Maximizing credit card rewards

[PWMDMD]

I think I've posted this in bits and pieces here and there on BITOG but as I'm about to fund my wife's backdoor Roth entirely with money generated by credit card rewards, I thought I'd share.

Disclaimers:
-I never pay interest charges and everything is paid off monthly.
-I never buy things I don't need chasing rewards - these are all expenses that need to be paid one way or the other.
-Amex points are worth A LOT MORE if used wisely for travel with travel partners - I mean 10-20X more valuable and this is what I do if I don't have travel coming up or I have extra points after using points for travel.
-It seems complicated but it's really not and yes, it is kind of a hobby.


1. The Fidelity VISA gives unlimited 2% cash back on everything when points are deposited into a Fidelity account. This is my general spending card for personal expenses and nearly everything personal that isn't groceries or food goes through this card.
2. The Schwab Platinum card allows redemption of all Amex points at 1.1 cents per point instead of the standard 0.6 cents per point. My personal and business Amex points all go into the same pool of Amex points. I put travel on this card at 5% cash back. It has a $695 annual fee that is negated by the nearly $1200 in freebees like $200 airline credit, free global entry, free Clear, $120 streaming video credit, free Walmart +, etc and when your annual fee hits you can ask for a "retention offer" - this year was spend $5,000 and get 50,000 points worth $550. I did this through online chat.
3. Amex Gold gives 4% cash back on restaurants and groceries - with three teen boys this is a lot of points.
4. I do a fair amount of business travel for continuing education and so have an Amex Business Platinum that also gives back 5% cash back on travel and it pays for many of the personal platinum freebees above for my wife.
5. I have two Amex Blue Business cash-back cards that have no annual fee and give 2% cash back on every charge up to $50k in spending per year.
6. Rakuten also gives Amex points as cashback. It has a browser plugin that will automatically identify websites with cashback during checkout and you can put your cc into your account and get credit for in-store purchases. Walmart was just at 8% cash back last week. I've generated an extra 50,000 points this year worth $550 just using Rakuten.

Fidelity points go directly to a Fidelity brokerage as cash. All the Amex points get redeemed as cash at Schwab and then transferred to Fidelity brokerage. Rakuten gets transferred to Amex, then Schwab to convert to cash, and then the Fidelity brokerage. These are all earning nearly 5% while I'm accumulating money throughout the year. When the brokerage hits $6500 I transfer to her traditional IRA and then do the backdoor Roth transfer. I just funded my wife's backdoor roth with $6500 entirely generated from the above.

 

[supton]

Nice! I don't bother with such stuff, as I don't think I have enough "churn" to bother, but pretty cool to make a buck off all the same.

 

[k1xv]

I found that, if I had rewards redeemed by having cash deposited to a personal checking account, at the end of the year I would get a 1099 and have to include that as taxable income.

However, if I had my rewards redeemed as a credit to the account where the rewards were generated, it was treated as a discount to my bill, and no 1099 was generated.

 

[PWMDMD]

I found that, if I had rewards redeemed by having cash deposited to a personal checking account, at the end of the year I would get a 1099 and have to include that as taxable income.

However, if I had my rewards redeemed as a credit to the account where the rewards were generated, it was treated as a discount to my bill, and no 1988 was generated.

If you keep funds in a MM it's a 1099-INT but the 5% completely outweighs the 1099. During times where MMs are paying nothing you could always keep Amex points as points at Amex until ready to invest them. Credit card points are considered rebates and not taxable until you convert them to cash in another taxable account type.

 

[John105]

Same here, don’t carry a balance, not ever. Will never fall for 0% again in this lifetime.

1. Use Citi Double for 2% cash back

2. Use PenFed for 5% on gas, permanently no revolving etc. the 5% is automatically deducted from every statement. Non gas purchases have NO REWARDS.

3. Use Costco visa for 2% at Costco, UNLESS my wife’s Chase Freedom is 5% at warehouse clubs. Also 3% restaurants and travel.

4. Use AMEX blue for 3% groceries unless wife’s Chase Freedom is 5% at groceries, or my discover IT .

5. Use Discover IT if grocery or restaurant 5%. It was when we did my son’s first communion reception which was $1200. Then got another 2% through the restaurant rewards.

6. One off. Got the chase United when family needed to go to Chicago last Sept. $200 round trip times 3. $250 statement credit and free carry on, $60 x 3. Didn’t use lounge vouchers. Didn’t get points bonus as had this card before in the past. Worth it to save $250 and $180. App Dinged my FICO but it’s back up.

The end

 

[alarmguy]

Wow, so impressed with a few of these posts but think I seen both @John105 and @PWMDMD before when I posted on the subject. I do the same.
Funny I thought about throwing my spare money in my existing Roth too but still use it for things other than that, the balance is or near 2k right now between the cards, haven't bought something in a while expect maybe one thing for a couple hundred. I still may.

