Can a credit card help you beat inflation?

You don’t have to watch the news to know inflation is making a major impact on household budgets this year. That said, a recent Consumer Price Index (CPI) Summary revealed that year-over-year inflation increased 8.3 percent during the 12 months leading up to August 2022, and all while core inflation rose 0.6 percent over the previous month.

With everything you buy and most major bills costing significantly more, getting “ahead” in a traditional sense may feel like a lost cause. This is especially true if you have credit card debt or you’re trying to get a mortgage this year. After all, the average 30-year mortgage rate just surpassed 6.75 percent as of October 2022, and the average rate on credit cards is teetering close to 19 percent.

In some cases, though, a credit card can actually help take the sting out of inflation. This is mainly the case if you’re able to secure a zero-interest offer for debt consolidation, or if you can responsibly earn rewards while keeping your credit card balance at $0.

Consolidating debt with a 0% APR credit card

If you have credit card debt and your APR is anywhere close to average, rising interest rates have made it so paying off that debt is more costly and time-consuming than before. However, several 0 percent APR credit cards could help you save money, pay down debt faster or both — but only if you use them in the way they were intended. Also be aware that the best balance transfer credit cards are geared to consumers with good or excellent credit scores and a long history of responsible credit use.

As an example, the popular Wells Fargo Reflect® Card gives consumers a minimum of 18 months from account opening to pay down debt with 0 percent introductory APR on qualifying balance transfers, and they can earn another three months of no interest by making on-time minimum payments during the intro period. The same 0 percent intro rate applies to purchases, and a regular variable rate of 17.74 percent to 29.74 percent applies thereafter.

Ultimately, this means consumers can consolidate and pay down debt or pay down large purchases at 0 percent APR for up to 21 months, and with no annual fee required. However, those who consolidate debt with this card are required to pay a 3 percent intro balance transfer fee (minimum $5) for balance transferred within the first 120 days, and a 5 percent balance transfer fee thereafter (minimum $5).

The Citi® Double Cash Card is another popular balance transfer card, but this one comes with a twist. First off, it offers 0 percent intro APR on balance transfers only for the first 18 months from account opening, followed by a variable APR of 18.74 percent to 28.74 percent. Cardholders also earn 2 percent cash back for each dollar they spend — 1 percent when a purchase is made and another 1 percent when it is paid off. This card also comes with no annual fee.

Earning cash back rewards to offset inflation

Cash back credit cards can also help consumers reduce the impacts of inflation, but only in certain circumstances. Obviously, it doesn’t make any sense to pay today’s credit card interest rates, which average at around 19 percent, to earn a maximum of 2 percent cash back on purchases. To truly benefit from earning rewards based on spending, it’s key to pay your credit card bill in full and on time each month in order to avoid interest charges altogether.

If you are someone who has managed to avoid long-term debt, the best cash back credit cards can help you earn something back for each dollar you spend. One of the top cards to consider is the Wells Fargo Active Cash® Card, since it earns a flat 2 percent cash rewards on purchases with no annual fee required. Interestingly, this card also offers 0 percent intro APR on purchases and qualifying balance transfers for 15 months from account opening, followed by a variable APR of 19.74 percent, 24.74 percent or 29.74 percent. That makes it a good option for earning rewards and paying down debt (or spreading the cost of large purchases out over time).

The Wells Fargo Active Cash Card also offers new customers a $200 cash rewards bonus when they sign up and spend $500 on purchases within three months of account opening. This bonus offer can help cover some of the impacts of inflation this year, such as rising costs on groceries or gas.

For those who want the chance to earn more rewards in bonus categories, the Chase Freedom Unlimited also has some inflation-fighting power. Cardholders who choose this cash back credit card earn 5 percent back on travel through Chase, 3 percent back on dining and drugstore purchases and 1.5 percent back on everything else. There’s no annual fee, and this card also offers a 0 percent intro APR on purchases and balance transfers for 15 months, followed by a variable APR of 18.74 percent to 27.49 percent.

As an added incentive, new Chase Freedom Unlimited customers can earn 1.5 percent cash back on everything they buy, on up to $20,000 spent in the first year.

Discounts on specific purchases

Some rewards credit cards even extend discounts or bonus rewards on specific types of purchases. One example comes in the form of Amex Offers, which are discounts that can be added to American Express credit cards. Chase also has its own Chase Offers program, and similar discounts with select retailers are offered on eligible Capital One credit cards.

Generally speaking, you have to add these discounts to your card before you make a purchase, and other fine print, like rewards or discount caps, can apply.

Bottom line

During 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. Make sure to use credit cards wisely if you decide to pursue 0 percent APR offers, rewards or card-related discounts, and take steps to avoid long-term debt if you want to end up “ahead” in the end.