We all know the story. Inflation is at its worst levels in decades. That means we are paying more across the board for products and services. You can complain and get angry, or you can fight back. Your allies in the fight are credit cards and credit unions.
Start by understanding what is causing these high inflation levels. In 2020 and most of 2021, the pandemic put downward pressure on purchasing. Tourist travel nearly stopped as did business travel. Purchases of white goods like washing machines plummeted as did sales of automobiles and durable goods. Instead, many consumers saved their money. Producers adjusted numbers downward to accommodate slow consumer spending.
Flash forward to 2022, and consumers started spending. On everything. Pent up demand was unleased and not in a measured or slow way. The result was more like turning on a faucet.
But producers had slowed production and the lingering pandemic closed production in India, China, and other key manufacturing countries. Even when goods were available, the supply line struggled. A shortage of containers for cross-ocean delivery, shortages in labor in both packing and unloading goods, shortages of materials like circuit boards, and shortages of truck drivers meant delays and expense.
Simply put, consumers wanted to buy, but there was limited stock to purchase. Since there was purchasing competition for nearly every item or service, prices rose.
It seems like a daunting task to fight against global inflationary pressures, but there are ways to limit the costs of inflation.
The first step is to manage expenses. Every person or family should have a budget. It is always, under every circumstance, important to understand what money is coming in, and what money is going out. Yet few people spend the time to understand their finances. In an inflationary period, it is essential to have a full, clear picture of personal and family finances. Create a budget.
First, account for all your essential needs. Ask yourself, what do you absolutely have to pay for? For most, this list includes shelter, utilities, food, daily medicines, and health insurance. Next would be transportation but this depends on the individual. Essentials often differ between people based on age or family needs so an individuals list of essential payments will differ. When you have determined your list of essential costs, match those expenses against your total income. Factor down to the dollar. With inflation, every dollar counts.
If your essential expenses exceed your income, seek help from a financial counselor. If you have left over income after paying for essentials, the first amount should go to building an emergency fund, usually between $500 to $1,500. If you have an emergency, you need to be able to cover the costs of immediate resolution. Emergency costs, car repair, appliance repair, a health scare are liable to cost more at this time. Having emergency funds on hand is critical.
If you have any income left over after paying for essentials, put money towards long-term financial security. Consider buying a Roth IRA or make a deposit in an existing IRA.
Next, join a credit union. The banking industry has changed radically over the past three years. More activity is happening online. Visiting a bank branch is less important. Credit unions generally have fewer fees, lower fees, higher interest rates on certificates of deposit and savings accounts, and much better customer service. The latter fact is important. Nearly all credit unions put customer service at a premium. If you have an account problem of any kind, including fraud charges on bank cards, a credit union can and will resolve it on average must faster than a large, national bank. Time is money, so saving time is saving money.
Now, it’s time for the strategic use of a credit card. This is important. The credit card industry is extremely competitive and they compete on rewards. The reward structure of credit cards can be used to great advantage by knowledgeable consumers, particularly during times of high inflation. Consider this. In 2022, because of credit card rewards, a consumer can get money back on every item or service they buy.
Consumers should look for a credit card with cash back rewards and no annual fee. Cash back cards give consumers that chance to build up cash rewards whenever they spend money if they pay it off every month. Also, many debit cards have monthly cash back offers for different categories, including restaurants, grocery stores, and gas stations. Track those monthly offers closely and take advantage of those offers, particularly for gas.
Consider using a credit card to pay all your essential, monthly expenses. In that way, they can build up larger rewards. But remember to pay off the card at the end of the month.
There is another consideration when using credit cards responsibly. Currently, the government is raising interest rates to battle inflation. This makes it harder to loan money for personal loans and large purchases. Responsible use of a credit card does help boost consumer credit scores. A good credit score will help consumers get better loan and mortgage rates, which is another way to beat inflation.
Other money saving tips are out there. Many retail and grocery stores have loyalty programs. Some grocery stores reward loyalty customers can receive money off a gallon of gas. Since gas is one of the major inflationary expenses, if consumers have the chance to save 10, 30, or 40% off a gallon of gas, they should take it.
There is a stigma that some consumers are against using store circulars or coupons. Get over it. In times of high inflation, it is important to take as many discounts and free items as possible. Use grocery store circulars. Every store has weekly specials, including many two-for-one deals and even loss-leader items that are free. Coupons often offer discounts on additional essentials including laundry soap, toothpaste, or dish soap, which are usually higher priced items, and consumers should take advantage. Depending on the store, many coupons will be applied to a consumer’s loyalty program automatically, but it is advised to keep an eye out for manufacturor’s coupons which can offer some unique benefits and are not applied automatically.
Inflation is painful for every consumer. But that does not mean consumers have to surrender to it. By making smart decisions about how and when to make purchases, and choosing the right financial partners to align themselves with, consumers can lower the pain of inflation.
Cyndie Martini, President and CEO of Member Access Processing, has managed and directed successful credit union card and ATM portfolios, marketing programs and business strategies for a quarter century. In addition to her expertise in the payments industry, Martini has over 30 years of marketing, sales, strategic planning, advertising, and payment technology experience and is recognized as an expert in the field of card and network payment systems. A veteran of the Washington Credit Union League and League Services Inc. (LSI), Martini is a loyal advocate for credit unions, having put her experience to work helping member-based cooperative financial institutions grow and succeed.