While many rewards enthusiasts focus on signing up for new credit cards to earn signup bonuses, not everyone has the time or desire to play the signup game. There is effort involved in tracking multiple cards, annual fees, and rewards programs, after all, and some people don’t want to spend their time or mental energy this way.
If you’re someone who falls into this category, you may be better off maximizing one or two cards instead of chasing rewards. Fortunately, you can earn plenty of rewards over time if you’re savvy about your card’s benefits and bonus categories.
The key to getting the most out of your rewards cards is understanding how they work and looking for opportunities to earn more points on your everyday spending. Here are some tips that can help.
Brainstorm every bill you could pay with a credit card
Because rewards cards offer points based on each dollar you spend, maximizing the amount you can spend on credit is the best way to boost your rewards haul. The smartest strategy to use here is figuring out how many of your monthly bills you can pay with a credit card.
While you may not be notified or aware, it’s possible that bills you’ve been paying with a check or debit card for years can be paid with a credit card without any fees. While your bills may vary, some expenses you should try to pay with a credit card include:
Utility bills like electric or gas
Cable television and internet
Auto and home insurance
College tuition or student loans
Keep in mind that these are just some of the bills you could be paying with credit. Depending on your situation, you could have additional, uncommon expenses to cover that could be paid with credit with ease.
Also, remember that these additional bills should be paid with credit on top of your everyday expenses like groceries, dining out, gas or bus fare, and miscellaneous spending. Every time you buy something in person or online, you should strive to pay with your rewards card if you can.
Leverage your rewards card bonus categories
It’s also important to leverage your favorite card bonus categories, whatever they may be. This is especially important if you have a few cards with different bonus categories since you’ll want to make sure you’re using the right card for bills that let you earn bonus points.
Let’s say you have a travel credit card that earns 3x points on dining and travel and another card that earns 6x points at the grocery store. In that case, you would be smart to use the travel card for dining and travel purchases and your other card when you stock up on food. While the amount of rewards you earn with individual purchases may seem nominal, using the right card for the right purchase can help you earn a lot more rewards over time.
Set up auto-pay bills to be paid with credit
Most of us have bills set up to be paid automatically, whether it’s our Netflix and Hulu subscriptions, gym membership, or utility bills. Make sure each bill you have set up to be paid automatically is set up to be paid with your rewards card and not a debit card. This way, you can earn rewards points on those expenses every month.
Use shopping portals and dining clubs
Many flexible rewards programs, frequent flyer programs, and hotel loyalty programs have shopping portals you can access to earn extra points. Major airlines like American, Delta, and United also have shopping portals that work similarly. (See also: How to Maximize Rewards Through Credit Card Shopping Portals)
Some programs like Southwest and Delta also offer dining clubs. These programs let you earn additional points or miles just for dining at participating restaurants in your area. It’s easy and it’s free to join, so you may as well earn extra miles on your spending if you’re going to dine out anyway. (See also: Everything You Need to Know About Airline Dining Rewards Programs)
How much the average family can earn
If you are skeptical the average family can rack up meaningful rewards without signing up for new cards over and over again, look at how this might work in real life. For example, imagine a family of four with two rewards card-toting adults. Across the two of them, they have:
A cash back card that earns 2% back
A travel credit card that earns 3% on dining and travel
A rewards card that earns 6% cash back at the grocery store on up to $6,000 in spending each year
To figure out how much this family might earn, we used Bureau of Labor Statistics spending averages from 2017. Here’s a rundown of that data for the year plus how much a family could earn in rewards over 12 months based on average expenses:
Food at home ($4,363): $261.78 in rewards at 6%
Food away from home ($3,365): $100.95 at 3%
Utilities, fuels, and public services ($3,836): $76.72 at 2%
Household operations ($1,412): $28.24 at 2%
Household supplies ($755): $45.30 at 6%
Household furnishings and equipment ($1,987): $39.74 at 2%
Apparel and services ($1,833): $36.66 at 2%
Gasoline and motor oil ($1,968): $39.36 at 2%
Other vehicle expenses ($2,842): $56.84 at 2%
Healthcare ($4,928): $98.56 at 2%
Entertainment ($3,203): $64.06 at 2%
Personal care products ($762): $45.72 at 6%
Education ($1,491): $29.82 at 2%
Total rewards: $923.75
While $900+ is a lot to earn in rewards within a year, you have the potential to earn a lot more. After all, these are just some of the expenses the average family faces and not all of them. If you could pay some additional big bills with credit each month like daycare or your rent, you could significantly add to your bottom line.
