Published in: Credit Cards | April 14, 2020
Credit Cards Can Help During an Economic Slump -- If You're Careful
By: Lyle Daly
Used correctly, credit cards could save you a lot of money when you need it most.
Credit cards aren't an obvious choice for help during an economic crisis. People have a tendency to end up in credit card debt when the economy is doing well, so relying on credit cards during a downturn may seem like a recipe for disaster.
Although it's true that there are risks to using credit cards, they also offer several ways for you to save money. If you're careful about how much you spend, the following credit card perks could be even more valuable when money's tight.
Cash back rewards
One of the biggest benefits of paying by credit card is being able to earn rewards on each purchase. The most valuable types of credit card rewards are cash back and travel points, but considering the present state of the economy and current travel restrictions, cash back has taken a sizable lead right now from a value perspective.
You're not going to get rich this way, but you can get some money back on your regular spending. Many of the best cash back cards also offer bonus categories where you can earn even more. On the high end, there are cards that offer 5% to 6% back in select categories. These often cover practical expenses, such as groceries, gas, and wholesale club spending.
The Ascent's best cash back credit cards
Our expert's scoured hundreds of credit card offers and our top picks deserve the title. From up to 5% cash back, no annual fees, and long 0% intro APR offers, these cards are stacked, to help you rake in the rewards.
There aren't many better ways to save on expenses than a credit card sign-up bonus. Most sign-up bonuses have simple requirements. You just need to make a minimum amount of purchases within a set timeframe, and you'll receive your bonus.
For example, a bonus may require that you spend $1,000 within three months to earn $200 cash back. If you're going to be spending $1,000 on bills within those three months anyway, why not get $200 back in the process?
The key is to make sure you can meet the minimum for the bonus with your normal bills. That way, you can earn the bonus without making any extra purchases.
Zero interest on purchases
Cash back rewards and sign-up bonuses get you money back on the purchases you're making, but they don't help much if you simply don't have the money to cover all your expenses. If that's the case, a credit card with a 0% intro APR on purchases is one option to get you through those kinds of tough times.
You'll pay no interest for the length of the intro period, as long as you make minimum payments every month. And several of the top 0% APR credit cards have intro periods that last 12 months or longer.
There's no catch with these offers, but your card's APR will rise quite a bit once the intro period ends. If you have a large remaining balance at that time, it could be expensive and difficult to pay off.
Consider this an option for emergencies only. You don't want to carry a balance on a credit card "just because," even on a card with a 0% intro APR. But if you have no other way to pay your bills, this type of credit card can buy you some time.
Compare the top cash back cards to find your fit
Wish you could compare cash back and rewards offers? Now you can with our picks of the best cards for 2020. Find the right offer for you, from market-topping cash back rates, great sign-up bonuses, 0% intro APR, and more.
Zero interest on balance transfers
If you have credit card debt that's costing you money in interest every month, you can also find credit cards with 0% intro APRs on balance transfers. For the card's intro period, you won't pay interest on any balances you've transferred over. Most credit cards charge a balance transfer fee, but this is a small price to pay to refinance debt at a 0% APR.
In a worst-case scenario, a balance transfer card could work well as a backup plan if you've been paying your bills with a 0% APR card. After that first card's intro period ends, you could get a balance transfer card and give yourself more time to pay back your debt interest-free.
Staying safe and saving money with credit cards
Credit cards are one of many ways you can get financial help during the COVID-19 crisis. To minimize your risk while using credit cards, make sure you track your spending and only buy the essentials.
If you do that, cash back rewards and sign-up bonuses are both smart ways to earn money on your typical spending. Zero-interest offers are risky because you can end up in debt, but if you're in a jam, they could save you a substantial amount on interest.
Don't pay credit card interest until nearly 2022
The Ascent just released a free credit card guide that could help you pay off credit card debt once and for all. Inside, you'll uncover a simple debt-cutting strategy that could save you $1,863 in interest charges paying off $10,000 of debt. Best yet, you can get started in just three minutes!