Have you ever wondered how much money you can actually make from your credit card rewards program if you saved and saved and saved the points, miles or cash back until you cashed them out all at once? Most credit card rewards programs offer a flat 1% rewards program, meaning for every $100 you spend, $1 is earned in cash, gifts or flights. How much do you think you would have to spend in order to live solely off of your credit card rewards points for a week, month, or even a year?
The answer to this question is certainly not an easy one. Ultimately, you would need to cash your credit card rewards in for free hotel stays and food. Unless your credit card offers a points or cash back based system, generating frequent flyer miles just won’t cut it.
Our first step in this insane experiment is to determine just what you would need to live somewhat comfortably for a full month. This simply means a roof over your head for shelter and washing up, three square meals a day and perhaps $250 in spending money for emergencies, midnight snacks and odd expenditures. So breaking it down piece by piece, you would need
- 30 nights at a hotel or motel (no sleepovers at friends houses here folks) @ $60 a night = $1,800.00
- 90 meals in order to keep up nutrition and strength to go on the job hunt @ $5 a meal = $360.00
- Odd and ends, transportation (bus fare) and toiletries (if not provided) = $250.00
TOTAL COST $2,410.00
Granted you could probably find a cheaper hotel and budget your meals more effectively, but I’ll stick with these numbers as a base for the example. Now that we know just how much (or how many nights and meals) this is going to take, let’s take a look at two of the best rewards credit cards on the market today and see just how much you would have to spend to be able to live solely on your credit card rewards for one full month.
First, we have the Chase Freedom® MasterCard – $100 Bonus Cash Back. This card offers users a 1% cash back rate on all purchases made with no blackout dates or restrictions of any kind. As an added bonus, Chase Freedom® MasterCard – $100 Bonus Cash Back users can receive 5% cash back on certain purchases throughout the year. The categories of the 5% cash back offer change every quarter so make sure you keep track of what purchases earn you 5% and when. Assuming you spend an average of $10,000 on your card a year (10% of which qualifies for the 5% cash back) you would earn exactly $140 in cash rewards every year. After 17 years, you would have successfully earned enough cash back to survive for one-month with no help from anyone but Chase.
Our second card of choice would be the PenFed Visa Platinum Gas / Cash Rewards Card that offers 5% cash back on gas, 2% cash back on grocery purchases and 1% cash back on everything else. In order to figure this one out, we’ll have to split up the $10,000 annual spend into three categories. Let’s say you spend $2,000 on gas each year, $4,000 on groceries and $4,000 on everything else. Your cash rebate amounts would be $100, $80 and $40 respectively meaning you would earn $220 in cash back every year. This means that in just 11 years, you would have earned enough cash back to live on your own for one full month. Seems like the card of record if you’re planning this down the road.
You may have heard of a man that recently fell on hard times named Jim Kennedy, who racked up millions of frequent flyer miles while working as a company executive. Two years after he was laid off, he had no where to live and no money to spend so he slowly cashed in his rewards points, for free flights and free hotel stays. With so many points at his disposal, he was able to survive for three months simply by moving from hotel to hotel and recently found a job at an internet advertising company. (As CEO no less)
Jim was using his unemployment checks to pay for food, clothing and other odds and ends while looking for a new job. With about five weeks left of unused rewards points, he finally landed a job. While I would love to know just how many points and with what credit card issuers Jim was able to do this with to expand my example beyond cash back credit cards, I would imagine that unless you travel on a regular basis, cash back credit cards are the fastest way to get this done.