What to watch out for
While maximizing rewards cards is a smart idea if you’re using them already anyway, there are always pitfalls to be aware of when you’re using a credit card. Here’s what to watch out for during your quest for more cash back and travel rewards.
Fees for using credit
While there are many bills you can pay with credit without a fee, some vendors, merchants, and service providers charge a fee to use a credit card as payment. Fees are especially prevalent on bills such as utilities, cable or internet, rent, and insurance. Make sure to verify you aren’t being charged a fee to use credit before you proceed.
Don’t forget that some rewards cards charge annual fees. These fees may be worth it depending on your spending and rewards haul, but you should always factor them into the equation to make sure each fee is worth paying. If you’re against paying annual fees, look for rewards cards that don’t charge one.
Using a credit card for all your expenses may simplify your financial life, but it could also cause your budget to fall out of whack. Make sure you’re only spending on purchases you planned to make anyway, and that you’re tracking your spending and paying off your credit cards regularly.
Never use credit cards for purchases you can’t afford to repay if you’re pursuing rewards. The interest you’ll pay will always be much more than the rewards you earn. If you’re worried using credit will cause you to rack up debt you can’t afford to repay, you’re better off sticking to cash or debit instead.
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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:
5 Reasons Not to Use Debit Cards When You Shop Online
How to Resist These 4 Rationalizations to Spend Money
4 Mindful Spending Habits That Will Save You Money
6 Things to Consider Before Making a Big Purchase for Rewards Points
Update 12/9/20: Deal is due to end on 1/13/2021 according to people with affiliate links. Make sure to apply through a link with the $50 bonus.
Update 10/1/20: Doing a dummy booking gets you 140,000 points + $50 statement credit with the AF waived. Somebody in the comments reported seeing a $150 statement credit, but I can’t get that to show at all. Updated the direct link.
Update 9/30/20: New direct link available, no longer needed to apply in app (wasn’t showing for everybody anyway). This time the annual fee is waived, making the deal the best ever.
Direct link to offer
Chase IHG Premier card is offering a signup bonus of 140,000 points after $3,000 in spend within the first three months.
Annual fee of $89 waived first year
Card earns at the following rates:
25x points per $1 spent on IHG properties (10x from the card + 15x from status and club membership)
2x points per $1 spent on gas stations, grocery stores and restaurants
1x points per $1 spent on all other purchases
Free night certificate on card anniversary, this is limited to properties that cost 40,000 or fewer points
Automatic Platinum elite status
Fourth Reward Night Free on any stay of 4 or more nights
20% discount when purchasing points
Global Entry or TSA PreCheck fee credit
10,000 bonus points when you spend $20,000 or more and make one additional purchase each account anniversary year
This product is not available to either (i) current cardmembers of this credit card, or (ii) previous cardmembers of this credit card who received a new cardmember bonus for this credit card within the last 24 months. If you have the old IHG card, youâre still eligible to get this bonus/card.
Chase 5/24 rule applies to this card
Best offer we’ve ever seen was 125,000 plus $50 statement credit, this one doesn’t have the $50, but comes with 15,000 more points. If IHG interests you and you are eligible, this one is worth signing up for. We’ll add this to our best credit card bonus page.
If you recently signed up with the targeted 125,000 points offer, you should be able to message Chase and have this 140k offer matched. As always read these things everybody should know about Chase credit cards before applying.
Thanks to all those who sent this in.
Update 9/17/20: Deal is now publicly 125,000 points. But there is a 140,000 point offer showing up in app for some. Hat tip to Kyle
Offer was supposed to end at end of March, but is still alive and well. Hat tip to VFTW
Cash back is a rewards benefit that many credit cards offer to cardholders. By taking advantage of it, youâll receive back a prespecified percentage of certain purchases you make. Many credit card companies will provide higher cash back rates on certain types of purchases, such as airfare, gas, food and more. Cash back is just one way that credit cards offer rewards, as mileage and points are some alternatives.
Before you spend too much money with your credit cards, make sure you have a financial plan in place. Speak with a financial advisor today.
What Is Cash Back?
