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How to use rewards cards to prepare for graduation day

Cap and gown, photos, family attendance tickets – the expenses add up quickly, but cash back cards and the right rewards strategy can help you score savings

Summary

Graduation day is a special occasion both for students and their families – but it can also get expensive quickly. Charging expenses on a cash back or rewards card can lower the bill.

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Just when you think you’re done paying for college, either as a parent or a student, you realize there’s one more expense to cover: graduation day.

The average graduation day spending ranges from $300 to $2,500, depending on what’s involved, according to CostHelper. The good news is charging graduation day expenses to a credit card can lead to savings if those purchases earn rewards.

As graduation season approaches, these tips can help you map out spending and maximize rewards earnings.

See related: Best credit-building strategies after graduating college

Set guidelines for graduation day spending

A budget is your starting point for planning graduation purchases, says Yaz Purnell, founder of personal finance site The Wallet Moth. The sooner you start planning your budget, the better.

“Identify all the major costs you’re likely going to need to pay for – cap and gown, photos, family attendance tickets, graduation party, dinner, etc.,” says Purnell. “Then, prioritize those items from most important to least.”

For instance, having a cap and gown is a must, but buying a brand-new outfit to wear under it may be optional. Likewise, purchasing tickets to the event for family members is probably a priority expense, but hiring a professional photographer for the day may not be.

“Having your costs prioritized will let you know how much money you need to save for essential costs versus extra costs that can make the day more special, but aren’t absolutely required,” says Purnell.

Cash back could trump miles or points for rewards

You could use any credit card to pay for graduation day expenses, but to get the most leverage, consider what type of rewards you’ll earn for those purchases.

Jacob Dayan, CEO and co-founder of accounting firm FinancePal, says a cash back card is the way to go when charging things like the cap and gown, graduation fees, dinner out or expenses for the graduation after-party.

“There are several cards offering a good cash back percentage on any purchase,” says Dayan, but consider whether a flat-rate cash rewards card is best.

  • The Citi Double Cash Card, for instance, allows you to earn 1 percent cash back when you make purchases and 1 percent cash back when you pay them off. That keeps things simple, but other cards could put more cash back in your pocket for graduation day spending.
  • Take the Capital One Savor Cash Rewards Credit Card, which offers 4 percent back on dining and entertainment. If you’re picking up the tab for dinner for the new graduate, plus family and friends, you’d get more traction from this card compared to one that offers a flat rewards rate.

Cash back cards that feature rotating bonus categories could also be lucrative.

  • For example, the Chase Freedom card is offering its 5 percent quarterly bonus on up to $1,500 in purchases at grocery stores and home improvement stores through June, after you activate.
  • If you’re planning to host a graduation party at home versus dining out, that might come in handy for buying food, drinks and party supplies.

See related: Best cards for restaurants

Stack rewards whenever possible

Incorporate cash back portals, cash back apps, loyalty programs and sites that feature promo or coupon codes into your graduation spending strategy for more savings.

“It’s a good idea to keep your eyes peeled for any coupons or promotions that are available and apply them when making purchases with your rewards card,” says Dayan.

Uri Abramson, co-founder of finance site Overdraft Apps, recommends shopping portals like Cashback Monitor, which can help you find the best cash back deals from retailers online. Other cash back portals that are good for stacking rewards include TopCashback, Dosh, Honey and Ebates.

You can use one of these apps or all of them to earn additional cash back. Here’s the gist of how they work:

  • You browse the app or portal for cash back deals.
  • Complete a purchase using your cash back rewards card.
  • Earn cash back with your card, plus cash back through the portal.

Card-linked offers work along the same lines. These are offers that are exclusive to your rewards card. Amex Offers, for example, lets you earn Membership Rewards points or statement credit when you shop through the portal with an eligible American Express credit card.

See related: Use airline and shopping portals to boost rewards

Get a bonus on graduation day purchases

One option for increasing reward earnings for graduation spending is scooping up introductory bonuses.

“Applying for credit cards with a huge introductory bonus is a great way to quickly accumulate points or cash back needed to cover your graduation expenses,” says Abramson.

There are cards that offer bonuses, whether you plan to spend a little or a lot for graduation.

  • Chase Freedom offers a $150 introductory cash bonus when you spend $500 within the first three months after account opening.
  • You can get a $150 introductory cash bonus when you charge $500 to the Wells Fargo Cash Wise Visa® Card within the first three months.
  • The Citi Premier Card offers 60,000 bonus points when you spend $4,000 within the first three months of opening your account.

“Just make sure to take annual fees into account,” says Abramson. “The Platinum Card® from American Express or Chase Sapphire Reserve have sizable introductory bonuses, but they also carry massive annual fees.”

Getting a bonus is great, but consider what a rewards card could be worth to you in the long run.

“Do some thorough research before committing to opening a new card just for this one-time expense,” says Dayan. “If you’re already in the market for a new card, then there won’t be a better time to apply for one.”

On the other hand, if you don’t plan to use the card that often after graduation, think about how the rewards you could earn compare to the impact to your credit score.

Each new inquiry for credit can trim a few points off your score. And if you’re charging a large balance to the card, but you won’t pay it off right away, that could also drain points away from your score.

Opening a new rewards card just to get a bonus could also spell trouble for your graduation budget.

“Be careful about overspending,” says Dayan. “Just because you have the credit available to spend a little extra doesn’t mean you should.”

Redeem rewards wisely

Earning cash back or even points may be preferable to miles if you’re planning to redeem rewards as a statement credit later.

“If you’re going to use a credit card to save money on graduation expenses, you want to be using one that earns cash back or points that can be converted into cash back,” says Purnell. “A card that earns air miles is essentially useless when buying things like a cap and gown, but a card that earns you cash back can be a really valuable tool for paying back what you owe.”

Rewards can also be redeemed for gift cards, but pay attention to what they’re worth when you’re ready to cash in.

“Read the fine print to maximize cash back, rewards points or miles,” says Abramson. “Your card may give you several options to redeem points but not all of them are equally good.”

He uses American Express Membership Rewards points as an example. Points value ranges from half a cent to 1 cent per point, depending on whether you’re redeeming for travel, statement credit, gift cards or online shopping at Amazon.

If you decide to use a travel rewards card for graduation day spending, you’ll typically get the most value when redeeming miles or points for flights, hotels or other travel expenses.

The Chase Sapphire Preferred Card, for example, offers a 25 percent rewards boost when you redeem points for travel through Chase Ultimate Rewards. Run the numbers on redemptions to make sure you’re getting your money’s worth.

“Always try to get a redemption worth at least 1 cent per point or something very close,” says Abramson.

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Published: April 19, 2019

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Credit Card Rate Report Updated: August 21st, 2019
Business
15.55%
Airline
17.49%
Cash Back
17.63%
Reward
17.49%
Student
17.69%

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