Recently I published a review of the Blue Cash Everyday from American Express credit card. With the preferred version of the card, you earn 6% cash back at the grocery store. That’s a huge return, and it got me to thinking–could a typical family earn $1,000 a year or more in cash rewards simply by using the right credit cards?
I call it the Ultimate Cash Back Credit Card Strategy.
The trick is to use the right card for the right purchase to maximize your cash back. The approach takes some effort. You can’t maximize your rewards by using just one card. But you can get excellent results with just a few credit cards. To get you thinking along these lines here are a few things to consider:
- Understanding how the rewards program works: Understanding how the rewards program works is a must. Many of the programs have limitations or caps on how much you can earn. For example, some cards might offer 5% cash back, but it’s on rotating categories that change every three months and there are caps on the amount you can earn.
- Seek out cards with double or triple points: The standard cash back reward is 1% or 1 point per $1 spent. But there are cards that do much better. Go for the cards that offer more bang for your buck.
- Pay monthly bills with a credit card: Consider paying some of your bills with your credit cards as a way to rack up some points. While some won’t let you pay with a credit card (e.g., your mortgage), many bills such as your cell phone, cable, internet, and even garbage collection accept credit card payments.
- Use a Business Card: If you are a business owner you might be able to add in a business card as part of your strategy. Many business rewards cards have a higher rewards cap. For example, instead of earning double points on gas purchases up to $2,500, you might earn double points on up to $5,000 in gas purchases.
- Find cards with sign up bonuses: Take advantage of cards that offer a cash back bonus offers to new card members.
With these factors in mind, it is absolutely possible with modest spending to earn $1,000 or more a year in free money by using the right credit cards. Below I’ve listed my top cash rewards picks for common spending categories. Then will put this strategy to the test with some modest spending assumptions.
Best Card for Grocery Shopping
|Blue Cash Preferred® Card from American Express|
Best Card for Gas Purchases
So even accounting for annual fees, saving $1,000 or more a year with the right credit card is not difficult. And many families spend far more than what’s listed in the table.
Should You Consider a 5% Rotating Category Card?
To earn even more, consider using a card like the Discover it® that gives 5% cash back in rotating categories. The categories change each quarter and there is a spending cap of $1,500. As we mentioned above, understanding these details can help you plan your strategy and maximize your earning potential.
If one of the quarterly categories is dining out, then consider using this card to receive 5% back on the first $1,500 you spend dining out – this is $75 back. Once you reach the $1,500 spending limit then switch over to another card (like the TrueEarnings(R) Card from Costco and Amex – 2% on dining out) that gives cash back for these same purchases.