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Common Mistakes Parents Make When Using Cash Back Credit Cards

A parent teaches their child about credit cards through buying something online.

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When you’re a parent and are dealing with the many expenses that come with raising kids, any free cash you can get your hands on is money you’re apt to appreciate. And so it pays to use cash back credit cards in the right situations. But one thing you don’t want to do is fall victim to these common cash back credit card mistakes that tend to plague parents.

1. Chasing sign-up bonuses

Kids require a lot of stuff. When they’re younger, they need cribs and car seats. When they get a bit older, there’s stuff like bikes and sports team uniforms to purchase. So if you’re going to be spending all that money, you might as well try to snag a credit card sign-up bonus, right?

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Well, actually, there’s the potential to spend above your means when you chase a sign-up bonus. If you only need $800 worth of stuff for your kids but you push yourself to spend $1,200 to meet the requirement for a $300 sign-up bonus, you’re not really gaining $300 — if anything, you’re losing $100.

So be careful about going after sign-up bonuses on cash back cards. And don’t assume that you’ll automatically hit a given spending threshold just because you have kids who need stuff.

2. Charging child care expenses on a card for the cash back

Daycare can be a huge expense for parents of young children who aren’t old enough to attend school. In fact, Care.com puts the average weekly cost of daycare at $321 for infants and $293 for toddlers. Oof.

You may be inclined to charge your daycare costs on a cash back credit card to get the free money. But one thing you should know is that many child care centers impose a fee for using a credit card to pay tuition. And the fee you’re charged for using a credit card might exceed the amount of cash back you get.

Before you sign up for this particular payment method, read the fine print. There’s no point in paying for daycare by card for 2% cash back if you’re looking at a 3% surcharge.

3. Only making minimum payments on your credit cards

When you’re juggling different child-related expenses, it’s easy to see how you might get to a place where you can only swing making the minimum payments on your credit cards. But not paying your balance in full each month could cost you in the form of accrued interest.

And be careful with a 0% interest rate credit card, too. If you let a balance accumulate and can’t pay it off in time, you risk getting stuck with a lot of interest once your introductory period comes to an end.

Not only might only making minimum payments result in you having to pay credit card interest, but it could also cause damage to your credit score, making it harder to borrow money affordably in the future. Having a large credit card balance relative to your total credit card limit can drag your score down. So if anything, what you may want to do is redeem your cash back and use it to chip away at your balance any month it starts to rise.

It’s not uncommon for parents to find themselves overworked and overwhelmed. After all, you’re juggling a career, a household, and a gaggle of little humans you’ve pledged to care for indefinitely. But don’t make your life harder by falling victim to these cash back credit card mistakes.

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