5 Effective Ways Parents Can Use Cash Back Credit Cards

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Life is expensive for most Americans, and especially for parents. Raising a child to age 17 is estimated to cost as much as $310,605, according to data on child-raising costs gathered by The Motley Fool Ascent.

You may find yourself looking for ways to get your expenses down so you can free up extra money to save. Cash back credit cards are a great way to do that -- some earn as much as 6% back on certain purchases! Here's what you can do to get the most value out of this type of credit card.

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1. Get a card that earns bonus cash where you spend the most

This is one of the easiest ways to earn more cash back. Consider where you spend the most and get a card that earns bonus cash there.

You can find cash back cards with all kinds of bonus categories. For many parents, gas and groceries credit cards are the best choice. Those tend to be two of the biggest expenses in a typical budget, especially if you commute to work and you mainly cook at home.

Or, if you order through Amazon all the time, you could get a Prime Visa. It earns a high cash back rate on all Amazon orders.

2. Open a 2% card for all your non-bonus spending

Most cash back cards with bonus categories earn 1% outside of those categories. You get a great rate in the places you spend the most, but you don't earn nearly as much everywhere else.

That's why some people decide to carry multiple cash back cards. They'll get one or two (or more) cards with useful bonus categories. And they'll also get a card that earns a flat rate of 2%. Whenever a purchase isn't going to earn bonus cash, you can use your 2% card.

3. Put your cash back toward your financial goals

Cash back adds up over time. You could end up earning over $500 and possibly even over $1,000 per year this way.

One of the most common cash back mistakes is not having a plan for how you'll use it. People who fail to plan ahead often find that the cash back they earn doesn't seem to make much of an impact on their finances.

When you redeem cash back, put that money toward a financial goal you have. For example, if you redeem $50 in cash back, and you're working on building an emergency fund, then transfer $50 to your emergency savings. If you want to invest money for your child's college fund, you could use the money you save with cash back to fund a 529 plan.

4. Redeem your cash back every month

Lots of consumers aren't in any hurry to use the cash back they earn. In The Motley Fool Ascent's survey on credit card habits, 49% of Americans said they let rewards accrue for as long as possible.

It's not the end of the world, but it's better to redeem your cash back regularly. Your cash back isn't getting more valuable while it's sitting around. In fact, it's getting less valuable due to inflation.

You're much better off doing something with your cash back, such as depositing it in a savings account. Some high-yield savings accounts currently earn over 5%.

5. Always pay your credit cards in full

Last but not least, don't carry a balance on your cash back cards. If you do, your card issuer can start charging you interest. All that money you've made from cash back will effectively be wiped out by interest charges.

It only makes sense to use cash back cards if you're able to pay the bill in full every month. This is a good rule to follow with credit cards in general, so you don't get charged any interest on your purchases. But if you ever need to pay off purchases over time, credit cards with a 0% intro APR are the best option.

The best thing about cash back cards is how easy they are to use. You don't need to make any big changes to start saving money with them. Just use cash back cards on all your regular spending, pay your credit card bill in full, and redeem your cash back every month.

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