How To Use Your Cash Back Credit Card To Build A Rainy Day Fund

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Cashback credit cards? Awesome. I’m personally so thankful that cash back cards are a thing because I utilize them to the full advantage. Or so I thought. Personally I have a Chase Freedom Unlimited card which gives me 1.5% back on everything I buy. Considering the fact that I graduated college recently and moved to a new city for my post grad life I got a lot of cash back during this move.

I try to use my credit card for every single purchase that I make because of the cash back feature. I know a lot of you will say this is irresponsible so let me quickly say I only expense things I can afford and will pay off every month. I don’t carry a balance and therefore I pay no interest on my card. So really, this cash back is just found money for me. When I was moving it was great because as I bought things that I would need in my new apartment my card gave me cash back to buy even more things I wanted but I didn’t consider essential to the apartment such as art or little knickknacks to make the apartment feel more like a home. Sadly, the plant I bought died but that’s neither here nor there. (I was devastated).

So getting back to cash back. If you are a responsible spender with your credit cards and not a frequent traveler I highly suggest going with the cashback option, but again you need to find a credit card that fits your lifestyle and personal spending habits. I know a lot of people around my age in cities like NYC or Boston that if they had excellent credit opted to go for the Uber credit card because of how it directly caters to those people who are very active in their social life. I also suggest checking out the Capital One Savor Card because of it’s great cash back on dining and entertainment.

I’ve talked to a lot of people about what credit card they use and why they chose that particular one. Most people take cash back and apply it to their statement balance so they owe less on their credit cards each month and I highly recommend doing this if you are carrying a balance from month to month. It will allow you to pay down your debt faster and get out of interest payments, if you have those.

Now that I carry a zero balance from month to month I don’t feel the need to apply my points right back into my credit card. Sure, I could go online and get some gift cards or apply them to travel but let’s be honest, I’m 22 and I don’t have time to go on crazy vacations and I try to curb my spending habits so that I can save more.

So I thought about this a lot. I wondered how I can best use my cashback. 1.5% sounds like nothing but it definitely adds up over the course of a year. As I was going through my options for my last point redemption it had an option if I would like to deposit the cash back into my checking account. Now I don’t keep my savings account with chase as you all know if you read my article on savings account, I use Marcus by Goldman. Some more digging allowed me to find that I can link any bank account up to my card and deposit the money there. Aha! A rainy day fund was created.

Sure I have my savings that I deposit a fixed amount in every month because I worked it into my budget, but I’ve never even thought about putting my cash back into a savings account. Even better, it’s an interest bearing savings account so basically I’m being handed money, putting it into an interest bearing account, and earning even more money on top of that. Think of it as a monthly allowance almost.

This is how I personally use my cash back but the more I thought about it the more I saw the wide range of possibilities this really has. Savings accounts offer low interest rates right now with the highest you’ll find hovering around 1.8% while the average market return year over year is 7%. So if you already have a rainy day fund and don’t feel the need to contribute more consider taking this cash back and putting it into an investment account, retirement or otherwise and letting it grow even more than a rainy day account ever would.

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