The most commonly recognized style of cash back is what you have likely seen advertised as cash back credit cards. This specifically refers to earning a certain percentage of your credit card purchases back as cash rewards. However, cash back rates vary widely, as do the categories that they apply to.
You usually wonât see credit card cash back rates higher than 5%, while 1% is the typically minimum you will earn. Cash back categorization is significantly more complex though, with a merchant category code (MCC) system being the main organizing force.
MCCs run the entire cash back industry, as they ultimately decide how each purchase you make is classified. These designations coincide with cash back rates set by the issuer of your card. For example, you could use your card for a $50 dinner at a steakhouse, which has a ârestaurantâ code. If your card offers a 2% cash back rate on all spending at restaurants, youâd earn $1 cash back.
Familiar alternatives to cash back include point- and mile-based programs, though many cardholders are partial to cash back. Cash back affords cardholders an independence that is ideal, since you can redeem it for nearly anything.
Popular Cash Back Credit Cards
Discover, American Express, Mastercard and Visa all have cash back rewards credit cards available for prospective cardholders. Each abide by their own set of regulations, though card issuers decide on cash back rates, promotions and bonuses. Chase, Wells Fargo, Citi and Capital One represent some of the most active card issuers on the market today.
Below are a few examples of what you can expect to earn when looking for a cash back credit card:
Cash Back Credit Cards Card Name Cash Back Rates Cash Back Bonus Costco Anywhere Visa Card by Citi 4% cash back on eligible gas up to $7,000 per year, 3% cash back on eligible travel and restaurants, 2% cash back in-store and online with Costco and 1% cash back elsewhere None Bank of AmericaÂ® Cash Rewards credit card 3% cash back in a category of your choosing, 2% cash back at grocery stores and wholesale clubs and 1% cash back on all other purchases (up to a quarterly cap of $2,500 in combined grocery/wholesale club/choice category purchases) $200 bonus cash back for spending at least $1,000 over your first 90 days Capital OneÂ® QuicksilverÂ® Cash Rewards Credit Card Unlimited 1.5% cash back everywhere $150 cash back bonus when you spend $500 during your first three months Citi Double Cash Card 1% cash back on your purchases and another 1% cash back when you pay your bill None Capital OneÂ® SavorÂ® Cash Rewards Credit Card Unlimited 4% cash back on dining and entertainment, 2% cash back on groceries and 1% cash back elsewhere $300 cash back bonus for $3,000 spent over your first three months TD Cash VisaÂ® Credit Card 3% cash back on dining, 2% cash back at supermarkets and 1% cash back on everything else Earn $150 cash back when spending $500 within the first 90 days (See Terms) USAA Preferred Cash Rewards Visa Signature Unlimited 1.5% cash back on everything None Blue Cash Everyday Card from American Express 3% cash back on up to $6,000/year at U.S. supermarkets (then 1%), 2% cash back at U.S. gas stations and select U.S. department stores and 1% cash back on other purchases $150 bonus cash back for spending $1,000 over your first six months Getting Cash Back at Retailers
Picture this: youâre buying some groceries on a Sunday morning, but know youâll need $40 cash to fill up your car with some gas later. You could swipe your debit card at the supermarket and then head over to the ATM. Or you could ask for cash back right from the cashier, eliminating the extra errand.
The above situation represents the alternative definition of cash back. Itâs ultimately the use of a cash register as if you were swiping your debit card at the ATM. When you request cash back from a cashier, your bank account will be charged the amount you asked for. This enables the funds to be pulled from your account so the cash can be placed in your hand.
Although this generally only applies to debit cards, there are a few exceptions for credit cards. DiscoverÂ® allows cardholders to ask for cash back at more than 50 large retail stores without a transaction fee.
There are many benefits to utilizing credit card rewards programs. But spending money that technically isnât yours will always involve some level of risk. If youâre in good financial shape, though, cash back and other types of credit card rewards can help you take more vacations, save money on purchases and more.
Credit Card Tips
Managing your credit cards and any debt you accumulate using them is a major part of your long-term financial outlook. Consider working with a financial advisor to make sure youâre managing your money with your goals for the future in mind. SmartAssetâs free matching tool can connect you with up to three advisors in your area. Get started now.
If youâre someone who wants freedom when spending credit card rewards, you may prefer cash back to a points- or mileage-based reward system. However, keep in mind that cash back rates are sometimes less than those in point-centric programs.
Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the authorâs alone, and have not been reviewed, approved or otherwise endorsed by the issuer.
Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.
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In response to the coronavirus pandemic, major credit card issuers are offering relief to their customers.
Even though many places around the country are open, the pandemic continues to impact the U.S. economy. Workers are still at risk of being laid off or facing reduced hours or pay.
“This is a rapidly evolving situation and we want our customers to know we are here to provide assistance should they need it,â Anand Selva, chief executive officer of Citiâs consumer bank, said in a statement in Spring 2020.
At the same time, scammers are now trying to take advantage of coronavirus concerns by sending out fake emails about the virus that are designed to steal consumersâ personal and financial information or to infect their computers with malware.
Financial strategies if you’re self-employed
How to manage your credit cards during the coronavirus outbreak
Coronavirus: What to do if youâre unemployed and have credit card debt
What to do if youâre struggling to pay your credit card bills
Many credit card issuers are allowing customers to opt into financial relief programs online. These programs are a convenient way to access short-term relief. But it could come with a long-term cost as many cardholders will continue to see interest accrue. With the average credit card interest rate sitting at 16.05%, cardholders might find more cost-effective relief through other options.
Here’s what issuers are currently offering:
Cardholders who are having difficulties can get assistance through American Express’s financial hardship program. Eligible cardholders have the option to enroll in a short-term payment plan, which provides relief for 12 months, or a long-term plan, which can provide relief for either 36 or 60 months.
Under both options, you will receive lower interest rates, plus waived late payment fees and annual fees. But you might not have access to certain card benefits and features.
If you enroll in the short-term plan, you might be able to continue putting new purchases on the card but with a reduced spending limit. If you are participating in the long-term plan, you will not be able to use the card.
Amex will report participating cardholders to the credit bureaus as current, assuming they comply with the program’s rules. But the program’s terms do offer some important caveats: Amex will inform the credit bureaus that you are enrolled in a payment assistance program (if you’re in the long-term plan). And under both plans, Amex will report that you have a lower credit limit.
While these factors do not have as much of an impact on your credit score as a delinquent account does, it could still signal to other lenders that you might be having some financial hardship.
Bank of America
Bank of America cardholders who have trouble paying credit card bills can request a credit card payment deferral by calling the number on the back of their card.
To qualify for payment assistance, cardholders must be carrying a balance, according to the website.
Bank of America sent an email to Preferred Rewards members in May 2020 stating that the company had temporarily suspended the annual program review process. Members whose assets dropped below the regular threshold to keep their status would continue to qualify for program benefits. It is unclear if Bank of America is still suspending this program.
Barclays urges credit card account holders to request payment relief online. As of May 4, 2020, the bank is granting payment relief for two statements, but interest will continue to accrue.
âWe understand that this is a time of uncertainty for many people, and we know that there may be instances where customers find themselves facing financial difficulties. Capital One is here to help and we encourage customers who may be impacted to reach out to discuss how we might be of assistance,â the bank said in a statement.
In a March 26, 2020 update, Chairman and CEO Rich Fairbank confirmed that they are offering waived fees and deferred payments on credit cards for some cardholders.
Because each customerâs situation is different, the bank encourages customers to contact it directly. To contact Capital One customer service about an existing account, call (800) 227-4825.
See related: How to clean your credit card
Previously, Chase Bank stated that customers will be able to “delay up to three payments on your personal or business credit card” if needed, with interest continuing to accrue. The website currently does not specify how many payments cardholders can defer.
It also stated that active duty military members who are responding to a disaster might have access to additional benefits. Servicemembers can call the bank for more information.
In a letter to shareholders, the company’s CEO, Jamie Dimon, also promised to not report late payments to the credit bureaus for “up-to-date clients.”
See related: Chase offering limited-time bonus on food delivery for some cardholders
Citi customers who have been impacted by the coronavirus pandemic might be eligible for assistance. Previously, the bank was waiving payments and late fees for two consecutive billing cycles. However, Citi has ended its pandemic assistance program.
“Due to a significant and steady decline in enrollments, our formal COVID-19 assistance program has concluded and we will focus on providing assistance options to those customers financially affected by COVID-19 on a case-by-case basis. We continue to closely monitor the situation and will evaluate additional actions to support our customers and communities as needs arise,” a spokesperson for Citi said in an email.
During the bank’s pandemic assistance program, interest continued to accrue, but accounts that were current at the time of enrollment were not be reported as delinquent.
