Today, I’m going to share with you my simple cash back credit card strategy. Groceries and gas are the two categories where we spend the most money, so those are the areas I focus on.
If you already have a credit card strategy, great! Share it with us! If not, this is for you!
Let’s dive right in.
Cash Back vs. Travel Rewards
For anyone just starting out, Cash Back Credit Cards is a great place to begin. They are simple to use and just as easy to redeem your rewards.
At this current time, I am only using cash back cards for my purchases. I don’t currently own any cards that provide travel rewards. My reason is we don’t fly enough to make it worth it, but I hope for that to change soon.
What to look for in a cash back credit card
No annual fee – With all the options available, there is no reason to be paying an annual fee. Doing so only takes away from your earning potential.
Accepted locations – Not all Credit Cards are treated equal. Visa and Mastercard are the two biggest players with Discover coming in third. American Express lags behind because of their high processing fees, so a great many stores don’t accept them. You don’t want to get stuck with a card you’re going to have a hard time using.
How they earn – Is it a set percentage all the time or quarterly rotating categories? Does the card pay more for certain types of purchases over others? Keep reading for more info on this.
Sign-up bonus – This is the icing on the cake. Nothing like a little extra money for doing what you already do.
My cash back strategy
Neither card has an annual fee. And they both use a rotating schedule, which means every quarter they offer 5% cash back on all purchases within a specific category.
Note: I signed up for the Discover It Cash Back card in Jan of 2019 so as a new member sign-up bonus they are going to match all the cash back I’ve earned at the end of my first year. This greatly increases my earning potential for this year.
Next year, when my Discover It bonus expires, I’ll likely go back to using my Chase Freedom Unlimited Card which gets 1.5% cash back on all purchases. Unless, of course, I find something better.
This is how the rotating schedule for 2019 looks for these two cards:
- Discover Pays 5% Cash Back on Groceries.
- Chase Freedom Pays 5% on Gas.
- Discover Pays 5% Cash Back on Gas
- Chase Freedom Pays 5% on Groceries.
- Discover Pays 5% Cash Back on Restaurants (we don’t eat out much but it helps)
- Discover Pays 1% on everything else so we still used it for groceries. With the end of the year bonus it’ll be like receiving 2% back.
- Chase Freedom Pays 5% on Gas.
- Discover Pays 5% Cash Back on Amazon, Target and Walmart – This means we will do more grocery shopping at Target and Walmart for the 5% cash back rewards. All other grocery purchases will get the equivalent of 2% cash back.
- Chase – Not yet announced.
As you can see, this schedule is not perfect, but it works for us a good percentage of the time and covers for what we buy the most. As better options come along, I will make adjustments.
I’ve been considering the Capital One SavorOne Card which gets 3% cash back on restaurant and entertainment purchases. Injecting that card into the mix at the right time will get me just a bit more cash back in that area. Another great thing about Capital One is, all their cards have no foreign transaction fees which makes it a great card for international travel.
My advice for setting up your own cash back credit card strategy
Figure out what you spend the most money on and sign up for credit cards that fit your style of spending. For instance, getting a travel credit card if you hate getting on a plane wouldn’t do you any good.
- Avoid Annual Fees.
- Look for cards that have a new member sign up bonus
- Don’t go out of your way to spend money just to get the bonuses.
- Avoid signing up for too many credit cards at one time
- It will impact your credit score negatively
- One card a year is about right
- You don’t want more than 2 credit inquiries at a time on your credit report.
- Do not carry a balance
- If you’re paying interest, what’s the point of having a cash back card?
- You’re giving them back all your earnings and then some!
- Adjust your plan as needed
- New deals come around all the time.
Play your cards right (no pun intended) and you could easily see a couple hundred dollars back into your account for just doing what you normally do.
Every dollar counts when you're trying to live a simple frugal life.
Have a strategy that you would like to share?
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Editorial Note: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, vendors or companies, and have not been reviewed, approved, or otherwise endorsed by any of these entities.