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
	Earn 150 Reward Dollars after you make $1,000 in purchases in the first three months of Cardmembership. 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. Simple and Straightforward: With the Blue Cash Preferred Card, you can start earning cash back. No rotating reward categories. No enrollment required. Terms and Restrictions Apply.
Intro APR Intro APR Period Regular APR Annual Fee Balance Transfer Credit Needed 0% 12 months 12.99%-21.99% (Variable) $75 Yes Excellent Credit

Best Card for Gas Purchases

PenFed Visa® Platinum Cash Rewards Card
	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
	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 U.S. 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 Yes Excellent Credit

Best Travel Card

Capital One® VentureSM Rewards Credit Card
	2 miles per dollar on every purchase, every day As seen in Money® Magazine’s “Best” issue three years in a row. - Money® Magazine May 2010, 2011, 2012 Earn 10,000 bonus miles when you spend $1,000 on purchases within the first 3 months, equal to $100 in travel Redeem your miles for any travel expense No limit on the miles you can earn and miles don’t expire Fly on any airline, any time with no blackout dates No foreign transaction fees $0 intro 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 13.90%-20.90% (Variable) $0 intro for first year; $59 after that N/A Excellent Credit

Best Card for Shopping

TrueEarnings® Card from Costco and American Express
	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 U.S. 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 Yes Excellent Credit

Best Card for All Other Purchases

Capital One® VentureSM Rewards Credit Card
	2 miles per dollar on every purchase, every day As seen in Money® Magazine’s “Best” issue three years in a row. - Money® Magazine May 2010, 2011, 2012 Earn 10,000 bonus miles when you spend $1,000 on purchases within the first 3 months, equal to $100 in travel Redeem your miles for any travel expense No limit on the miles you can earn and miles don’t expire Fly on any airline, any time with no blackout dates No foreign transaction fees $0 intro 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 13.90%-20.90% (Variable) $0 intro for first year; $59 after that N/A Excellent Credit

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.

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.

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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.

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