You don’t have to watch the news to know that inflation is having a major impact on household budgets this year. However, the recent consumer price index (CPI) summary showed annual inflation rose by 8.3 percent in the 12 months leading up to August 2022, with core inflation up 0.6 percent from the previous month.
With everything you buy and most of the big bills costing significantly more, moving forward in the traditional sense can seem like a lost cause. This is especially true if you have credit card debt or are trying to get a mortgage this year. After all, the average 30-year mortgage rate has just topped 6.75 percent as of October 2022, and the average credit card rate is hovering around 19 percent.
In some cases, however, a credit card can actually help fight inflation. This mostly happens if you can get a zero interest offer for debt consolidation or if you can responsibly earn rewards by keeping your credit card balance at $0.
Debt consolidation with a credit card 0% per annum
If you have credit card debt and your annual income is close to average, rising interest rates have made it more costly and time consuming to pay off that debt than before. However, a few zero interest credit cards can help you save money, pay off debt faster, or both, but only if you use them for their intended purpose. Also keep in mind that the best balance transfer credit cards are for consumers with a good to excellent credit score and a long history of responsible credit use.
For example, the popular Wells Fargo Reflect® card gives consumers at least 18 months to pay off zero-interest debt, and they can earn an additional three months without interest by making payments on time during the initial and extended periods. The same 0% starting rate applies to purchases, and then the regular variable rate from 15.99% to 27.99% is applied.
Ultimately, this means consumers can consolidate and pay off debt or pay for major purchases at 0% APR for up to 21 months and no annual fees. However, those who consolidate debt with this card must pay a 3 percent balance transfer fee ($5 minimum) for a balance transfer within the first 120 days and a 5 percent balance transfer fee after that.
The Citi® Double Cash Card is another popular balance transfer card, but it has a twist. First, it offers a 0 percent starting annual interest rate on balance transfers only for the first 18 months of account opening, followed by variable annual interest rates from 16.99 to 26.99 percent. Cardholders also receive 2 percent cashback for every dollar spent – 1 percent when a purchase is made and another 1 percent when it is redeemed. This card also comes with no annual fee.
Cash back reward to compensate for inflation
Cashback credit cards can also help consumers reduce the impact of inflation, but only under certain circumstances. Obviously, it makes no sense to pay today’s credit card interest rates, which average around 19 percent, to earn a maximum of 2 percent cash on purchases. To truly earn rewards based on spending, it is important that you pay your credit card bills in full and on time every month to avoid accruing interest entirely.
If you’ve managed to avoid long-term debt, the best cashback credit cards can help you get something back for every dollar spent. One of the best cards to consider is the Wells Fargo Active Cash® card as it gives you a fixed 2% cash back on all purchases with no annual fee. Interestingly, this card also offers 0 percent APR on purchases and balance transfers for 15 months, followed by variable APR of 17.99 percent, 22.99 percent, or 27.99 percent. This makes it a good option for earning rewards. as well as paying off debt (or spreading the cost of large purchases over time).
The Wells Fargo Active Cash Card also offers new customers a $200 cash bonus if they sign up and spend $1,000 on purchases within three months of opening an account. This bonus offer could help offset some of the effects of inflation this year, such as higher food or gas prices.
For those looking to get more rewards in the bonus categories, Chase Freedom Unlimited also comes with some inflation-fighting ability. Cardholders who choose this cashback credit card earn 5 percent on rides through Chase, 3 percent on restaurant and pharmacy purchases, and 1.5 percent on everything else. There is no annual fee, and this card also offers a 0 percent starting APR on purchases and balance transfers for 15 months, followed by a variable APR from 17.24 to 25.99 percent.
As an added incentive, new Chase Freedom Unlimited customers can receive a 1.5% cashback on everything they buy up to $20,000 spent in the first year.
Discounts on certain purchases
Some rewards credit cards even offer discounts or rewards on certain types of purchases. One example is Amex Deals, which are discounts that can be added to American Express credit cards. Chase also has its own Chase Offers program and similar discounts are offered at select retailers on qualifying Capital One credit cards.
Generally speaking, you must add these discounts to your card prior to making a purchase, and other fine print such as rewards or discount limits may apply.
bottom line
In times of economic hardship, credit cards can be a blessing or a curse. Ultimately, the type of credit card you have and how you use it will determine your personal outcome. Be sure to use credit cards wisely if you choose to take advantage of zero-interest card-related offers, rewards, or discounts, and take steps to avoid long-term debt if you want to end up “out front.”
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