Build Wealth by Shopping with Credit Cards

Many people look to credit cards and their cashback rewards programs as ways of saving money and building wealth. At first glance, this appears disingenuous since any credit card expenditure is by its very nature counterproductive to saving. Upon closer examination, it becomes clear that there are ways and means of using credit cards for maximum advantage. For example, if an individual has enough resources to pay off all credit card bills in full within the month, that person will benefit from using plastic. Most credit cards today offer clients cashback between 1% and 3% on purchases.

Piggybacking Off the Habits of Others and Profiting Accordingly

Granted, these cashback percentages may be restricted to certain purchases. For example, the 1% cashback may be on net retail purchases, 2% cashback may be at grocery stores and/or wholesale clubs, and the 3% cashback could be on gas. It’s important to read the terms and conditions associated with these cashback offers since they are often worked into complex terms and conditions in the fine print. Nonetheless, if you have the means to pay off your cards quickly you will benefit tremendously from the cashback offers. Think of it this way: You are going to spend the money anyway – why not get rewarded for doing so? For folks thinking of how this is going to help build wealth, consider the following: If your monthly expenditure on your credit cards is $3,000, why not benefit from up to 3% cash back and pay 0% in interest to the credit card company.

That could translate into $30 – $90 per month in cashback (between 1% and 3%) which translates into $360 – $1,080 per year in additional cash. That can be used to fund vacations, pay your mortgage, or contribute towards a 401(k)investment plan. You may be wondering why credit card companies would offer cashback if they don’t benefit from earning interest off the money they provide their clients. The fact of the matter is that the majority of credit card holders are paying extortionary amounts of interest-related repayments on their outstanding balances. Credit card companies like Visa, MasterCard,  American Express, Discover and others are not interested in the 1% – 3% cashback they pay on cardholders’ accounts. This gives credence to the age-old saying: It takes money to make money.

Using Debit Cards Builds Wealth Too

If credit cards encourage unchecked spending, debit cards do the opposite. Debit cards have the distinct advantage of limiting the cardholder to whatever funds are available in the account. Unlike credit cards, debit cards do not extend lines of credit to the cardholder. Whatever money is available is 100% yours and does not have to be repaid. Wealth creation is dependent on putting strict limits on expenditure. Credit cards are the opiate of the masses – they entice their owners to buy, buy, buy. Debit cards are treated with a lot more respect because that money doesn’t belong to banks and financial institutions – it belongs to the owner. The next time you use a debit card for shopping  at your favorite retailer, be sure that it complies with all your requirements. The fees associated for maintaining a debit card account should be reasonable and the card should be easy to reload with additional funds. Both credit cards and debit cards can be associated with reward programs. The Walmart debit card is a prepaid card that offers easy transfers, convenience, flexibility, low fees, complete control, rewards and prizes. However, there are certain drawbacks to using this particular debit card.

Keep Your Spending Habits on a Tight Leash

The monthly maintenance fees can eat away at your available balance, and if you don’t make a $1,000 deposit, the monthly fee will not be waived. Walmart shoppers who are on a tight budget will not appreciate the $20 minimum reload amount, and store credits to your card can take up to 10 days. You may also wish to consider that the cashback options are capped at $75 per year. Nonetheless, the Green Dot card from Walmart offers cashback of up to 3% on a range of shopping options. For those who don’t qualify for credit cards, this option can curtail your expenditure and make you a more responsible shopper. Regardless, it simply makes financial sense to understand the pros and cons of prepaid cards and credit cards as there are significant benefits to be had when these tools are used correctly.