Discover will be extending relief to qualified customers who are experiencing financial difficulty caused by the spread of COVID-19.
“We encourage them to contact us by calling and are directing them to www.discover.com/coronavirus for phone numbers for each product line and other FAQs,” Discover said in a statement earlier this year. “We also can provide relief through our mobile text app, which connects a customer directly with an agent.”
Discover it Miles cardmembers can also put their miles towards their bill â including their minimum payment.
See related: What to do if you can’t pay your business credit card bill
Apple Card customers can enroll in an assistance program. Previously, cardholders could waive payments without accruing any interest. The website currently doesn’t specify if this is still the case.
Cardholders can defer payments for three billing cycles. Though interest will continue to accrue, enrolled cardholders will not receive late fees, and their accounts will be reported as current, as long as accounts were not delinquent at the time of enrollment.
Synchrony is extending relief to customers experiencing financial hardship. The company’s website previously stated that this could include payment relief for up to three statement cycles, while interest would continue to accrue. The website currently offers no specifics about what the issuer is prepared to offer.
Truist (formerly SunTrust and BB&T)
Previously, Truist offered payment relief assistance to customers with personal and business credit cards, among other products. As of April 14, it was willing to delay payments for up to 90 days. The website currently offers no specifics about what the issuer is prepared to offer.
Previously, impacted cardholders could defer monthly payments for two consecutive billing cycles. The company’s website currently does not specify what assistance cardholders can expect to receive.
See related: Coronavirus stimulus legislation doesnât suspend negative credit reporting
ultimate guide to coronavirus limited-time promotions for more offers designed to help cardholders maximize rewards amid the coronavirus pandemic.
Business credit cards
If you are a small-business owner and cash is not flowing and bills are piling up, the most important thing to do is contact your card issuer.
Some banks are also providing assistance in case you can’t pay your business credit card bill.
Another coronavirus complication: Scams
As consumers wrestle with the impact of the coronavirus, scammers are trying to take advantage of the situation.
In a June 2020 public service announcement, the FBI warned that the increasing use of banking apps could open doors to exploitation.
“With city, state and local governments urging or mandating social distancing, Americans have become more willing to use mobile banking as an alternative to physically visiting branch locations. The FBI expects cyber actors to attempt to exploit new mobile banking customers using a variety of techniques, including app-based banking trojans and fake banking apps,” the PSA warns.
Scammers might also be capitalizing on health and economic uncertainties during this time. In one such scam, cybercriminals are sending emails claiming to contain updates about the coronavirus. But if a consumer clicks on the links, they are redirected to a website that steals their personal information, according to the Identity Theft Resource Center (ITRC).
Identity theft in 2020: What you need to know about common techniques
The outbreak of a disease can upset daily life in many ways, and the ripple effects go beyond our physical health. Thankfully, many card issuers are offering relief. If you’re feeling financially vulnerable, contact your credit card issuer and find out what assistance is available. And while data security may seem like a secondary consideration, it’s still important to be vigilant when conducting business or seeking information about the coronavirus online.
Weekend plans look a lot different nowadays, eh?Â Iâm sure you are as sick of reading stories that begin with,Â “In these unprecedented times” or “Our new reality.”Â So Iâm going to skip the intro and the explanation …You are being a hero by staying home and protecting the health of your family and that of your neighbors.Â Thank you!Â Let me reward that good behavior with a list of a few things to keep you entertained this weekend.
Itâs a ridiculous tongue in cheek nature show on Netflix.Â There are plenty of adult jokes disguised as nature facts.Â Itâs child safe and adult approved.Â The whole family enjoyed it!Â If you are looking for a program the whole family can enjoy, add Absurd Planet to your watch list.
Speaking of Netflix, did you know you can watch a movie with friends long distance?Â Check outÂ Netflix Party.Â It synchronizes everyoneâs video playback and adds a chat feature.Â If you and your significant other arenât quarantining together, this is certainly a fun date night option, too!
Date Night Dinner & Dessert
If you are homebound with your significant other, youâre probably ready to spice things up. Â Tasty did a great feature of creating a three-course meal from the pantry.Â I was impressedâ¦.especially when one of the courses was peanut butter cookies!Â Follow along and cook a great meal or just get inspired to create your own pantry date night!
