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? This article explains a strategy for optimizing purchases in the right categories for each credit card (restaurants, grocery stores, gasoline, AIR MILES partners, etc.):
When you start to venture into the world of credit card rewards, you quickly realize that the most lucrative strategy is to apply for credit cards in order to earn welcome bonuses.
For beginners, we recommend starting with one or two credit cards, then spacing out applications by at least 6 to 9 months. Then, once you’re more comfortable with credit card management, you can increase the number of credit card applications and space them out over time.
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 obtained after the welcome bonuses following the three subscriptions:
This strategy accumulates $1,610 in net worth ($1,885 – $275) on $14,000 in expenses, for a return of 11.5%.
In this second part of the strategy, the suggested credit cards give welcome rewards and cash back bonuses directly:
This strategy yields $738 in net worth on $6,500 in expenses, a return of 11.4%.
So, with these two rounds of credit cards, an individual’s annual spending of $20,500 could generate $2,348 in cash back. That’s a return of 11.5%.
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.
Credit cards with the highest cashback rates and good insurance often come at a price. Since the changes made to the American Express Cobalt® 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.
* Gift cards for these stores can be purchased in grocery or convenience stores for 5% cash back.
Here are some numbers to illustrate the return of this strategy:
With this portfolio, an individual’s annual expenses of $14,000 could generate $315.12 in cash back once annual fees are subtracted ($591 – $155.88 – $120) or 2.25%. This strategy yields a significantly lower return when underwriting bonuses are removed from the equation. However, an average of 2.25% 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. The gift card strategy is therefore essential to master when it comes to cash back.
What’s more, many American Express online promotional offers put the American Express Cobalt® Card annual fee into perspective. With generous American Express credits, the real return on this strategy is around 4% to 5% cash back.
In short, there are several strategies for optimizing credit card purchases and maximizing cash back. The aim is to apply for as few cards as possible, pay as few fees as possible and spend as little as possible.
If you have any cash-back strategies of your own, don’t hesitate to share them with the Milesopedia Facebook community!
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