The Ultimate Cash Back Credit Card Strategy

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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
Blue Cash Preferred® Card from American Express
Apply Now...
  • Get 100 Reward Dollars, redeemable for a $100 statement credit, after you make $1,000 in purchases with your new Card in the first three months.
  • Plus, get one year of Amazon Prime after you sign up for a new membership with your Card and meet the spending requirement in the same time period.
  • As an Amazon Prime member, you get unlimited Free Two-Day Shipping on millions of items.
  • Earn Cash Back: 6% US supermarkets up to $6,000 per year in purchases, 3% US gas stations & select US dept stores, 1% other purchases. Terms and limitations apply.
  • Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit.
  • 0% intro APR on purchases and balance transfers for 15 months, then a variable rate, currently 12.99% to 21.99%, based on your creditworthiness and other factors.
  • Terms and Restrictions Apply.
Intro APR Intro APR
Period
Regular
APR
Annual
Fee
Balance
Transfer
Credit
Needed
0% 15 months 12.99% - 21.99% Variable $75 0% Excellent Credit

Best Card for Gas Purchases

PenFed Visa® Platinum Cash Rewards Card
PenFed Visa® Platinum Cash Rewards Card
Apply Now...
  • You must be a PenFed member to apply. Not yet a member? It's easy to join!
  • You may be eligible through your employment, association membership, and volunteerism, or by becoming a member of one of our nonprofit partner organizations.
  • Earn 5% cash back on gas purchases paid at the pump and .025% on all other purchases.
  • Cash rewards automatically awarded to your account every month with no caps.
Intro APR Intro APR
Period
Regular
APR
Annual
Fee
Balance
Transfer
Credit
Needed
N/A N/A 9.99% (Variable) $0 4.99% Excellent Credit

Best Card for Dining Out

TrueEarnings® Card from Costco and American Express
TrueEarnings® Card from Costco and American Express
Apply Now...
  • 3% Cash back at US gas stations and on gasoline at Costco up to $4,000 per year in purchases, then 1%
  • 2% cash back at US restaurants; 2% cash back on eligible travel purchases, including at Costco; 1% cash back on other purchases, including at Costco
  • Terms and limitations apply; You will receive your cash back annually in the form of a reward coupon
  • The Two-In-One Card: it's an American Express® Card and Costco membership card, with no annual fee for Costco members
  • Cardmembership offers access to benefits such as Global Assist and Purchase Protection* *Underwritten by AMEX Assurance Company
  • Terms and restrictions apply.
Intro APR Intro APR
Period
Regular
APR
Annual
Fee
Balance
Transfer
Credit
Needed
0% 6 months 15.24% variable No Annual Fee with your paid Costco Membership N/A Excellent Credit

Best Travel Card

Capital One® Venture® Rewards Credit Card
Capital One® Venture® Rewards Credit Card
Apply Now...
  • Earn unlimited 2X miles on every purchase, every day
  • Enjoy a one-time bonus of 20,000 miles once you spend $2,000 on purchases within the first 3 months, equal to $200 in travel
  • Fly any airline, stay at any hotel, anytime
  • Travel when you want—no blackout dates
  • Miles don't expire
  • No limit to the miles you can earn
  • No foreign transaction fees
  • No annual fee for the first year; $59 after that
Intro APR Intro APR
Period
Regular
APR
Annual
Fee
Balance
Transfer
Credit
Needed
N/A N/A 13.9% - 20.9% (V) $0 intro for first year; $59 after that N/A Excellent/Good

Best Card for Shopping

TrueEarnings® Card from Costco and American Express
TrueEarnings® Card from Costco and American Express
Apply Now...
  • 3% Cash back at US gas stations and on gasoline at Costco up to $4,000 per year in purchases, then 1%
  • 2% cash back at US restaurants; 2% cash back on eligible travel purchases, including at Costco; 1% cash back on other purchases, including at Costco
  • Terms and limitations apply; You will receive your cash back annually in the form of a reward coupon
  • The Two-In-One Card: it's an American Express® Card and Costco membership card, with no annual fee for Costco members
  • Cardmembership offers access to benefits such as Global Assist and Purchase Protection* *Underwritten by AMEX Assurance Company
  • Terms and restrictions apply.
Intro APR Intro APR
Period
Regular
APR
Annual
Fee
Balance
Transfer
Credit
Needed
0% 6 months 15.24% variable No Annual Fee with your paid Costco Membership N/A Excellent Credit

Best Card for All Other Purchases

Capital One® Venture® Rewards Credit Card
Capital One® Venture® Rewards Credit Card
Apply Now...
  • Earn unlimited 2X miles on every purchase, every day
  • Enjoy a one-time bonus of 20,000 miles once you spend $2,000 on purchases within the first 3 months, equal to $200 in travel
  • Fly any airline, stay at any hotel, anytime
  • Travel when you want—no blackout dates
  • Miles don't expire
  • No limit to the miles you can earn
  • No foreign transaction fees
  • No annual fee for the first year; $59 after that
Intro APR Intro APR
Period
Regular
APR
Annual
Fee
Balance
Transfer
Credit
Needed
N/A N/A 13.9% - 20.9% (V) $0 intro for first year; $59 after that N/A Excellent/Good

Calculate Your Earnings

Using the same figures and categories we discussed above you can review the table below to see just how much you can earn if you play your cards right. The table reflects an estimation of what reasonable monthly expenses for a family of four would be in the following categories: grocery shopping, gas purchases, dining out, travel expenses, and other purchases.

Card
Category
Monthly Spending
Annual Cash Back
Blue Cash PreferredSM from American ExpressGroceries
(6%)
$750$540
Visa® Platinum Cash Rewards CardGas
(5%)
$400$240
Blue Cash PreferredSM from American ExpressDepartment
Stores
(3%)
$100$36
Chase Sapphire PreferredTravel
(2%)
$200$48
Amex True EarningsEating
Out
(2%)
$250$60
Cap One VentureOther
(2%*)
$1,000$240
Total Annual Cash Back$1,164

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.

Published or Updated: February 11, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Philip says:

    Well done, Rob. Another possible add on is to buy restaurant gift cards at the grocery store. That way you could get 6% back on some dining out expenses.

  2. Ryan says:

    Nice way to maximize points! I second Phil on this one – the AmEx Blue Cash Preferred is awesome, and one that I signed up for a few months ago. We’ve already earned a nice cash back bonus from them. In addition to restaurant gift cards, you can buy gift cards for major expenses you are planning, such as Home Depot or Lowes, Best Buy, etc. The other thing to look out for is how stores are coded. For example, if you buy groceries at a Target superstore, it may not be coded as groceries, and you may not earn the full 6% cash back. On the flip side, some big box “superstores” are coded as groceries, so you may be able to earn additional cash back on non-grocery purchases.

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