I Have $400 in Credit Card Cash Back. Here's How I Plan to Use It

I'm making big plans for my $400 bonus cash. Here's what they look like

I'm making big plans for my $400 bonus cash. Here's what they look like.

Like many people who use credit cards, one of the biggest perks I enjoy is getting cash back for the purchases I'm already making. And one of my credit cards -- the Costco Anywhere Visa® Card by Citi -- makes it easy for me to rack up rewards. That's because all cardholders get 2% cash back at Costco, and since I do a lot of my family's grocery shopping there, I tend to accumulate a nice amount of cash back over time. The card also gives 3% cash back on restaurants and travel and 4% cash back on gas, but last year, I didn't spend a lot in any of those categories thanks to the coronavirus pandemic.

One thing I really like about the Costco Anywhere Visa® Card by Citi is that reward certificates are issued on a yearly basis. You can then redeem your reward at Costco locations, either by using your certificate to pay for your purchases or swapping it for actual cash at the customer service booth.

Recently, I got my reward certificate for 2020 and it comes to about $400. And I know how I'm going to use it.

A pile of fun money

The responsible part of me says that I should use my $400 in rewards to better my financial situation. Instead, I intend to spend it on small indulgences that improve my family's near-term quality of life.

The reason? First of all, I consider my $400 "bonus money." It's not part of my income -- it's extra money I received in cash back form, and since it's money I wasn't counting on, why not enjoy it?

Secondly, I'm doing pretty well as far as my personal finances go. So I don't really feel the need to use that money responsibly. Right now, I have enough money in my savings account to cover about a year's worth of living expenses, which is above and beyond what I'd normally tell someone to sock away for emergency purposes. I also don't have any unhealthy debt. The only debt I have is a mortgage payment. And while I could put that $400 into my home loan, it's not going to make a meaningful difference with regard to my repayment period, and the amount of mortgage interest it will save me is negligible.

As such, I'm taking that money and having fun with it. I'll probably spoil my kids by letting them each choose one toy or game -- something to keep them busy while they're cooped up a lot at home during a pandemic. I'll also probably use some of that money for extra takeout food this month -- it's a treat for my family and it gives me a break from cooking and having to clean up.

And I'm definitely planning to spend some of that money to order sweets from a candy shop I once visited on my travels that's become a long-time favorite of mine. Their products are expensive, as is shipping. So normally, I get one small box a year for my birthday or the holidays. But I've decided that this year, I'm treating myself again (and yes, I intend to share with the rest of my household).

If you're getting a nice chunk of cash back from your credit card, it's important to assess your financial situation and see what that money can do for you. If you're behind on savings or have unhealthy debt, like a credit card balance, then you should consider using that money to boost your cash reserves or chip away at what you owe. But whether or not you're already meeting your financial goals, there's nothing wrong with taking your cash back and spending it on yourself. After all, it's been a tough year for everyone. And at this point, a little self indulgence is hardly uncalled for -- especially when you can pay for it with free money.