FINANCE YO SELF

Getting A Little Extra From Credit Cards

I’ve made around $2000 this year from credit card sign up bonuses and rewards.  This doesn’t involve travel hacking or finding intricate ways to move money around, and takes maybe a few minutes each month to keep track of.

Before we begin, it’s important to note that when used unwisely, credit cards can be dangerous to your financial health.  If you have credit card debt, pay that sucka down now!  This article is intended for those of you who are interested in further optimizing an already solid financial plan.


My credit card strategy is pretty simple.  I have a couple of cards (no annual fee of course!) that are permanent, and over the course of the year I’ll sign up for maybe 2-3 new cards with attractive sign-up bonuses.  Most cards with good sign-up bonuses have an annual fee which is usually waived the first year.  I simply cancel the card before the annual fee kicks in.

I’ve been using You Need a Budget for 2 years now and at this point more than anything else it serves as a great way to track my spending.  It also forces me to spend only money that I have, which makes it perfect for putting as much of your spending as possible on a credit card.  I pay my cards off in full at the end of each month and have never paid interest.  Paying interest will destroy any benefits you get from using rewards cards.

I also track my cards on a simple spreadsheet, including the date opened, bonus requirements, rewards (points, miles, cash back) values and amounts, and when the annual fee kicks in.

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My Credit Card Spreadsheet

You Don’t Need to “Travel-Hack”

When I first got into maximizing credit card rewards I found a lot of information about “travel-hacking”.  I tend to use my rewards for cash back and credit, but you can earn a lot of free travel with a little research and dedication.  If you travel regularly for work and get reimbursed, you can earn a lot with very little investment.  I recommend The Points Guy if you’re interested in upping your travel stash.  The point of this post is to show that you can still make a tidy sum with just a couple cards and sticking to your every day spending – no buying gift cards or transfers or anything like that.

I’ve found that on average I spend about $1000 that can be put on a credit card – depending on the rewards rate and what cards I use this amounts to $30-50 a month.  For annual fee cards I usually only go for bonuses that are worth around $4-500.  3 new cards a year is pretty easy to keep track of but if you pick the right cards you can hit $2000 without breaking a sweat.  Most cards with bonuses this high have fairly high requirements, like spending $3-4000 in the first 90 days, so I try to time when I sign up with big upcoming expenses (budgeted for, of course).  For instance, I pay my car insurance every 6 months, so that’s a decent chunk out of a sign up requirement.

Redemption

When looking for new cards it’s important to have an idea about what you want to use the rewards for.  Again, The Points Guy is a great resource for all things travel related, including points valuations and transfer options between airlines, hotels, and travel sites.  If you’re interested in cash back, there are a couple of options.

  1. Straight Cash Back – This is the simplest way to redeem rewards – usually applied as a statement credit for existing purchases.
  2. Gift Cards – This isn’t buying gift cards as a way to meet sign up bonuses.  It’s also not as simple as straight cash back but allows you to take advantage of some of the more lucrative sign up bonuses.  Some cards might offer you only 1 cent per 2 points (or a 50% value compared to redeeming for travel) but up to 100% for gift cards, usually to places like restaurants or stores.  The problem is that most of the gift card options aren’t always appealing or something you would actually use.  In this case, I use Cardpool.com.  Cardpool buys your unwanted gift cards for either cash or an Amazon gift card.
    • Browse Cardpool before you redeem your points for gift cards.  Different gift cards command different prices, with the difference being between 70-87% of the card’s value.  Obviously you want to find which gift cards you can sell for the most value.  
    • Selecting the option to get paid in an Amazon gift card instead of cash boosts your earnings by 6%.  I buy most of my clothing, Christmas gifts, and other household items from Amazon over the course of the year and currently have over $1000 in credit there.  If I need something I check Amazon before going to the store.  Amazon also has a wider selection of gift cards than most credit card points hubs, so you have more options for how to spend your rewards by going through Amazon.

Ideally you would be able to get 100% of your rewards back all the time.  When gift cards are worth more than straight cash back I’ve found selling them through Cardpool to be the best option.  On a $400 sign up bonus you can still get $372 worth of credit, and considering this is extra money anyways I don’t view it as losing anything.

To get an idea of what your points are worth, a simple Google search of card company + rewards name + redemption will bring up a chart listing the values for each redemption option.

Cards I Use

Free

  • Barclaycard Sallie Mae Mastercard – unfortunately this card has been discontinued, but I get 5% back on gas and groceries every month.  Depending on which category you spend more in, a no-fee card with high rewards in one of these areas is a good bet for an every day card.
  • Chase Freedom – you get 5% back on quarterly rotating categories like gas, groceries, restaurants, Amazon, etc.  During holidays cash back can even jump to 10%.  Chase Ultimate Rewards are the best credit card rewards out there – they can be redeemed 100% (or more) on travel or 100% cash back.
  • Discover It – similar to the Chase Freedom, quarterly rotating categories and a 100% cash back option.

The 3 cards above have no annual fee, which makes them ideal for holding on to and using when the rewards are in your favor.  They all also offer at least 1% back on purchases outside of the promoted categories.

With Annual Fee

Over the last year or so I’ve used the Chase Sapphire, Capital One Venture, Citi Thank You Preferred, American Express Preferred, and Barclaycard Arrival+.  All have had signup bonuses in the $4-500 range plus whatever extra I got from using the card to meet the spending requirement.

Summary

Using credit cards to boost my income has worked well for a couple of reasons.  First, I put a system in place where meeting spending requirements comes down to simply swiping a credit card instead of a debit card and I did a little research and thoughtful planning before signing up for anything.  These two things have allowed me to earn some sizable rewards with very little extra effort and added complexity to my regular financial process.

I also haven’t gotten too greedy – while some people have had tremendous success travel hacking and playing the credit card game, I know that beyond a certain point I’m just creating more work for myself.  The extra income that I earn is great because it truly feels extra – putting more work into it probably wouldn’t get me much better results and there are other things I’d rather spend my time on.

By being efficient with when I apply for cards and which cards I apply for the impact on my credit score is minimized (practically no change over the last year or so).  Below is a handy picture for reference on what makes up your credit score.

How Credit Scores Are Made

How Credit Scores Are Made


Remember, credit cards can be a dangerous financial tool depending on your situation.  The ideas discussed here aren’t going to make you rich, but I hope give you some ideas on ways to optimize your finances.   

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2 Comments

  1. Nice work, $2k is a good chunk of cash! We do a lot of travel and recently started taking advantage of the different travel reward cards. It does take some time to track all of the cards, but so long as you make your payments the rewards are worth the time. We will be able to book our next vacation using only travel rewards.

    • That’s awesome that you’ve been able to cover your travel expenses!

      I agree it takes some time and effort up front, but the hourly return is a lot better than most 9-5’s.

      All in all I think it’s a great reminder that you don’t have to be debt free or a stock expert or have millions in the bank to have opportunities – a little bit of mindfulness can go a long way!

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