one of the largest and lushest lounge networks in the world, encompassing Amex Centurion lounges, Delta SkyClub lounges and the Priority Pass network.
Furthermore, the card is laden with valuable travel credits, including an airline fee credit of up to $200, up to $200 in Uber credits each year, a credit for Global Entry or TSA Precheck membership and a $75-$100 hotel credit.
The credits can be trickier to apply than the Sapphire Reserveâs travel credit (the airline fee credit, for instance, only applies to incidentals on one airline that you must designate at the start of each year). However, if you know how to use the Platinum cardâs perks, you can easily outmatch the $550 annual fee.
See related: When is a credit card annual fee worth it?
Capital One Venture Rewards Credit Card: Best flexible card for international travel
The Capital One Venture Rewards Credit Card offers an interesting rewards proposition and miles you can use in more than one way. Once you sign up, youâll rack up a flat 2X miles for each dollar you spend. The card also offers 60,000 bonus miles worth $600 in travel when you spend $3,000 within three months of account opening.
Redemption is simple and straightforward: You can redeem Capital One miles for any type of past travel on your credit card statement at a rate of 1 cent per mile using. Or, if youâre a bargain hunter and want to get a little extra value out of your miles, you can transfer them to a number of airline and hotel partners at a transfer ratio that varies based on the program.
If you decide not to travel, you can even redeem your miles for purchases made through PayPal.com or Amazon.com.
The card also offers a couple of features that make it a great choice for taking it abroad: It doesnât charge any foreign transaction fees, and youâll get up to a $100 credit for Global Entry or TSA Precheck membership, which can help you get through customs and security much faster. A $95 annual fee applies.
Chase Sapphire Preferred® card: Best credit card for infrequent international trips
If you want to earn rewards for international travel but you don’t take many trips abroad, it can make sense to sign up for a premier travel credit card that offers fewer international travel perks with a lower annual fee.
The Chase Sapphire Preferred® card is one of the best options out there due to the fact you can transfer your points 1:1 to popular airlines for international travel, including Emirates, United Airlines, British Airways and more. You can also book international travel through Chase Ultimate Rewards, and you’ll get 25% more value when you do.
This card starts you off with 60,000 points worth $750 in travel when you spend $4,000 within three months of account opening, but you’ll also earn 5X points on Lyft rides (through March 2022), 2X points on travel and dining and 1X points on all other purchases. Through April 30, 2021, you’ll also earn 2x points on up to $1,000 per month in grocery spending.
While you won’t get perks like airport lounge access or Global Entry membership, you’ll only pay $95 per year to keep this card.
See related: Best credit cards for airport lounge access
Bank of America Travel Rewards credit card: Best international credit card with no annual fee
While we generally prefer premium travel cards over no-annual-fee travel cards, you should check out the Bank of America Travel Rewards credit card if youâre trying to avoid an annual fee. For international trips, the Bank of America Travel card is a great choice â it doesnât charge foreign transaction fees, plus you can add a PIN number to your card.
A PIN number is a convenient option for foreign countries where chip and pin cards are standard â you can use your card in more places, including unattended terminals that require PIN numbers.
The Bank of America Travel card also offers a solid rewards program: You get 25,000 points when you spend $1,000 on your card within the first 90 days, plus an unlimited 1.5 points for each dollar that you spend. When it comes to redeeming your rewards, you can cash them in for travel purchases at a rate of 1 cent per point, or for gift cards, merchandise and more.
As a nice bonus, you’ll qualify for 0% APR on purchases for 12 months, followed by a variable APR of 14.99% to 22.99%. This perk can help you finance a large international trip then pay it down without interest for the first year.
Bank of America® Travel Rewards Credit Card for Students: Best international credit card for students
If youâre a student with no credit history trying to qualify for a travel card, you should check out the Bank of America Travel Rewards Credit Card for Students. The card offers a couple of key advantages: It doesnât charge an annual fee, and it doesnât charge any foreign transaction fees.
It also offers an exceptionally good rewards program for a student travel card. You get the same 25,000-point sign-up bonus as the regular Bank of America Travel card and the same 1.5-point earning rate, allowing you to rack up lots of points that you can use to fund your travels.
Redemption is just as easy and flexible as the regular Bank of America Travel card â you can redeem points as statement credits to cover any travel purchase. And like you would with the regular card, you’ll get 0 percent APR on purchases for 12 months, followed by a variable APR of 14.99% to 22.99%.
