Earn Money with Cash-Back Reward Credit Cards

Last year I earned $330 from American Express by using their cash-back credit card. I could have earned more, but $330 wasn't bad. As such, I love cash-back credit cards. Why? Because they give you free money for doing something you'd already do! What a deal!

Here's a piece from Market Watch that details the benefits of cash-back credit cards. Their main thoughts:

If you're looking for the sweet smell of cash -- and 60% of cardholders involved in reward programs are -- Discover is one of the more interesting cards. You get cash. Not points, but cash. Once you reach a reasonable threshold, you get not one point per dollar spent, but one cent. Real money, and that's a sweet aroma if you're going to use a card at all. Spend $20,000, collect $200. You can spend this cash any way you want, including using it to pay your outstanding balance.

Other cash-back cards offer kickers, up to 5% for items like gasoline (not bad at three bucks a gallon).

Maybe it's because consumers are becoming more conscious of low savings rates. But recently, a whole crop of new reward cards has sprouted offering various flavors of savings rewards attached to card spending.

However, as the article warns, you have to be sure you know the terms associated with your cash-back credit card. Specifically look for the following:

Watch for savings limits, high fees, required ties to company-provided accounts, short grace periods, high interest rates and -- the newest "gotcha" of all -- so called "default" rates, where interest rates soar, sometimes to over 30%, if you miss a payment or are late with a payment.

Also watch for cards that share your spending profile with marketers. Read the fine print carefully, and make sure the savings are worth what you give up or risk if you make a late payment.

The one disappointment of this piece is that the author ends by recommending Discover because it has a plain and simple 1% back on everything. I'm not a big fan of the Discover option for two main reasons:

1. I can earn more elsewhere. Last year, I earned the equivalent of 1.68% with American Express. If I'd only earned 1%, I would have lost $131. The difference is probably even greater when compared to the Chase Rewards Plus Visa.

2. Discover isn't offered everywhere, which guarantees you'll need to have at least two credit cards if you like to charge as many places as possible -- a key to maximizing your cash-back rewards (BTW, this is a drawback with American Express too, though Amex is the only credit card accepted at Costco -- one store I'm at frequently).

Comments

[Dan]

In your previous post about cash-back cards, I mentioned that I had the Chase PerfectCard because it had no limits and it was free of hassles. After more research, I switched over to the Chase Rewards Plus card. Instead of 3% gas and 1% everything else, I get 5% gas/groceries/drugstore and 1% everything else. No limits on rewards earnings, and you can get cash back if you want (along with a wide range of other prizes).

The only down side is that you have to get your cash back in the form of checks, rather than having it applied directly to your credit card balance as was done with the Chase PerfectCard. I don't know why they don't offer this for the Rewards Plus; I'm sure it would save them a lot of administrative expense and trouble.

Anyway, so far the card is working out great, although I haven't redeemed any rewards yet.

[My Personal Finance Blogger]

I've been maxing out the rewards on my Household Bank card for a couple of years now (2% on everything, limit $400 per year). I use it for pretty much everything until I hit the reward limit for the year, then switch to a different card.

[hossam iron]

i am very happy to earn money wiht you

[ChrisCPA]

I just wanted to give you a heads up to let others know. I just emailed CITI about their 5% dividend credit card. Here is what they said:

Dividend Credit Card 08/23/06 11:25:08 AM 4 of 4
You wrote:

Hello, I've recently heard that CITI is scaling back the dividend on the CITI Dividend Platinum card from 5% (Gas & Supermarket) to 2%. Is this true? When will it happen? What will CITI do to keep longtime, faithful customers from switching to higher dividend-paying credit cards after the change? Thanks, Chris
Re: Dividend Credit Card 08/23/06 01:04:20 PM 4 of 4
Customer Service Wrote:

We would like to inform you that the Dividend reward program is undergoing a change and will be effective from 10/13/2006.

New reward program details:

· 2% cash back on purchases made at grocery stores, gas stations, drug stores, convenience stores, utilities, and cable.

