Signing up for new credit cards can be a great way to supercharge your finances. Many credit cards offer rewards not only for everyday spending, but a big initial welcome offer that can be worth hundreds of dollars. Here’s a quick look at how credit card rewards work and why you should be taking advantage of them.
How Do Credit Cards Work?
When you have a credit card, the card issuer extends a line of credit to you (referred to as your credit limit). If you have a card with a $5,000 credit limit, that means that you can spend up to $5,000 on the card. If you don’t pay off your credit card bill in full when it comes in the mail each month, then you are charged interest on the balance. And these interest rates are usually pretty high — from 14% to 25% or even higher.
The trick then is to not charge anything on your credit card that you don’t have the money to pay for. You should always pay your credit card bill in full each month. If you do, then you won’t be charged any interest or fees. The only fee that you might pay is a possible annual fee on the credit card. Some credit cards have an annual fee, while others do not.
Do Credit Cards Come With Fees?
As we mentioned, some premium credit cards do come with an annual fee, but it is often waived for the first year as an incentive to sign up for the card. If you’re not sure about paying an annual fee, then stick with one of the many cards that do not have one. Just be aware that in many cases, it can make good financial sense to have a credit card with an annual fee, since the value of the sign up bonus and rewards that you earn each year are higher than the cost of the annual fee.
How to Sign Up for a Credit Card
Signing up for a credit card is a fairly straightforward process once you decide which card you want to sign up for. If you’re not sure which credit card you should get, that’s where CashFreely can help you the most! Once you know what card you want to get, you just fill out the application and submit it to the credit card company for processing.
Sometimes you will get an approval screen right away after hitting submit. In other cases, you might get a notice that your application was received and that the credit card company needs more time to process it. In many cases, this process takes a week or so and completes without any further interaction needed. In some cases, you may need to call or send in additional information for your application to be approved.
What to Do Once You’re Approved for a New Credit Card
Once you’ve got your new credit card, it’s time to start maximizing your rewards. You can start using your new credit card right away, to earn cash back on purchases. You’ll want to be aware of how much you need to spend to meet your initial spending target and have a plan to make sure you meet the target with plenty of time to spare.
If your card has any additional perks, you can start taking advantage of those right away. One example is the Chase Freedom Flex — make sure that you sign up to take advantage of your quarterly 5% bonus categories as soon as your account has been approved. Another thing that makes sense is to set up your credit card account for automatic payments. That way you won’t have to worry about missing a payment and getting hit with interest or late payment fees.
Hitting Your Spending Bonus Target
If you sign up for a credit card with an initial spending bonus, you have a limited amount of time to reach the initial spending bonus target. The spending target varies depending on the credit card you’ve signed up for, but 3 months is a typical period of time.
It’s usually a good idea to take a screenshot of the initial welcome offer when you apply for the card, just in case there are any questions with the credit card company. Generally, the initial welcome offer is all or nothing — if you come up even $1 short or 1 day late of the spending target, you get nothing.
Sometimes there are tiered spending bonuses. You might get $200 for spending $2,000 in the first three months of having the card, and an additional $300 after spending a total of $10,000 in the first six months of having the card. No matter what, just follow the terms listed on the application to make sure that you get your bonus.
The Best Ways to Redeem Your Credit Card Rewards
You usually have a few ways to redeem your cash back rewards. One of the most common is the ability to convert your cash back to a statement credit on your account. You can also transfer your cash back to your bank account or get a paper check. In many cases, there is a minimum amount of cash back that you’ll need to have before you can cash out, so make sure to check the terms of your card’s rewards program.
Many banks and credit card companies also offer other options for redeeming your cash back. This can include shopping at sites like Amazon or Paypal, or redeeming your cash back for gift cards or merchandise. While these options may be more convenient, make sure to check the terms for the rates you get — in many cases you’ll get a lower redemption value when using these options. If that’s the case, then it’s better to just redeem to a bank account and use that money to buy the item in question
The Bottom Line
Credit card rewards and cash back can be a great way to earn additional rewards for purchases that you were already planning on making. Just make sure before you sign up for a credit card that you have the financial ability and discipline to pay off your credit card balance in full, each and every month. One great way to take advantage of these credit card rewards is by signing up for new cards. Many credit cards offer initial welcome bonus offers that can be worth hundreds of dollars. Make sure to follow CashFreely so that you know how to find the best offers and take your cash back to the next level.
