Use rewards to boost back-to-school savings
By Cathleen McCarthy | Published: August 4, 2016
Saving money on back-to-school shopping means comparison shopping and – if you’re lucky enough to live in the right state – shopping during the sales tax holiday. But the smartest shoppers add one more trick to their back-to-school search for savings: They use their credit cards strategically.
Here are six ways to use credit cards to cut your back-to-school bill.
Use revolving category cards
It’s hard to beat the 5 percent cash back of a revolving-category card, but some third-quarter offerings are better suited to back-to-school than others. Chase Freedom is rewarding wholesale clubs (Costco, etc.) this quarter and Citi Dividend Platinum Select is offering 5 percent on Hilton hotels and car rentals, which may help if you’re setting up your new college student.
Back-to-School Guide 2016
Discover It is offering 5 percent cash back at Amazon and home improvement stores through September. If you’re shopping for clothes, books or electronics, or furnishing a new college student’s dorm room, this is a pretty rewarding combo.
What’s more, new cardholders can double that. With its CashMatch program, Discover will match any rewards (points or miles) you score in the first 12 months of using Discover’s cash-back or miles card. So that 5 percent spent on school supplies on Amazon becomes 10 percent back. “CashBack Match is a great opportunity for customers to try Discover,” says Maureen Powers, vice president of rewards at Discover. “Once they try it and take advantage of all the ways to earn rewards, I think they’ll see how valuable the card can be.”
US Bank Cash+ allows you to choose your own two categories to earn 5 percent on each quarter – including clothing, sporting goods, bookstores, electronics and furniture – all potential goldmines for back-to-school rewards. “With the Cash+ card, you earn 5x in two categories and 2x in some everyday-spend categories each quarter,” says Bob Daly, senior vice president of rewards for US Bank. “So, to the extent that you can steer your spending based on seasonality, that can be a rich proposition.”
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Take a holiday from sales tax
If you live in a state offering back-to-school “sales tax holidays,” you may be able to shave even more off your purchases. Your state will have its own variation on product categories and price limits, so check the guidelines before you shop.
“Each state gets really specific about dollar amounts,” says Leah Ingram, blogger and author of Suddenly Frugal: How to Live Happier and Healthier for Less. “In Missouri, for example, backpacks that cost $50 or less qualify for a tax refund. So if you buy a backpack for $51, you’re out of luck.”
In some places, you can save serious money on big purchases. “Where you’re really going to find savings are in the states that cover computers,” Ingram says. New Mexico, for example, waives sales tax on any computer costing $1,000 or less. Sales tax in that states varies by county, but can go as high as 8 percent, meaning you can potentially shave $80 off that PC purchase.
You don’t have to shop local to get sales tax waived, by the way. Using your credit card for online purchases qualifies, as long as purchases are made within the tax-free holiday and are shipped to an address within that state – but it’s best to stick with major sellers likely to have automated sales tax, warns Jennifer Dunn, editor of TaxJar. “You probably don’t want to buy from Etsy or a small ecommerce site, but you’re safe if you buy from a site like Amazon.com,” says Dunn. “Amazon has a very robust system for collecting sales tax.”
Shop via rewards portals
Get in the habit of starting your online shopping at your card issuer’s website. Most major retailers partner with rewards cards, and less-known merchants often have bigger discounts. Why order directly from a merchant if you can earn more points via a rewards portal?
Order your daughter a $100 leather book bag directly from macys.com using a Chase Freedom or Sapphire card, for example, and you earn the standard 1 point per dollar. Click over to Macy’s via the Chase Ultimate Rewards portal, however, and you earn 3 points per dollar. That $100 purchase just netted you an extra 200 points. Buy that Macy’s bag – or iPad on Apple – via the Discover portal and you can earn 5 percent cash back. Discover is offering 10 percent back on Samsung.
If you shop on Amazon, you can use reward points in place of cash with both Discover and Chase. For Chase cardholders, that requires signing into your Chase account online, linking your card to your Amazon.com account, then using your points to pay for all or part of your orders at checkout, including tax and shipping. It works pretty much the same with Discover.
Of course, if you’re doing the bulk of your shopping on Amazon, the simplest reward option may be the Citi Double Cash card, which offers 2 percent back – 1 percent when you buy, 1 percent when you pay – with no categories, no annual fee and no caps.
Take advantage of gift cards
This is also a great time of year to cash in points for gift cards. If you have more rewards than cash, you can get that same bag for 10,000 points by purchasing a Macy’s gift card with your Ultimate Rewards points where 10,000 points gets you a $100 gift card. Discover usually has the best deals on gift cards, where 20 CashBack points can get you a $25 gift card.
“When I need to do the bulk of my shopping for back-to-school or holidays, I cash in my rewards for gift cards, so it’s like I’m shopping for free,” says Ingram. “I buy all my shoes on Zappos using $100 Discover gift cards I get for $90. Cards like Discover also offer promotions, where certain stores offer more than the normal 5 percent cash back for a period of time.”
Look for flexible rewards spending
If you’re taking on a new card, Daly advises considering not just how many points you’ll earn, but how easy they will be to spend. The US Bank FlexPerks Visa Signature, which he calls “the crown jewel of our rewards cards,” gives you 2 points per $1 on most cellphone expenses and either gas, grocery or airline purchases. If you have kids in college and at home, you may be spending in all those areas.
FlexPerks Visa is the only card offering US Bank’s mobile rewards redemption. Launched last fall, Real-Time Rewards allows you to redeem rewards at the point of purchase – whether your checking out online or at a store counter.
“It takes about 15 seconds to sign up, and then any time you make a purchase, we ping the rewards bank to see if you have enough points to redeem for the thing you just bought,” Daly says. “You get a text message: ‘You have 118,000 flex points. Want to use 4,000 of them?’ Text back the word ‘redeem’ and, poof, we instantly credit the purchase. It doesn’t affect the price on your receipt or involve the merchant in any way.
“The beauty is that we’ve let the customer be a savvy shopper,” he says. “She can shop the sales, get the best deal, and then decide if she wants to apply reward points to the purchase price.”
Protect yourself with the soft perks
No matter how great a deal you get, you’ll want your money back if the item you purchase doesn’t live up to expectations – or you find it a better deal elsewhere. Your card may have you covered there too. Both Discover and Chase Freedom (and Sapphire), for example, insure you for up to $500 for theft or damage of items purchased with their cards.
They also offer price protection for up to $500 per claim. As of May, Citi Price Rewind is matching that, upping their protection from $300 to $500 and from 60 to 90 days, and throwing in an additional 24-month warranty on top of the manufacturer’s.
So, if you buy your student a laptop, then find it at a lower price within 90 days from purchase, these card issuers will refund you the difference (not including taxes and shipping). These “soft perks” of a rewards card are often buried in the fine print, but don’t overlook them. They can come in mighty handy when you do serious shopping.
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