How I Earned $700 From Cash-Back Credit Cards in Just 6 Months

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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.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.