See related: What happens when your 0% introductory APR ends?
Compare top credit cards for international travel
Rewards
Annual fee
Chase Sapphire Reserve®
3x points on travel and dining
3x points on up to $1,000 in grocery spending per month through April 30, 2021
10x points on Lyft rides
1x points on other purchases
50,000 points if you spend $4,000 in first 3 months
$550
The Platinum Card® from American Express
10x points on eligible purchases at U.S. gas stations and U.S. supermarkets on up to $15,000 in combined purchases during first 6 months of card membership
5x points on up to $500,000 in airfare annually booked directly with airlines or through AmexTravel.com
5x points on prepaid hotels booked through AmexTravel.com
1x points on other purchases
75,000 points if you spend $5,000 in first 6 months
$550
Capital One Venture Rewards Credit Card
2x miles on all purchases
60,000 miles if you spend $3,000 in the first three months of account opening
$95
Chase Sapphire Preferred card
2x points on travel and dining
2x points on up to $1,000 in monthly grocery spending through April 30, 2021
1x points on other purchases
60,000 points when you spend $4,000 within three months of account opening
$95
Bank of America® Travel Rewards credit card
1.5x points on every purchase
25,000 points if you spend $1,000 in first 90 days
$0
Bank of America® Travel Rewards Credit Card for Students
1.5x points on every purchase
25,000 points if you spend $1,000 in first 90 days
$0
How to choose an international travel card
When choosing a card for international travel, youâll want to look for rewards and benefits that match your travel plans and preferences. Most importantly, you need a card that you can use where youâre planning to travel. Here are the key features to consider:
Global acceptance â Visa and Mastercard are most likely to be accepted around the globe, though American Express is also widely accepted in some parts of the world. Make sure you select a card that will be accepted where you travel the most.
No foreign transaction fees â Choosing a credit card that doesnât charge foreign transaction fees will save you from paying an additional 3% or more on purchases you make abroad.
Chip and PIN technology â Chip and PIN technology is immensely helpful when you travel abroad, but not all travel credit cards offer this perk. See which cards have chip and PIN technology before you choose a card.
Good exchange rates â One big benefit of using a credit card with no foreign transaction fees is that the currency you pay with will be converted to your home currency with no fees required on your part. Mastercard typically offers slightly better rates than its competitors.
Earning categories â The best credit cards for international travel tend to offer bonuses on certain categories of spend. Search for cards with category bonuses that match your spending patterns.
Good redemption options â The top cards in this realm let you redeem for travel directly or transfer points to airline and hotel partners at a good value (1 cent per point or mile is standard). The more options you have and the more value you get on your points and miles, the better off youâll be.
Travel insurance benefits â The best travel credit cards offer free travel insurance like trip cancellation/interruption coverage, auto rental coverage, lost baggage insurance, baggage delay coverage and travel accident insurance.
Airport lounge access â Look for cards that let you enter a range of airport lounges at airports around the globe, but specifically in destinations you travel to often.
Global Entry/TSA Precheck â Also look for credit cards that offer a Global Entry or TSA Precheck credit. Both these benefits let you enjoy expedited airport security, saving you time and stress when you travel.
Hotel or airline preferences â If you travel frequently with certain hotels or airlines, youâll find that certain cards are a better fit for you. On the other hand, if you arenât loyal to any hotel or airline program, you may be better off with a more flexible travel card.
Origin or destination of travel â Make sure the cardâs rewards and benefits fit with your travel plans. For instance, some cards may offer better lounge options along your route, or you may find that certain rewards cards donât offer good redemption options where youâre planning to travel.
Customer service â Having a card with excellent customer service could come in handy in case of an emergency. According to J.D. Powerâs 2020 U.S. Credit Card Satisfaction Study, American Express and Discover received the highest marks for customer service satisfaction last year, followed by Bank of America.
Tips for using credit cards while traveling internationally
Notify your card issuer that you will be out of the country to reduce the chance of having your account frozen at an inconvenient time.
Bring multiple credit cards (preferably from different payment networks) in case a merchant doesnât accept your main card, or your card gets declined.
Rotate your cards to get better rewards on certain purchases.
Have plenty of cash on hand for situations where you canât use your credit cards.
If you are traveling to a country with chip and PIN cards, see if your issuer will allow you to add a PIN to your card.
