It works much better with cash back credit cards than travel credit cards, since travel points can vary in value depending on a card's rewards program. This makes it easy to compare the value of no-annual-fee credit cards with cards you need to pay for. If a credit card has an annual fee, you can subtract that amount from the total cash back the card would earn per year. If you spend more than $5,000 per year on groceries, then you need to take that into account when you do the math. For example, you find a card that earns 3% back on the first $5,000 per year in grocery purchases and 1% back once you've exceeded that limit. Remember to check for any spending caps on a credit card's bonus categories. Total cash back: $21 per month/$252 per yearīy choosing the first card instead of the second, you'd earn an additional $120 per year.
Other purchases: $12 per month/$144 per year.After checking your budget again, you find that you spend $200 per month on dining, $100 per month on travel, and $1,200 on the rest of your purchases. Maybe another card earns 3% on dining and travel and 1% on other purchases. Total cash back: $31 per month/$372 per year.Other purchases: $5 per month/$60 per year.With that card, here's how much cash back you'd earn by category: You look at your budget and see that you spend $600 per month on groceries, $400 per month on gas, and $500 per month on everything else. Let's say you're looking at a credit card that offers 3% cash back on groceries, 2% on gas, and 1% on other spending. Add the rewards you'd earn in each category together.Multiply each rate by your normal spending in that category.Find how much the card offers in each spending category.
YOU NEED A BUDGET CREDIT CARDS HOW TO
Here's how to calculate the rewards you'd earn using a credit card: After that, you can compare these amounts to see which card offers the most value. How to use a budget to calculate credit card rewardsįor each credit card on your list, you're going to calculate the amount of rewards you would earn with it. It's essential to get accurate numbers for purchases you make only a few times per year, such as air travel.īesides a budget, you'll need a calculator, a list of rewards credit cards you're considering, and the rewards rates for those cards. You can use a monthly or yearly budget, but make sure it reflects all your expenses, not just the ones you have every month.
/woman-paying-with-card-reader-641264598-5b82ae1046e0fb00504af4a6.jpg "you need a budget credit cards")
The first step is to make a detailed budget with expenses broken down into spending categories. It doesn't take long, and it's a decision that can pay off when you use your card. If you do this, you could end up leaving a lot of money on the table.Ī better approach is to use a budget to pick the credit card that will earn you the most back. They open credit cards offering bonus categories that seem good at a glance, without considering how those categories match up to their own spending habits. Some consumers just take a shot in the dark here. There are also credit cards that earn the same flat rate on purchases. You can find cards with all sorts of bonus categories, such as dining, air travel, hotels, grocery stores, and even streaming services. When you're shopping for a new credit card, one of the most important features is the rewards rates different cards are offering. Want to potentially earn hundreds more in credit card rewards each year? Your budget could be your secret weapon.
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