1. Discover Card 5% back rotating categories every 3 months, just finishing up restaurants and Sam's club 5% now.
2. Chase Rotating 5% every three months until July 1st that is LOWES and AMAZON
3. AMEX failsafe for 3% on groceries all year long
4. Citicard 2% all year long
5. My wife's Citicard 5% on highest spending category for the month. So for instance if I am not getting 5% back on gasoline with Chase we will use her card for gas for those 3 months.

You do have to watch when you hit limits on certain cards for promotional 5%. Ex. Chase Lowes and Amazon, once you hit (guessing) $7,500 in purchases it goes down to 1% or something like that. I happen to hit it and then switched to my fail safe 2% Citicard which has no limit on dollar about. It's rare I hit those limits, we just happen to have moved into a new home and some larger than normal purchases. .

Starting in July for 3 months Discover 5% cash back on gasoline, so at that point we will switch and I will use the Discover which was restaurants last 3 months and start buying gas with it and use my wife's CITI CARD for restaurants for the 5% cash back.
GET THIS, first time I ever saw this in addition to Discover giving me 5% on gas, its giving me 5% on all purchases that I use my digital wallet for (in my case Apple Wallet)

Chase new category starting 7/1 is 5% gas and EV charging.

I too enjoy this stuff. It's fun, rewarding and just plain smart, why let others keep free money?
My wife and I too, NEVER carry a balance and I mean NEVER.

BTW in the last year I collected another (gosh, loosing track here 2k or so max) opening and closing credit cards and savings accounts with promotions from competing banks. Im talking $250 to $500 each. This though isnt an everyday thing, once the required time to keep them expires I close them. Again, this isnt a common thing we do, but we had an intense year of offers last year and the year before, it's now settled down and honestly do not look to do a lot of it and have too many credit inquiries.

 

[JohnnyG]

I do pretty much the same thing, but I don't travel much so have no need for air miles and such.
I also refuse to pay a fee for a card, so AMEX is a no go for me.
My Chase Visa has no fee, and pays points so ALL of my purchases go through it.

Just opened a MM fund the other day @ 5.2%.

 

[sw99]

I do pretty much the same thing, but I don't travel much so have no need for air miles and such.
I also refuse to pay a fee for a card, so AMEX is a no go for me.
My Chase Visa has no fee, and pays points so ALL of my purchases go through it.

Just opened a MM fund the other day @ 5.2%.

AMEX Cash magnet is a no fee 1.5% cash back on everything card just fyi.

 

[John105]

AMEX Cash magnet is a no fee 1.5% cash back on everything card just fyi.

I had a buddy who drank the Ramsey kool aid. He would say all in this thread is nonsense. I would get right to one that I thought is a no-brainer. Since he says credit rewards are to spend more.

PenFed Gas 5%, deducted from each statement automatically. Why would I want to leave 5% back at the pumps?

He said nope. Pay cash (that’s not practical) or debit card. Period.

I would ask is this what you would teach your kids?

He slipped up. One time he tells me “Gracie got her first CC so I tried to tell her to use it responsibly.”

Wait I need to mention 0%—never again on a new acct nor transfer. I did get the new HVAC on 0% equal payments 60 mos in 2020. There are no minimum payments, they are equal payments.

My buddy said you need to do without AC if you’re not paying cash. Where he became so hard lined and black and white I’ll never know. Meanwhile he divorced his wife and took half of everything and hasn’t worked in 15+ years….

 

[CKN]

I had a buddy who drank the Ramsey kool aid. He would say all in this thread is nonsense. I would get right to one that I thought is a no-brainer. Since he says credit rewards are to spend more.

PenFed Gas 5%, deducted from each statement automatically. Why would I want to leave 5% back at the pumps?

He said nope. Pay cash (that’s not practical) or debit card. Period.

I would ask is this what you would teach your kids?

He slipped up. One time he tells me “Gracie got her first CC so I tried to tell her to use it responsibly.”

Wait I need to mention 0%—never again on a new acct nor transfer. I did get the new HVAC on 0% equal payments 60 mos in 2020. There are no minimum payments, they are equal payments.

My buddy said you need to do without AC if you’re not paying cash. Where he became so hard lined and black and white I’ll never know. Meanwhile he divorced his wife and took half of everything and hasn’t worked in 15+ years….

It's VERY HARD for me to understand those against credit cards when you pay your balance off monthly and receive $100's or even $1,000's in rewards .

 

[paulri]

The Fidelity rewards to go to a Fido account, but they then let you transfer the cash to a non-Fido account if you just want the cash, instead of wanting to invest it in one of their mutual funds. It is an extra step, but all it takes is a couple of clicks.

I use Citi Double Cash for almost everything now, Amazon Prime cc gives 5% off all amazon purchases, Target Red Card gives 5% at the point of sale (hard to beat that), but Double Cash is for everything else.

I strongly agree--this cannot be stated enough--that paying off the balance every month is crucial. If you aren't doing that, then your 2% rewards will get eaten up and then some, with interest payments. And saying "No" to a purchase saves you 100% of the price; a good rewards card will only give you (generally) 2% of the price.

