If you have been reading the blog for a while you have probably noticed that I have a cash back category in my income statements each month. The amount varies but it isn’t unusual for me to make $50 or more in cash back. This amount comes from both cash back credit cards and online cash back shopping portals. Some may think that cash back isn’t worth the hassle. With interest rates for savings being in the 1% range getting 1% to 15% cash back on purchases you’re going to make anyway is a great deal. Plus, it isn’t really that much of a hassle to get cash back.
Although, I am doing pretty good at earning cash back I think I can do even better. Obviously, I don’t want to just increase my spending to earn more cash back as that would eliminate any benefit from the extra cash back. There are some strategies I can implement to increase my cash back earnings that don’t require me to increase my overall spending. First, I’m going to detail how I currently earn cash back.
Discover Card – This card earns 5% cashback on a rotating set of categories each quarter. They also have occasional promotions where they will offer 2% cash back on certain days. Black Friday was a 2% bonus day and allowed me to earn over $60 in cash back. If you make a purchase outside of the bonus categories you receive 0.25% cash back on your first $3000 in purchases and 1% on purchases after that. Purchases that get 5% cashback do not count towards your $3000 in purchases.
Chase Freedom This card has 5% cash back rotating categories similar to Discover Card. It does pay 1% cash back on all other purchases though without a minimum spend requirement. The amount of 5% cash back you can earn is capped on this card and the Discover Card.
Capital One Platinum Card – This card pays a flat 1% cash back on purchases. I mainly use this card for balance transfers. Currently, I have a no-fee 2.99% balance transfer on there for the remaining balance owed on my car.
Capital One Sony Card This card pays 5% in points when you use it to purchase Sony products. When I signed up for this card I could get some good deals through Sony Rewards. They have changed the program since then so I never use this card now.
Emigrant Direct Visa – This card pays a flat 1% cash back. I got this card for the $150 sign up bonus. I’m not sure how much I’ll use it now.
PayPal Debit Card – I get 1.5% cash back on purchases I make using this debit card. They only offer 1% to people who sign up now, but I am grandfathered in at the 1.5% rate. I don’t use this card too much since I usually just transfer my balance over to my
Mr. Rebates – This is an online cash back shopping portal that allows me to earn up to 15% cash back on my online purchases. The great thing about Mr. Rebates is that I also earn cash back on my referrals’ purchases. Most of the money I get from them is from other people’s purchases rather than my own purchases.
Ebates – This is another cash back shopping portal similar to Mr. Rebates. I don’t use it as often since it doesn’t have as good of a referral program and I find it easier to just use one cash back shopping portal.
Using the above reward credit cards and cash back shopping sites I earn a decent amount of cash back, but I want to earn more. Here are some things I’m planning to do to increase my cash back earnings.
Use the Discover Card less. I wasn’t aware until recently that my purchases in the 5% cash back categories didn’t count towards my $3000 spend requirement. Since I don’t want to make any purchases that only earn 0.25% cash back the Discover Card will only be used for 5% cash back purchases from now on.
Use my PayPal debit card more. If I have a purchase that doesn’t qualify for more than 1.5% cash back then I will use the PayPal card to make the purchase. This is dependent on me actually having money in my PayPal account so I won’t always have PayPal as an option.
Get a card that earns more than 1% cash back. The 1% cash back is a common offering from credit cards, but there are several cards out there that earn more. To keep things simple I’m considering trying to convert my Capital One Sony card to a Capital One Cash credit card that pays 1.5% back. If they won’t convert the card for me I’ll probably sign up for the Amex Blue Cash that pays 3% cash back on groceries, 2% cash back on gas and department stores, 1% on everything else or the Priceline Rewards Visa that pays 2% cash back on everything. I’m also considering the Perkstreet Debit card that pays up to 2% cash back but I would prefer the flexibility of a credit card.
Do more shopping online. Generally, you can earn more cash back for an online purchase than an offline purchase. I need to see if I can switch some of my offline purchases into online purchases. I also need to check my credit cards’ reward shopping sites, they often offer even more cash back than the online cash back shopping portals.
Get more referrals to Mr. Rebates. If I can get more people to sign up for Mr. Rebates then I can make even more cash back without making more purchases. This is a good deal for both my referrals and myself.
Using the above strategies I should be able to significantly increase my cash back earnings next year. The main thing that might prevent me from earning more cash back in the coming year is the fact that I plan to spend less overall. This means I’ll need to make sure I earn more cash back on what I do spend. That shouldn’t be difficult.
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Cash rewards calculated on purchases (which is most of what you list) are discounts on those purchases and should be considered a credit on your expenses. They don’t need to be attached to a specific item but rather listed as a lump sum that reduces your total expenditures. They aren’t “earned” and they certainly aren’t income. If they’re income, they should be added to your 1040 and subject to state and Federal income tax. A wise consummer understands these gimmicks mean less spending, not increased income. Of course the credit card issuers know many people spend more than they otherwise would becasue they’ve conceptualized the come-on that they’re “earning income.”
It is true that cash back is considered a discount and you don’t have to claim it as income on your taxes. I prefer to count it as income for my purposes. As I stated in the post, increasing your spending to get more cash back eliminates the benefit of getting cash back.
So how many open credit cards do you have right now?
All of my credit cards are listed in this post. I only carry a balance on one and that will be paid off as soon as I sell my van. I have an excellent credit score so I should be fine if I get another card. I don’t want to switch back and forth between cards too much though so I’ll probably only get one more card at the most and perhaps close one of the cards I rarely use.
I have 5% cash back rewards on my credit card and I just applied for Chase Freedom Cash Back Reward Card that will give me 5% cash back on gas, drugs, and Starbucks. I will be going on a lot of road trip on the first quarter of 2013, which means I will be spending a lot on gas, so I am looking forward to getting a lot of cash back rewards in return.