Have your card information and your issuerâs emergency card services phone number on hand in case your card gets lost or stolen.
Opt to put your charges in the local currency to avoid paying more for the currency conversion.
Use your credit cards instead of cash where you can â as long as you are charging in the foreign currency, you can get a better exchange rate.
Avoid using your cards for cash advances, unless itâs an absolute emergency.
Use your credit card instead of a debit card to make purchases â not only can you avoid foreign transaction fees, but your purchases are more secure.
Bottom line
Picking a credit card for foreign travel can be an especially complicated choice. While you may have your eye out for a card with a large sign-up bonus and lots of points, you should have some travel goals in mind before you choose a card. If you know where and how you intend to travel, youâre more likely to find a card that can take you far in your journeys.
All information about the Chase Sapphire Preferred Card and the Bank of America Travel Rewards Card for Students has been collected independently by CreditCards.com and has not been reviewed by the issuer. This offer is no longer available on our site.
When deciding between traditional and online banks, it helps to know the pros and cons of each, including price, service, and available options. Find out which type of bank account is best for you.
Sending cash to friends and family? Before you reach for that credit card, grab a calculator. It’s time to do a little math.
With most everything you purchase online or through apps, credit cards have the edge. With plastic, you have chargeback rights. If you’re overcharged or receive the wrong item, broken merchandise or nothing at all, your card issuer will make it right. And if you use a rewards card, you collect points or miles, too. Win-win.
But it’s different story when you’re sending money through peer-to-peer platforms. Many of them (like Google Pay, Popmoney and Zelle), don’t allow consumers to use a credit card to send cash.
Others (like Cash App, PayPal and Venmo), allow credit cards but also charge a fee for the privilege – often about 3%.
See related: How to choose a P2P payment service
The hidden costs of using credit cards to send money
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Choose a credit card to send money and you might also end up paying additional fees to your card issuer. That’s because the combination of some peer-to-peer apps with certain cards are coded as cash advances, rather than purchases.
For many cards, that cash advance code triggers a higher interest rate that kicks in the moment you make the transaction, as well as a separate cash advance fee that’s often $10 or 5% of the transaction – whichever is higher. (Currently, the average interest rate for cash advances is 24.8%, while the average APR for purchases is 16.05%.)
So the combination of peer-to-peer service fees, credit card cash advance fees and that higher interest rate (with no grace period) could make sending a few hundred dollars a bit more costly than you’d planned.
No chargeback rights with credit cards
The real kicker: Unlike other venues, you don’t have chargeback rights when you use credit cards to make peer-to-peer money transfers.
When you present your credit card in an online or brick-and-mortar store, there’s a merchant involved – and the law provides chargeback rights for your protection in case you don’t get what you were promised in the deal. But in a peer-to-peer money transfer, there’s no merchant, so currently the laws don’t give consumers any chargeback rights, says Christina Tetreault, manager of financial policy for Consumer Reports.
“The chargeback right requires a merchant,” says Tetreault. “One of the hoops a consumer has to jump through is to try and work it out with the merchant.”
If you use a peer-to-peer service and send the wrong amount or send the money to the wrong person, most platforms advise that the only way to get it back is to contact the recipient and ask them to return it. And that’s often the same whether you use a credit card, debit card, bank account or funded account on the platform.
“Be doubly sure when you’re sending the money that you’re putting in the correct information,” says John Breyault, vice president of public policy, telecommunications and fraud for the National Consumers League. “It’s still a buyer beware world when it comes to peer-to-peer.”
The solution
If you’re sending money and want to use a credit card, it pays to do a little sleuthing first. Check out the peer-to-peer site. Does it allow users to send money with a credit card? If so what, if any, fees does it charge?
On some platforms (PayPal is one), you could see similar fees for using a debit card – while sending from a bank account or funded account on the platform is free.
The good news is that many peer-to-peer platforms clearly disclose it when there’s an extra charge to use a credit card, says Tetreault. With Venmo, for example, you’ll get a pop-up message.
Harder to decipher: Will credit card transactions on the platform be treated as a cash advance? If your preferred platform doesn’t post this information, you might need to contact customer service. (And how quickly and easily you get an answer can tell you a lot, too.)
Ask your card issuer the same question: Are peer-to-peer money transfers on the platform you’ve chosen treated as a cash advance? If they are, what’s the interest rate, and what’s the cash advance fee?