I think I've posted this in bits and pieces here and there on BITOG but as I'm about to fund my wife's backdoor Roth entirely with money generated by credit card rewards, I thought I'd share.

1. The Fidelity VISA gives unlimited 2% cash back on everything when points are deposited into a Fidelity account. This is my general spending card for personal expenses and nearly everything personal that isn't groceries or food goes through this card.

Fidelity points go directly to a Fidelity brokerage as cash. All the Amex points get redeemed as cash at Schwab and then transferred to Fidelity brokerage. Rakuten gets transferred to Amex, then Schwab to convert to cash, and then the Fidelity brokerage. These are all earning nearly 5% while I'm accumulating money throughout the year. When the brokerage hits $6500 I transfer to her traditional IRA and then do the backdoor Roth transfer. I just funded my wife's backdoor roth with $6500 entirely generated from the above.

 

[walterjay]

I never use cash. I use Citi Double Rewards for 2% off. Red Card for 5% at Target. Lowes card 5%. Amazon card for 5%.
Yesterday I opened an account with Continental tires to get $220.00 back on tires that I am buying today.
I work the system and earn all that I can. It really adds up.

 

[Escape08]

The best CC for me is Discover. It's the only one I use. Their cash back is always generous and it helps a lot when you add it to when paying bills. Customer service reps are US based.

 

[dishdude]

It's VERY HARD for me to understand those against credit cards when you pay your balance off monthly and receive $100's or even $1,000's in rewards .

Someone on AM talk radio told them to pay everything in cash from envelopes.

 

[WylieCoyote]

I had a buddy who drank the Ramsey kool aid. He would say all in this thread is nonsense. I would get right to one that I thought is a no-brainer. Since he says credit rewards are to spend more.

PenFed Gas 5%, deducted from each statement automatically. Why would I want to leave 5% back at the pumps?

He said nope. Pay cash (that’s not practical) or debit card. Period.

I would ask is this what you would teach your kids?

He slipped up. One time he tells me “Gracie got her first CC so I tried to tell her to use it responsibly.”

Wait I need to mention 0%—never again on a new acct nor transfer. I did get the new HVAC on 0% equal payments 60 mos in 2020. There are no minimum payments, they are equal payments.

My buddy said you need to do without AC if you’re not paying cash. Where he became so hard lined and black and white I’ll never know. Meanwhile he divorced his wife and took half of everything and hasn’t worked in 15+ years….

Anyone who recommends using a physical debit card at a gas pump is automatically discredited in my view. Best advice I can give is to gas up exclusively at places that offer remote pump activation hooked to a proprietary rewards card.

 

[walterjay]

Someone on AM talk radio told them to pay everything in cash from envelopes.

That works for people who are trying to establish financial discipline.

 

[John105]

Anyone who recommends using a physical debit card at a gas pump is automatically discredited in my view. Best advice I can give us to gas up exclusively at places that offer remote pump activation hooked to a proprietary rewards card.

Like I said why leave 5% at the pump? I’m talking deducted monthly from the statement amount, not Starbucks gift cards. My buddy said reassessing property values is a money grab.

I said I’ve always heard revenue blind. But his types scared me saying taxes doubling. After it happened, I said no increase I was right. He said you are the exception

Then I send 5 years of my taxes down to the penny no increase due to reassessment. But still he screamed money grab.

This reminded me of when we were teens colleges claimed admissions was need blind. Flash forward they proved it.

Nobody should use a debit card. They are not protected. Credit card one can not be liable for more than $50 on a charge not made by cardholder. Not so with debit.

 

[Oillover]

I do pretty much the same thing, but I don't travel much so have no need for air miles and such.
I also refuse to pay a fee for a card, so AMEX is a no go for me.
My Chase Visa has no fee, and pays points so ALL of my purchases go through it.

Just opened a MM fund the other day @ 5.2%.

My Amex card (thru my bank) is usually 120ish per year.
As long as I keep my checking acct over 5k, they automatically waive the yearly fee.
I also don't pay monthly interest (never have)

As for rewards, I get points towards gift cars to pay for consumables outside of groceries and gas (motor oil, home fixtures, etc.)
This year I've earned about $700 so far. But even if I had to pay the 120 for the annual membership, the benefits far outweigh the costs of having the card.

 

[CKN]

Someone on AM talk radio told them to pay everything in cash from envelopes.

Yea-that guy is for simple-minded people with no self discipline. Since we traveled to South America this year-(all booked towards the end of last year) I got $1,000.00 rebate from CostCo. That's a hunk of change.

 

[Pablo]

I too use my Fidelity card whenever possible. Love it for large purchases when a card is accepted- the cash right to the brokerage account is sweet.

PayPal card at 3% is good too but seems I just don’t use it much anymore no particular reason other than consolidation

Lastly I like the Walmart Capital One card - buy gold from from Walmart.com and get 5% which can go directly against the balance