Can Credit Cards Help Fight Inflation?

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These are expensive times we’re living through. 

2022 was a year rife with higher prices for just about everything we buy, and as we start off 2023, there’s not much relief in sight. The most recent Consumer Price Index Summary (released Dec. 13, 2022) found that prices overall were up by an average of 7.1% from December 2021. Inflation is down a little from highs during the summer of 2022, but still too high for comfort. Many ordinary consumers are struggling with paying more, and many are desperate for relief. If you’re among them, you may already have a tool that can help you offset higher prices: a credit card.

The best credit cards don’t just offer a safer and more convenient way to pay for purchases. Many of them can save you money in sometimes surprising ways. Read on to see how different credit card perks and features can help offset the higher living costs we’re all dealing with.

Cash back and points

This is perhaps the most direct way credit cards can fight inflation. The best rewards and cash back credit cards will pay you back a percentage on your spending. It can be in the form of a statement credit on your account, money redeemed in your bank account, or even a check mailed to you. It could also be points you earn on spending that you can either cash out or use to make other purchases.

Earning a percentage on certain purchases

Some cards offer a higher percentage back (or more points) on some purchases. For example, you can use a grocery rewards credit card to get more back for buying groceries (a particularly expensive purchase these days; the CPI summary notes a 12% rate of inflation for “food at home”).

Welcome bonus

You can get free money to offset your higher costs if you choose a credit card with a sign-up bonus. You’ll be required to spend a certain amount within a predetermined time frame after signing up for the card. If you do, you’ll get a chunk of money or points added to your account. Just be careful not to spend more than you normally would to get that bonus, as that will defeat your attempt to defray added costs from inflation.

Special offers

Don’t forget about special offers and deals through your credit card issuer. This could look like a certain percentage or dollar amount back on a purchase made with a certain retailer during a set period of time. Note that you likely have to manually add these offers to your account via the card issuer’s website or mobile app to redeem them.

Travel perks

Another major category that consumers use credit cards for is travel spending. If you use a travel credit card, you can make future travel less expensive. Your vacation budget is likely tight enough already thanks to inflation — why not give it a hand?

Air travel savings

You can earn free airline miles, offsetting or entirely paying for your flights. Your card might also get you a free checked bag, giving you both convenience and more savings. Some travel credit cards offer free airport lounge access, which can ease your stress levels while you travel.

Hotel stays

Some credit cards offer free nights in posh hotels, or significant savings on them. You might also get a travel credit from your card that can be used for a hotel stay, making it free or less costly.

Travel insurance

Some credit cards come with travel insurance perks. We’re not over COVID-19 and if you end up needing to cancel booked travel because you’re sick, or you get sick while away from home, this feature can definitely save you money. Just make sure you’re booking your travel with the card that offers this coverage, or you’ll be out of luck if your vacation goes sideways.

Other cost offsets

Here are a few more inflation-busting and cost-saving benefits your credit cards might offer. Take advantage of these perks if they’re available to you:

Cellphone protection: If you pay your credit card bill with a credit card that offers this and your phone suffers a tragic mishap, your card issuer could cover the cost of a replacement.Rideshare app credits: Some credit card companies have a deal with rideshare apps like Uber and Lyft to offer cardholders a monthly credit for these services.Dining credits: Your credit card may offer you a set amount of money per month to cover dining purchases. Free food!Delivery memberships: You might score a free membership for a food delivery app (like DoorDash or Grubhub) thanks to your credit card.Money back on streaming services: There are credit cards that really shine when it comes to offsetting the cost of streaming services. If you have one of these, it’s worth it to see how you can benefit by using it to pay for streaming entertainment.Balance transfers: Finally, credit cards can benefit you in inflationary times by lowering the cost of paying off debt. If you have debt to pay off, consider using a balance transfer card to consolidate it. You’ll receive a period of time with 0% APR, so you can get ahead of your debt without having to pay extra interest on it.

Be cautious about your spending

As you can see, there are so many ways that credit cards can be your ally in the fight against rising costs. However, you want to avoid carrying debt on credit cards if at all possible, especially now. The average credit card APR was 19.04% in November 2022. Paying that on top of a credit balance will definitely cost more than any savings you see by using credit cards. If you can keep your balances in check (and ideally, pay them off every month), you’ll be well positioned to take advantage of all the inflation help credit cards can offer.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends DoorDash and Uber Technologies. The Motley Fool has a disclosure policy.

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