If you’re anything like me, you come over all guilt-stricken when you realise you’ve got no hard cash and have to pay for your tiny basket of items with your credit card. But the fact is, small spending on credit cards is being very much advocated by the world’s leading credit card companies, who offer incentives to keep us flashing the plastic, even for very basic everyday items.
Lots of consumers have caught on and taken up using their credit card for simple, small purchases. In the US, around 400 billion (and rising) under $5 purchases are made annually and Visa reported a total $17 billion of cardholders spending their money at fast-food restaurants across the country.
So why is the enthusiasm for small purchase spending on credit cards racking up? Apart from the fact that credit cards are accepted practically everywhere and it’s so much easier to draw out the credit card than spend ages counting cash, here are some lesser known benefits of going all minimalist with your credit card.
You Earn Points for Everyday Spending
Many credit cards, such as American Express, have jumped on the everyday spending bandwagon by introducing a small spending centred reward system for their customers. American Express Blue uses a points system that rewards customers one point for every dollar spent. When a customer spends money on every day purchases such as petrol or food shopping, the points system is then exercised at 10 times its value. Customers can then choose what rewards they would like once they have reached 1000 points; this could be travel miles, gift cards or cash. It’s not just the trusty Amex who want to encourage regular repetitive use, the Citi-forward credit card offers five points for every one dollar spent on music, books or movies.
Rebuild your Credit Rating
Making small purchases on everyday items means that you’re not eating hundreds into your total available credit and this looks good to any potential lender, which boosts your credit rating. It is also a good way to rebuild credit rating by using your credit card specifically for small purchases. It is a useful way to control your spending and keep regular tabs on it, thus building back good credit. It is important that credit card bills are paid off on time each month (fully if you want to avoid the interest applied) in order to maintain a good credit rating.
You Can Get Cash Back Rewards
Credit cards associated with retailers offer cash back reward schemes for their customers, encouraging them to make regular, small purchases. Most retailers offer around 1% cash back on small purchases. Costco’s credit card offers 3% cash back for small purchases from their store but also offer the same for dining and petrol purchases elsewhere. The aforementioned American Express Blue offers up to a whopping 5% cash back on small spending, according to the total amount you spend monthly. This is only one of the many ways to make the most out of your rewards and points schemes on your credit card.
Contributed by Kayla Wilson from CreditCardCompare, a credit card comparison website based in Australia.