· 1% cash back on all other purchases

· 1% cash back on cash advances taken at the standard cash rate.

· $5 Dividend dollars for each balance transfer transaction of $1500 or more.

· Unlimited cash back at the Dividend Merchant Network

· $300 annual cap

· Redemption upon request with $50 threshold

Thank you for using our website.

[MS]

I wouldn't recommend the following system for someone who maintains debt on a credit card, which indicates a probable lack of discipline, but if you live debt free (I'm not counting 'good' debt such as student loans or a mortgage) taking advantage of your bank / credit union's cash-back or award points program gets your daily expense money working double-time for you, kind of like a souped-up spare change jar kept for you by the bank.

Since your credit card is most likely linked to your savings / checking account and accessible online, pay off the credit card amount every 2 weeks when you get a direct deposit from your employer. Don't wait for end-of-month since your discipline can fade on you - do it rigorously every paycheck.

Now I run all expenses thru the credit card and collect the points. This typically translates into (for example) round-trip airline tickets once a year, which is a major savings for since I have to fly home for the holidays.

I didn't expect this, but I find 2X a month I get a 'hit' or high of having paid off a credit card (yes, the same one 2X a month) - while this high is not equal to that joy I experienced when I FINALLY got rid of all my bad (credit) debt, it seems to re-inforce my fiscal discipline and keeps me from backsliding.

The key is discipline. This means you track every penny, every expense in some financial software every day (Quicken, Money), live below your means, plan major purchases and live (bad) debt-free as a matter of course.

So DON'T use this if you have a practice of living off credit or are prone to binge spending.

[AUGUSTINE ATTAH]

want creditcards

[Ajay]

I currently have the Citi Dividend Platinum which was mentioned by chris... I love the card now at 5%, but I hate it at 2%.
I plan to switch... and I'm trying to find another good Cash Back Credit Card. I know about the American Express Blue Cash, which gives 5% cash back, but its on an annual basis in the form of credit on your bill. I'd rather get a check like my current card gives. Also, I'm one of the those people that pays the credit card bill in full each month.
Any suggestion???

[credit card cash back rewards enthusiast]

Ajay, HSBC Direct Rewards pays 5% on gas/groceries/drugs from dollar 1 (as opposed to being tiered like AmEx Blue Cash). Also, the Citi Driver's Edge card gives 6% on gas/groceries/drugs applicable toward car maintenance, purchase, or lease.

[Susan]

Regarding the Chase Rewards Plus Visa or Mastercard, while it is true that you get 5 points for each $1 spent at gas stations, drug stores or grocery stores, I don't think it is correct that you get 5% cash back. If you look at the rewards brochure, you'll see that it takes 3500 points to get a $25 check or 6000 points to get a $50 check. Not until you accumulate 10,000 points do you get the fullest possible value - a $100 for 10,000 points. Someone else will have to do that math, but it is still probably a better deal monetarily than the Chase Perfect Card, especially if you do much shopping at grocery stores and drug stores (which includes places like Wal-mart and Target). However, it appears to be more hassle than the Perfect card, where cash rewards are simply credited to your account each month.

[Bart Stapley/ Stapley Contracting Inc.]

I would like a simple 3% to 5% cash back card for all business realated purchases with no earn caps. is this possible?

[Jane Lake]

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Two programs that fit this criteria and have worked extremely well for me
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and

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Let me know what you think.

Jane Lake

[Naga Pappireddi]

You can try Chase freedom card which gives 3% on gas, grocery,fast food restaurants. If you are willing to wait till you accumulate $200, you get $250 -- it is like 25% extra.

Citi driver edge has 6% for gas,grocery,drugstore for only first year. I am using it atleast first year because it also gives 1 cent for each mile you drive on a car you register with them. That works out additional $150 per year, if you drive 15000 miles. The only problem is the rewards are in the form of reimbursement to car maintenace, purchases and that too you have submit reimbursement forms. May not be ideal for people who donot have time

Lastly there is citi cashreturns which gives 5% cashback on all purchases for 3 months(1% after wards). If you have large purchase in the pipeline, worth timing it