In the first six months of 2018, I earned roughly $700 in cash-back rewards from credit cards, and I do it all with my everyday spending.
I’ve worked to maximize my credit card rewards for roughly five years to make sure I get the most bang for my buck. As a result, I know that I’ll get a good return on the purchases I make.
To help you do the same, here’s a sneak peek into my strategy and how to choose the right credit card for you.
3 ways I maximize my credit card rewards
If you want to get the most out of your credit card rewards, it’s important to have a clear plan on how to do it. Here’s what I’ve learned over the past five years.
1. I detail my spending habits
Rewards credit cards often offer bonus rewards on certain spending categories. It’s important to know where you’re spending your money so you can take advantage of those bonuses.
With a family of four, my wife and I spend a lot on groceries and gas. As a result, we signed up for credit cards that offer high rewards rates on those purchases. We also spend a lot on Amazon and at Target, so we got credit cards that maximize our cash back at those stores.
One key thing to understand is that your spending habits can change over time. So a card that worked well for you a few years ago may no longer offer you as good of a return.
For example, my wife and I used to spend a lot of money at the grocery store, but we noticed last year that we started buying more groceries in bulk at Costco. Since credit card issuers don’t consider warehouse clubs such as Costco and Sam’s Club as grocery stores, they don’t offer the same bonus cash back on those purchases.
To address this, we applied for Costco’s co-branded credit card, which I’ll cover in more detail in a bit.
You don’t necessarily need to calculate all of your expenses down to the penny to do this step effectively. Just get an idea of where most of your money is going and look for credit cards that reward those purchases well.
2. I use as many cards as I can handle
Once I took stock of where I spent most of my money, I signed up for several credit cards to maximize my rewards on those purchases.
Here are the credit cards I keep in my wallet or have stored online for everyday use:
- Citi Double Cash Card: This card offers 1% cash back on every purchase, plus another 1% back when I pay it off. This is the card that I use for purchases that won’t earn bonus rewards with one of my other cards.
- Costco Anywhere Visa Card: I get 4% back on eligible gas purchases (up to $7,000 spent per year), 3% back at restaurants and on travel, 2% back at Costco and Costco.com, and 1% back everywhere else. This is my go-to card for gas, restaurant, and travel purchases. It’s also perfect for Costco trips because the retailer only accepts Visa.
- American Express Blue Cash Preferred Card: This card nets me 6% cash back at U.S. supermarkets (up to $6,000 spent per year), 3% back at U.S. gas stations and select department stores, and 1% back everywhere else. I use this card primarily for groceries at my local Kroger store. The card does charge an annual fee, but I only need to spend $132 per month on groceries to break even.
- Amazon Prime Rewards Visa Signature Card: As an Amazon Prime member, I get 5% cash back every time I shop on Amazon.com and at Whole Foods. I can also earn 2% back at restaurants, gas stations, and drugstores, and 1% back everywhere else.
- Discover it: This card gives me 5% cash back on different categories each quarter, on up to $1,500 spent per quarter. Categories for 2018 include gas stations, wholesale clubs, grocery stores, restaurants, and Amazon.com. All other purchases net only 1% back, so I use the card only for its 5% cash-back categories.
Keep in mind that I’m not recommending that everyone manage five or more credit cards at once. For some people, one or two cards is enough. The key is knowing your limits and purchasing habits and working within them. If you go overboard, you could miss payments or forget which cards to use and when.
The cards above are just examples of cash-back offers I personally use; I’m not recommending these specific cards to everyone. Compare these with other top cash-back credit cards to make sure you get the best card for you.
3. I follow strict spending rules
Earning hundreds of dollars in credit card rewards means nothing if you spend that much or more on stuff you don’t need. In fact, I don’t recommend anyone use a credit card at all unless you do these three things:
- Use a budget. Studies have shown that people tend to spend more with plastic than with cold hard cash. But if you set a budget for yourself every month and stick to it, you won’t have that problem. If you’ve never budgeted before, it can take a few months to get the hang of it. Consider using a budgeting app to make things easier.
- Pay off your balance in full each month. Despite using credit cards heavily over the past five years, we’ve never paid a penny in interest. That’s because we pay off our balances on time and in full every month. Any amount of interest you pay eats into the value of your rewards, and missing a payment could harm your credit and result in a fee.
- Avoid convenience fees. I use my credit cards whenever possible, but some merchants charge a convenience fee to use credit. For example, some utility companies, landlords, and person-to-person payment services will charge you up to 3%. Of course, some merchants charge lower fees that could make sense, but if you’re paying more than you’d get back in rewards, it’s not a good deal.
What I do with my credit card rewards
All of the cash back I earn from my credit cards go straight into a travel fund. My wife and I like to travel and spend at least a few days on vacation every couple of months.
Specifically, I can use my cash rewards to cover food, car rentals, and other ancillary trip costs. What you use your credit card rewards on is up to you. But as you take steps to maximize the value of your rewards, they can make a big difference for your bottom line.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|