With the price of food and gas where it is, everyone’s looking for an edge and for more and more people, myself included, that edge is in maximizing what you can get out of credit card cash back reward programs. Credit card companies charge vendors a hefty percentage to process credit card transactions (AMEX and Discover charge the most, that’s why they often have the best cashback programs), so doesn’t it make sense that they pass along some of that to you? Of course it does!
So here are eight tips I use to ensure I get the most cash back out of credit cards, hopefully you will find them useful as well.
1. Know Your Spending
Every card is tailored to a slightly different person and a slightly different spending profile. They’re looking to get a slot in your wallet or purse and so they sometimes offer strange groups of eligible cashback categories in order to get there. The best way for you to figure out which card is best for you is to check your budget and see where your spending is.
Unfortunately, gone are the days when supermarket purchases offered 5% cashback but purchases at gas stations and auto maintenance offers are still around. For me, the answer is combining Costco’s cheaper gas with their Costco TrueEarnings card, which offers 1% cash back. You can get Costco gas without a membership in some areas .
Here are some popular categories and the cards I use (if applicable):
- Movies: Citi mtvU  gives 5% ThankYou Rewards, which I turn into cash for student loans. You can also submit grade reports for free ThankYou points .
- Books (& anything at Amazon.com): Again, Citi mtvU card .
- Gas: Costco TrueEarnings card , I use it at Costco for 2% cashback on gas. This only makes sense if you already have a Costco membership.
- Everything Else: Citi CashReturns offers 1% plus a 20% bonus for the first year.
There are certainly more cards out there but those are the ones that were ever on my radar given my spending categories.
2. Skip Stuff, Get Cash
I always opt for cash back because it makes the math easier and you can never have “loss” in the conversion. I know some people like to get “stuff” but often times, if you check out the catalogs, the conversion of points to products is never in your benefit.
Let’s take the simplest example of a gift card on the Citi ThankYou network. Each ThankYou reward point is worth approximately a penny, meaning 100 points equals one dollar. If you were to trade in your points for a $5 Barnes & Noble Gift Card (Item 1111022), it would cost you 1,000 points – or $10 worth of points! Of course as you get to larger gift cards, the exchange rate is more favorable ($10 gift cards cost only $15 in points) and it only starts to become even when you reach the $25 gift card level, depending on the vendor. The loss is most obvious with gift cards but it happens with stuff too because you’re often paying retail value in points.
3. Don’t Get A Zillion Cards
In my list above, I mentioned that I didn’t get the AMEX SimplyCash or the Home Advantage card because I didn’t spend a lot there. From time to time I do spend money at Home Depot or Lowes in spurts, as I will soon do to repair drywall damage in the next week or so, but it doesn’t make sense to load down your wallet or purse with a ton of plastic you don’t use regularly.
First, applying for a lot of credit cards will damage your credit score for a little bit. Second, you risk losing track of them if you don’t use them regularly. Maybe you forget to pay a bill or one of the cards falls out when you’re running around, losing track can wipe away an entire year’s cash back in one unfortunate incident. Finally, who wants to carry around all that extra weight anyway?
4. Have Backup
You’ll want at least one card that will give you 1.2% cash back on everything (for the first year, there’s a 20% bonus on top of the normally 1% cash back offer) that you can turn to if you forget whether you can get better cash back rewards on a purchase. Most cards will have at least 1% cash back so finding one will be a cinch. The Citi CashReturns card is our backup 1.2% card because there is no limit (crucial) and they send a check automatically once you reach the $50 threshold. The only way you can do better is if you can find a card that will deduct the cashback right off the credit card statement (the American Express SimplyCash(SM) Business Card will do this) or find one with a higher cash back, which I haven’t seen yet.
5. Beware Low Limits
Discover Card’s Open Road card offers 5% cash back. Ordinarily that would be a screaming hot deal, but read the fine print and you’ll see “Earn a full 5% Cashback Bonus on your first $100 in combined gas and auto maintenance purchases each billing period.” Woah. $100 can’t even fill the tank for some people. So the 5% looks good at first glance but really isn’t that great.
6. Write Down Cashback Percentages
Get some scotch tape and write down all the categories and percentage cash back on the face of the card. Some cards offer rewards in categories you don’t normally spend in, by writing it down you can flip through your cards as you wait in line so you can maximize your rewards. For example, the Discover More card is part of a program where the 5% cashback reward categories change every quarter. There’s no way for you to keep track of what it covers this month because it changes four times a year, so rather than rely on memory, write it down and change it as the program changes.
7. Always Pay In Full
Never carry a balance. Any interest you pay will erase your reward totally and completely.
8. Stop Spending
What!? What kind of tip is this? It’s actually the best tip. 🙂 On some things you can’t simply “stop spending,” like food and gas, but on others you might want to consider putting off the purchase for a few days, weeks, or months until the economic climate recovers a little. Skip that movie once a week or cook dinner more often, those little steps will save you more money than a few percentage points off your bill.
Do you have any tips or tricks to maximize your cash back? If so, please share!
(Photo: andresrueda )