“What I would suggest is to ask that question, via email, of your financial institution,” says Tetreault. “It may be in their FAQs. And you want to save that email. If you have it in writing, if there’s an issue later, you’re better positioned to contest that fee.”
But “the hard truth is you may not be able to find out ahead of time,” she says.
Another solution: Opt to use a credit card issued by a credit union.
“With credit unions, the APR is usually the same” for purchases and cash advances, says John Bratsakis, president and CEO of the Maryland and District of Columbia Credit Union Association.
Likewise, with American Express cards you pay your regular interest rate and no cash advance fees on peer-to-peer transfers, says Elizabeth Crosta, vice president of public affairs for American Express.
And credit cards from U.S. Bank register peer-to-peer money transfers as regular purchases – with no cash advance fees or cash advance APRs, says Rick Rothacker, spokesperson for the bank.
See related: How do credit card APRs work?
What’s your reason for using a credit card?
Take a good look at the reason you’re using a credit card, too. If you want chargeback rights, that’s not an option. If you’re doing it for the rewards, will the value of those points or miles be eaten up by extra fees or a higher interest rate you have to pay to use the card?
And if you’re using a card because you don’t have the cash, that might be a good reason to rethink the idea of sending money in the first place.
That’s a huge red flag, says Bruce McClary, vice president of public relations at the National Foundation for Credit Counseling.
“The need to convert credit into cash is what really gets my attention – because that hints at a lack of savings,” he said. “It’s a reality a lot of people are facing, especially now.”
Cash advances aren’t as expensive or risky as payday loans and car title loans, but they should be among your last resorts. If you’re looking for short-term relief, you could ask your credit card issuer for help, or find out if you qualify for a personal loan. You could also borrow from a family member or trusted friend, but be wary of the potential relationship toll if you can’t pay them back.
Getting cash from credit cards
Fifty-two percent of Americans report that the pandemic has damaged their finances, according to a recent survey by the NFCC. More than a fifth of those had to tap savings for everyday expenses, while 16% increased their credit card spending.
And that’s a sign of financial stress, says McClary. “It means that, in some situations, they have run out of savings.”
There are ways you can use your card to get cash, though.
Cashing in rewards
Some rewards cards from issuers such as Chase, Bank of America and US Bank let you deposit cash-back rewards directly to your bank account.
And Wells Fargo also will let you deposit its Go Far Rewards directly into another Wells Fargo customer’s account, says Sarah DuBois, spokesperson for the bank.
Gift cards
Many credit cards let you convert rewards into retail gift cards. So a pile of points can help a friend or family member buy much-needed groceries or a few holiday presents.
Or simply “buy a gift card for someone,” says Bratsakis.
Retailer-specific gift cards and gift cards issued through local and regional retail associations and malls often come with no fees – meaning every dollar you spend goes toward your gift.
Convenience checks
While you can get a cash advance or use convenience checks from your card issuer, both those options often come with fees and higher interest rates. Not a smart money move, especially in the current economy.
While some lenders may offer convenience checks with deferred interest, that’s not the same as “no interest,” says Bratsakis. Also, if you don’t pay the loan in full, will you owe the full interest retroactively?
“That’s where consumers have to be careful,” he says. With a convenience check or even a cash advance, “that’s usually where consumers can get themselves into trouble if they can’t pay it off and get hit with deferred interest.”
See related: What is deferred interest?
Bottom line
When it comes to peer-to-peer payments, cash really is king. You can then put it into a funded account with the money transfer platform or your bank account. And most peer-to-peer platforms let you do this for free.
“The safest way to use these services is to send money person-to-person and be diligent about getting all the details correct so it doesn’t go to the wrong person,” says Tetreault.
Only send to people you trust and know in real life, she says. “And before sending money make sure you understand what, if any, fees you might incur.”
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The Purpose of the Community Hospital * Frederick D. Stubbs * Address delivered at the Annual Meeting of the Booker T. Washington Community Hospitals Association, Newark, N. J., May, 1944.
about what to expect in the coming hours in the hospital. It’s not real but everyone takes their role seriously, and with …
An emergency department (ED), also known as an accident & emergency department (A&E), emergency room (ER), emergency ward (EW) or casualty department, is a medical treatment facility specializing in emergency medicine, the acute care of patients who present without prior appointment; either by their own means or by that of an ambulance.The emergency department is usually found in a hospital or …
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