Making rewards credit cards, saving work together

While some U.S. consumers will go to great lengths to manipulate their cash flow to squeeze out some extra savings, for most Americans it may be easier just to make use of a solid reward credit card.

Compare Reward Credit CardsConsumers have been known to use a number of tricks in order to save some of their money.  One of these strategies is to have their paycheck deposited directly into a high-yield savings account.  That lets them earn added interest before the money is transferred into a checking account and used to pay bills.

Meanwhile, Americans may choose to borrow at 0 percent APR from a low interest credit card.  They will then deposit this money into an online high-yield savings account.  If the cardholder takes a large enough amount in cash advances on their credit cards, the amount of interest earned can be substantial.

When they aren't earning interest with 0 percent credit card offers, consumers may be hunting for a credit card that supplies the best rewards.  Once they find the credit card currently paying the highest rewards, they will charge everything they can on their plastic to rack up the rewards.

Depending on the consumer and the desired reward, they may opt for a credit card that provides cash back or perhaps airline miles on purchases.

But it may be that this final strategy -- searching for the best rewards credit card and then using it often -- is the safest technique.  By charging as many expenses as possible, while always making sure to pay the entire balance each month, consumers can enjoy some impressive savings.

For example, if a cardholder charges $1,000 each month on an airline credit card, they should earn enough points every two years for a domestic round-trip ticket valued at up to $400.  If the airline credit card gives double miles plus bonus points for the first card purchase, the consumer could be looking at two or three airline tickets.

When shifting money between a saving account, checking account, and a credit card, there are some serious dangers to be aware of.  These include bouncing a check due to insufficient checking account funds, or missing a credit card payment on that cash advance.  Such costly mistakes could result in sizable fees or a damaged credit history.

Still, there are ways consumers can safely enjoy added savings even as they use their reward credit cards.  While maintaining sufficient funds in their checking account in order to avoid fees, they can shift the rest of their money into a high-yield savings account or money-market fund for higher interest.

But even more important, consumers should seek to reduce annual expenses on their mutual funds instead of applying strategies to their cash flow.  Lowering costs related to their mutual funds can have result in substantial savings, while also proving much easier than rotating funds through bank accounts and credit cards.

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Updated: 03-21-2019