There are hundreds of different credit cards on the market to earn cash back rewards for everyday savings.
However, how do you maximize cash back with a small amount of spending?
Here’s a strategy to consider when optimizing purchases in the right categories on each credit card (restaurants, grocery stores, gas, AIR MILES partners, etc.):
- the least number of credit card applications
- the cheapest way possible
- the minimum expenditure required
This strategy is not exhaustive! Come and share your cash back strategies in the Milesopedia Facebook community!
Cash Back: The Credit cards Welcome Bonus Strategy
When you start venturing into the world of credit cards rewards, you quickly realize that the most lucrative strategy is in applying for credit cards to get welcome bonuses.
For beginners, we recommend starting with one or two credit cards, and then spacing out applications by at least 6 to 9 months. Then, once you become more comfortable with credit card management, you can increase the number of credit cards applications and move them closer together over time.
First round of credit cards
The credit cards suggested in the first round of the strategy provide rewards points primarily for travelers. However, these points are indirectly a form of cash back, depending on how you look at the strategy.
Here is the valuation that we obtain after the welcome bonuses following the three application:
Credit card | Bonus | Minimum expenses | Rewards | Annual fee | Final value |
TD First Class Travel® Visa Infinite* Card
|
80,000 TD Rewards points | $1 | 3 points | No annual fee the first year |
$400 |
|
100,000 HSBC Rewards points | $1 | 3 points | $49 (thanks to the $100 credit ) |
$500 |
American Express Cobalt™ Card | 30,000 privilege points | $6,000 spread over the first year |
30,000 privilege points | $ 155,88 | $600 |
TOTAL | 210,000 points | $ 6 002 | 30,006 points | $204,88 | $1,500 |
This strategyearn $1,295 in net worth ($1,500 – $205) on $6,002 in expenses for a 21.58% return.
Second round
In this second part of the strategy, the suggested credit cards give welcome rewards and cash back bonuses directly:
Credit card | Bonus | Minimum expenses | Rewards | Annual fee | Final value |
CIBC Dividend® Visa Infinite* Card | $250 | 2,500 over 4 months | – | with no annual fee the first year |
$250 |
BMO® AIR MILES® World Elite® MasterCard® | 3,000 miles (or $315) |
$3,000 over 3 months | 750 miles (or $79) |
with no annual fee the first year |
$394 |
Tangerine Money-Back Credit Card | $150 | $1,000 over 2 months | – | with no annual fee | $150 |
TOTAL | $715 | $6,500 | 79 $ | $0 | $794 |
This strategy earns you $794 in net worth on $6,500 in expenses or a 12.22%return.
Cash back: the long-term strategy
For a variety of reasons, many people prefer the strategy of arming themselves with a good wallet that has one cash-back credit card, to be kept for the long term with little annual fee to pay.
The credit cards that give the highest cash back rates and good insurance are often not free. Since the changes to the American Express CobaltTM Card, it has become one of the best cash back credit cards in Canada.
Second, as a strategy, I recommend that you seek out credit cards to cover expenses where American Express is not accepted, or categories that aren’t boosted.
Cash back: the long-term credit cards portfolio
Card | Spending Category | Cash back | Welcome bonus | Annual fee |
American Express Cobalt™ Card |
|
5 % | 30,000 Membership Rewards points (i.e. $300) |
155,88 $ |
Tangerine Money-Back Credit Card |
|
2 % | $150 | No annual fee |
BMO® CashBack® Mastercard®* |
|
3 % | $100 | No annual fee |
HSBC World Elite® Mastercard® |
|
1.5% to 3% | 100,000 points (i.e. $500) |
$49 (thanks to the $100 credit ) |
*Gift cards for these businesses can be purchased at grocery or convenience stores for 5% cash back.
Illustrated example of the strategy
Here are some numbers to illustrate the return of this strategy:
Card | Category | Annual expenditures | Rewards earned |
American Express Cobalt™ Card | Grocery store where American Express is accepted | $1,500 | $75 |
BMO® CashBack® Mastercard®* | Grocery | $1,500 | 45 $ |
American Express Cobalt™ Card | Gas | $1,000 | $50 |
American Express Cobalt™ Card | Restaurants where American Express is accepted | $500 | $25 |
Tangerine Money-Back Credit Card | Dining | $500 | $10 |
American Express Cobalt™ Card | Uber Eats | $700 | $35 |
American Express Cobalt™ Card | Tim Hortons, Starbucks | $500 | $25 |
Gift cards strategy | Walmart | $500 | $25 |
Gift cards strategy | Amazon | $1,000 | $50 |
Gift cards strategy | SAQ | $500 | $25 |
Gift cards strategy | Netflix | $250 | $12.5 |
Gift cards strategy | Cinema | $500 | $25 |
Gift cards strategy | Books and cultures | $500 | $25 |
Tangerine Money-Back Credit Card | Drugstores | $300 | $6 |
Gift cards strategy | Furniture (IKEA, Wayfair, etc.) | $375 | $18.75 |
Gift cards strategy | Minor renovation and maintenance | $375 | $18.75 |
Gift cards strategy | Clothing | $1,000 | $50 |
HSBC World Elite® Mastercard® | Miscellaneous (other) | $2,500 | $37.5 |
TOTAL | $14,000 | $558.5 |
With this portfolio, an individual’s annual expenses of $14,000 could generate $354.62 in cash back after subtracting the annual fees ($558.5 – $155.88 – $49) or 2.53%.
This strategy yields a significantly lower return when welcome bonuses are removed from the equation. However, an average of 2.53% cash back is still excellent.
When you have few credit cards, the best strategy is to make sure you go out and optimize each category of purchase to get the most optimal cash back possible. Therefore, the gift card strategy is essential to master in a cash back perspective.
In addition, there are many online American Express promotional offers to help offset the annual fee for the American Express CobaltTM Card.
With the generous credits from American Express, the real return in this strategy is around 4% to 5% cash back.