Credit Card Cash Back Strategies

by Andy Hough on January 23, 2012

One of the ways I like to save money is by getting cash back from my credit cards. There are many different types of reward credit cards available. When deciding which credit card is best you need to choose which one is the best for you based on your needs. First, you need to know whether having a credit card will cause you to spend more than you would with cash. If having a credit card does cause you to spend more than you probably should not have one because even if you are getting rewards you are likely losing money compared to just using cash.

If you are able to use a credit card responsibly then you need to look at how you spend your money. If you do a lot of driving you might want a gas rewards credit card, if you fly a lot you might want to look at airmiles credit cards. Or you might just want to choose a general rewards credit card that rewards you with cash. Those are the ones I have and I chose them for their bonus cashback categories.

Of course you don’t have to choose just one rewards credit card. I have three credit cards that I use. My Chase Freedom card offers 5% cash back on select rotating categories and gives me 1% cash back on everything else. My Discover card I try to use only on their 5% cash back categories. I attach a post-it note to these cards to remind myself of the current 5% cash back categories. My Target card is used to get a 5% discount at Target. There are probably even better deals out there but I don’t want to chase every credit card deal that is offered. The system I have is pretty simple and it works for me so I don’t plan on making any big changes.

1 PK January 24, 2012 at 10:16 am

Or one of each? I have a 5% card on Bookstores/Theaters/Restaurants another for Gas, and another for Groceries/Drug Stores, along with a rotating category card. I figure I should have as many of my bases covered as possible!

2 Andy Hough January 24, 2012 at 11:36 am

That makes sense but I just don’t want to get any more cards right now. I’m just trying to get the most out of the cards I already have.

3 retirebyforty January 26, 2012 at 1:16 pm

I have a Chase freedom card too and it’s my main card. I’m pretty happy with it in general. I probably should get an airline card to get miles.

4 Andy Hough January 26, 2012 at 3:05 pm

I’ve thought about getting an airline card but I don’t travel that much right now. Of course if I were earning free trips with an airline card that could change.

5 Johnny August 14, 2012 at 3:40 pm

You touch on a lot of great points here, and I think that I might have something to add to them. First of all, everyone should have a credit card. I’m not saying this because I’m a credit card apologist or anything like that, credit cards are just the best way to build credit (whether you actually make purchases or not) since they send information to the major credit bureaus on a monthly basis. In case you don’t know, having a good credit score will save you a TON of dough throughout the course of your life on loans and will make it easier to find a car to lease or even a job. If you don’t think you’ll be able to keep your spending in line, you can ask your issuer to just lower your limit, get a secured card, or simply lock your card away.

Spending responsibly is the best course of action, though, because it allows you to earn rewards on everyday spending (obviously not possible with cash). Like the author of this post says, I recommend cash back rewards because it’s easier to judge their value than points and miles. Cash also can’t be made more or less valuable than points/miles by a credit card company and won’t expire.

It’s important to note, however, that you should really only make rewards a priority if you have excellent credit and pay your bills in full every month. Otherwise, you could save more with a card that has a low interest rate or no annual fee.

The author was also correct to point out that if you are interested in rewards, you should get a card offering the best rewards on your biggest expenses. The reason for this is that it will help you earn the most rewards possible. Too many people go for a travel rewards card with an eye on a free vacation, only to forget to redeem or see their miles become less valuable over time.

Finally, you don’t need just one card. You can actually get better value by getting a couple of different cards, each of which has excellent rewards on one particular major spending category. By combining them, you could therefore get way better rewards than any single credit card might offer. You can also apply for a card with great initial rewards every once in a while.

So, those are my two cents, and if you’re interested in the specific cards I’d recommend, well I wouldn’t want to disappoint:

Everyday Spending/Groceries: Amex Blue Cash Preferred
Gas: PenFed Platinum Rewards
Travel: CapOne Venture
Initial Bonus: Chase Sapphire Preferred

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