We are sitting still so much more than usual.Â You need to give your joints and bones and muscles some love! Stretch them out!Â There are plenty of free stretching videos on YouTube and the like, but my number one recommendation is the Peloton App.Â They are offering a 90-day free trial right now, after that itâs $13/month.Â The full body stretches are 5-15 minutes long giving you plenty of options.Â Additionally, they have meditation, boot camp, running, and walking programs.Â (and no, Iâm not an affiliate…I just think itâs a great app)
Try A New Summer Recipe
Yeah, cooking isnât a groundbreaking suggestion.Â Approach it a little differently today.Â Think of it as a meditation.Â Take your time cleaning and cutting the fresh veggies or fruit.Â Maybe watch a Youtube video first and learn a new technique.Â Then when you are ready, take on one of these yummy summer recipes.
Last week I took a dance lesson to learn the moves to the Tik Tok âSavageâ dance. The instructor was amazing…I was a *mess*!Â But I havenât laughed that hard in a while…and it used up a lot of energy!Â You can find plenty of lessons on YouTube or you can try a virtual class with Diva Dance DC.Â You can literally dance like nobody is watching! And who knows…maybe you will find some hidden talent!
Phone a Friend
â¦.not for your sake, but for theirs.Â People are getting cabin fever.Â They need each other.Â Scroll through your phone and find the friend that you know lives alone or the friend you know wishes they were living alone, and give them shout.Â It doesnât have to be a Zoom happy hour and it doesnât have to be an hour long.Â You can simply share a happy memory you have with them.Â Small interactions and gestures go a long way right now.Â Â
Thatâs it for this week.Â As I find specific events or awesomeness, I will share a new post weekly!Â If you have ideas or events to include next week feel free to send them my email@example.com or @Apartmentalist on Instagram.
Sending cash to friends and family? Before you reach for that credit card, grab a calculator. It’s time to do a little math.
With most everything you purchase online or through apps, credit cards have the edge. With plastic, you have chargeback rights. If you’re overcharged or receive the wrong item, broken merchandise or nothing at all, your card issuer will make it right. And if you use a rewards card, you collect points or miles, too. Win-win.
But it’s different story when you’re sending money through peer-to-peer platforms. Many of them (like Google Pay, Popmoney and Zelle), don’t allow consumers to use a credit card to send cash.
Others (like Cash App, PayPal and Venmo), allow credit cards but also charge a fee for the privilege – often about 3%.
See related: How to choose a P2P payment service
The hidden costs of using credit cards to send money
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Choose a credit card to send money and you might also end up paying additional fees to your card issuer. That’s because the combination of some peer-to-peer apps with certain cards are coded as cash advances, rather than purchases.
For many cards, that cash advance code triggers a higher interest rate that kicks in the moment you make the transaction, as well as a separate cash advance fee that’s often $10 or 5% of the transaction – whichever is higher. (Currently, the average interest rate for cash advances is 24.8%, while the average APR for purchases is 16.05%.)
So the combination of peer-to-peer service fees, credit card cash advance fees and that higher interest rate (with no grace period) could make sending a few hundred dollars a bit more costly than you’d planned.
No chargeback rights with credit cards
The real kicker: Unlike other venues, you don’t have chargeback rights when you use credit cards to make peer-to-peer money transfers.
When you present your credit card in an online or brick-and-mortar store, there’s a merchant involved – and the law provides chargeback rights for your protection in case you don’t get what you were promised in the deal. But in a peer-to-peer money transfer, there’s no merchant, so currently the laws don’t give consumers any chargeback rights, says Christina Tetreault, manager of financial policy for Consumer Reports.
“The chargeback right requires a merchant,” says Tetreault. “One of the hoops a consumer has to jump through is to try and work it out with the merchant.”
If you use a peer-to-peer service and send the wrong amount or send the money to the wrong person, most platforms advise that the only way to get it back is to contact the recipient and ask them to return it. And that’s often the same whether you use a credit card, debit card, bank account or funded account on the platform.
“Be doubly sure when you’re sending the money that you’re putting in the correct information,” says John Breyault, vice president of public policy, telecommunications and fraud for the National Consumers League. “It’s still a buyer beware world when it comes to peer-to-peer.”
If you’re sending money and want to use a credit card, it pays to do a little sleuthing first. Check out the peer-to-peer site. Does it allow users to send money with a credit card? If so what, if any, fees does it charge?
