Here’s Why the Rich Use Credit Cards; Should You Follow?
The rich don’t get ahead by leaving money on the table. While some people view credit cards as nothing more than toxic plastic, affluent consumers enjoy cash rewards that add up over time. In fact, cash back is the most desired credit card perk among those who probably need it the least. Should you follow in their footsteps?
A new survey from CreditCards.com finds that 60% of cardholders with investable assets of at least $100,000 say cash back is their favorite feature. Only 22% say they prefer frequent flier miles. Other perks barely receive a mention. Free hotel stays are the top choice by only 7% of respondents, while merchandise is the preferred perk by just 5%. Concierge services, special access to experiences, airport lounge admission, and companion airline tickets combined account for a mere 3%.
Many Americans across different income levels would agree that cash back is the best perk of using credit cards. However, we should not ignore why the wealthy, who could easily live without credit cards, use plastic in their daily lives. Aside from convenience factors, it’s about maximizing cash flow.
As long as you pay off your monthly balance in full each month, you avoid interest rate charges but still get to receive extra cash. Interestingly, even the majority of Americans with investable assets of $500,000 or more prefer cash back to other perks.
To be clear, if you’re planning to use credit cards in order to reap rewards, you need to be responsible. Use credit to make purchases you would normally make anyways, not as a way to stretch your living standards. Think of credit cards as a plastic form of the cash sitting in your bank account. If the cash isn’t there, don’t use your credit card. This will help you avoid overspending and carrying a balance. You also need to pay the balance in full each month on time so you avoid costly late fees.
In addition to cash back programs, various credit cards offer other perks, such as free car rental insurance, extended warranties, price matching, theft protection, and even monthly credit scores. When used responsibly, credit cards can help boost your credit score, too, potentially saving you money in other areas of life. Furthermore, credit cards can make life easier for booking hotels or traveling abroad. Bank of America cardholders can even enjoy free admission to more than 150 museums and other cultural organizations across 93 cities in 31 states.
The credit card industry is competitive, which is good for consumers. In order to attract new customers, companies often offer sign-up or referral bonuses. These can add up to hundreds of dollars. Card companies are also making it easier to redeem cash rewards. Discover recently announced that cash rewards will never expire, and members can receive their cash back in any increments.
Discover also has a wide variety of discounted gift cards that can be purchased with cash back, further maximizing your rewards. Meanwhile, Wells Fargo customers can redeem rewards at more than 12,500 ATMs across the country.
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