Credit card cash back a risky proposition

Q: My wife wants us to use our Dis­cover credit card for all our pur­chases and pay it off before any inter­est is charged. She feels that we can get extra money from the cash back offer. Is this a good idea or is there some­thing we are missing?

–Den­nis, Crofton, Kentucky

A: The only thing you could be miss­ing is a big chunk of change if you don’t fol­low through with the oh-so-critical “pay it off before any inter­est is charged” part of the plan. One of the chal­lenges with this type of approach is that credit cards make it easy to spend what we don’t have. If you’re using cash or your debit card, when the money is gone so too is your pur­chas­ing power. That’s not the case with credit cards.

I will tell you that at our house we use an approach sim­i­lar to what you pro­pose in order to get travel miles. Unfor­tu­nately, there have been a cou­ple of months when the con­ve­nience and ease of mak­ing pur­chases, com­bined with our inat­ten­tion, left us spend­ing beyond our plan. So be care­ful and make sure you’re the one that is tak­ing advan­tage of the program!

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Scott Halliwell and JJ Montanaro are CERTIFIED FINANCIAL PLANNER™ practitioners with USAA Financial Planning Services, one of the USAA family of companies. Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and Certified Financial Planner™ in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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