On some platforms (PayPal is one), you could see similar fees for using a debit card – while sending from a bank account or funded account on the platform is free.
The good news is that many peer-to-peer platforms clearly disclose it when there’s an extra charge to use a credit card, says Tetreault. With Venmo, for example, you’ll get a pop-up message.
Harder to decipher: Will credit card transactions on the platform be treated as a cash advance? If your preferred platform doesn’t post this information, you might need to contact customer service. (And how quickly and easily you get an answer can tell you a lot, too.)
Ask your card issuer the same question: Are peer-to-peer money transfers on the platform you’ve chosen treated as a cash advance? If they are, what’s the interest rate, and what’s the cash advance fee?
“What I would suggest is to ask that question, via email, of your financial institution,” says Tetreault. “It may be in their FAQs. And you want to save that email. If you have it in writing, if there’s an issue later, you’re better positioned to contest that fee.”
But “the hard truth is you may not be able to find out ahead of time,” she says.
Another solution: Opt to use a credit card issued by a credit union.
“With credit unions, the APR is usually the same” for purchases and cash advances, says John Bratsakis, president and CEO of the Maryland and District of Columbia Credit Union Association.
Likewise, with American Express cards you pay your regular interest rate and no cash advance fees on peer-to-peer transfers, says Elizabeth Crosta, vice president of public affairs for American Express.
And credit cards from U.S. Bank register peer-to-peer money transfers as regular purchases – with no cash advance fees or cash advance APRs, says Rick Rothacker, spokesperson for the bank.
See related: How do credit card APRs work?
What’s your reason for using a credit card?
Take a good look at the reason you’re using a credit card, too. If you want chargeback rights, that’s not an option. If you’re doing it for the rewards, will the value of those points or miles be eaten up by extra fees or a higher interest rate you have to pay to use the card?
And if you’re using a card because you don’t have the cash, that might be a good reason to rethink the idea of sending money in the first place.
That’s a huge red flag, says Bruce McClary, vice president of public relations at the National Foundation for Credit Counseling.
“The need to convert credit into cash is what really gets my attention – because that hints at a lack of savings,” he said. “It’s a reality a lot of people are facing, especially now.”
Cash advances aren’t as expensive or risky as payday loans and car title loans, but they should be among your last resorts. If you’re looking for short-term relief, you could ask your credit card issuer for help, or find out if you qualify for a personal loan. You could also borrow from a family member or trusted friend, but be wary of the potential relationship toll if you can’t pay them back.
Getting cash from credit cards
Fifty-two percent of Americans report that the pandemic has damaged their finances, according to a recent survey by the NFCC. More than a fifth of those had to tap savings for everyday expenses, while 16% increased their credit card spending.
And that’s a sign of financial stress, says McClary. “It means that, in some situations, they have run out of savings.”
There are ways you can use your card to get cash, though.
Cashing in rewards
Some rewards cards from issuers such as Chase, Bank of America and US Bank let you deposit cash-back rewards directly to your bank account.
And Wells Fargo also will let you deposit its Go Far Rewards directly into another Wells Fargo customer’s account, says Sarah DuBois, spokesperson for the bank.
Many credit cards let you convert rewards into retail gift cards. So a pile of points can help a friend or family member buy much-needed groceries or a few holiday presents.
Or simply “buy a gift card for someone,” says Bratsakis.
Retailer-specific gift cards and gift cards issued through local and regional retail associations and malls often come with no fees – meaning every dollar you spend goes toward your gift.
While you can get a cash advance or use convenience checks from your card issuer, both those options often come with fees and higher interest rates. Not a smart money move, especially in the current economy.
While some lenders may offer convenience checks with deferred interest, that’s not the same as “no interest,” says Bratsakis. Also, if you don’t pay the loan in full, will you owe the full interest retroactively?
“That’s where consumers have to be careful,” he says. With a convenience check or even a cash advance, “that’s usually where consumers can get themselves into trouble if they can’t pay it off and get hit with deferred interest.”
See related: What is deferred interest?
When it comes to peer-to-peer payments, cash really is king. You can then put it into a funded account with the money transfer platform or your bank account. And most peer-to-peer platforms let you do this for free.
“The safest way to use these services is to send money person-to-person and be diligent about getting all the details correct so it doesn’t go to the wrong person,” says Tetreault.
Only send to people you trust and know in real life, she says. “And before sending money make sure you understand what, if any, fees you might incur.”