Cash back credit cards can be one of the best or worst financial tools at your disposal. If used properly, they will result in hundreds, if not thousands, of additional dollars coming back to you on purchases you were going to make regardless. If used poorly, they’ll trap you into a cycle of high-interest debt. In this article, I’ll help you take advantage of cash back credit cards so you can keep more money in your wallet, and show you each of the six cash back cards that I use.
Before reading this, I recommend reviewing my article on basic personal finance for fathers. If you only read one part of that article, I highly encourage you to read about the debt portion and do your own research of the evils of most debt.
The Basics Of Cash Back Credit Cards
A ‘cash back credit card’ is sort of self-explanatory—it’s a credit card that gives you cash back on purchases. However, how much cash back you get and what purchases you get cash back on are different for each and every card.
For the majority of cash back credit cards, you will receive a flat rate (usually 1-1.5%) for each purchase you make. Some even offer enhanced rewards for rotating categories (usually 3-5%). High-end cash back cards give you the greatest rewards, but the draw back can be the high annual fees it costs to acquire the card in the first place.
There are many different ways to take advantage of cash back credit cards. However, the foundational rule is that if a card has an annual fee you must have a high level of certainty that you’ll get more cash back than the fees of the card. It’s so, so, so easy to see a card with a 5% cash back rate on something you spend money on, only to do some basic math and realize that you’re losing money. Plus, you don’t want to have a hard credit inquiry if it doesn’t help you!
Why Doesn’t Everyone Have These Cards?
As with anything in this world, there are pros and cons to cash back credit cards. Fortunately, because of the way I use these cards, I have been left with all of the pros and none of the cons. I’ll explain how soon.
First, unless you have a credit score in the high 600s, you’re not going to be eligible for most (if any) cash back cards. Like low interest loans, this is a financial product that people with no or poor credit histories are simply not going to have access to.
The other, and maybe most important, reason some people don’t and probably shouldn’t have a cash back credit card is because the interest rates are higher than average. I just checked the APRs of a couple of my cards and both are above 20%. As CNBC highlights, if you’re carrying the average amount of American credit card debt ($6,000) and paying the minimum on an average rate (17%) card, it would take four years and $2,200 in interest. For a cash back credit card it would take even longer and you wouldrack up more interest charges.
If you have a good credit history and routinely pay your credit cards off each month then you are literally wasting money by not making purchases with a cash back card.
So, How Do I Take Advantage of Cash Back Credit Cards?
After understanding the basics and pit falls of cash back credit cards, you’re ahead of most people. Now, you’re officially ready to learn how to take advantage of cash back credit cards.
Assuming you have a good credit history, before finding out what shiny new piece of plastic or metal to add to your physical and digital wallets, you have to do an analysis of what you’re spending your money on each month.
For example, if you spend a lot of money on groceries, then you’ll want to find a card to has a good reward for grocery store purchases. If gas is a big expense in your household, then searching for an option that gives you a good percentage in rewards for gas station purchases is ideal. Even things like streaming services and eating out can be rewarded handsomely with the right card.
At a minimum, you should be accessing a 1.5% cash back credit card. Forgetting about cards for specific purposes, if you charge $1,000 a month to your card, you would be rewarded with $180 each year in cash back. Not bad for purchases you were going to make anyway!
How I Take Advantage Of Cash Back Credit Cards
Over the years I’ve developed a *knock on wood* fool proof system that results in four figures a year coming back to me in total credit card rewards.
Now, I want to note that this took time. I wasn’t able to get my first cash back card until I was about 20 years old, but once I got that card I was off to the races working to set up a system that maximized my money back.
After having my daughter, I was even more interested in finding ways to take advantage of my cash back credit cards. Over the next six sections I will highlight each of the cash back cards that I currently have in my wallet, what I use them for, and how I maximize returns on the purchases I would make regardless of the credit card I had.
American Express Blue Cash Preferred
The American Express Blue Cash Preferred isn’t my most used card, but it is my favorite.
With this card I get 6% back on groceries (up to $6,000 in purchases) and streaming services, 3% back on gas and transit, and 1% back on everything else for a $95 annual fee.
I do most of my grocery shopping via Walmart + (more on that below), so this card doesn’t help much with that. I do make the occasional run to my local grocery store to use the 6%, but the beauty of the way I take advantage of this card is through the purchase of gift cards. Whether I am buying a $100 gift card to take the family out for dinner, a $500 Best Buy gift card for an Xbox Series X or spending a couple thousand on Home Deport cards for my home improvement needs, I get 6% back–on top of the gas rewards I get from my local store’s loyalty program.
I don’t pay for gas with this credit card because my local station has a better internal deal, but despite the I still racked up $372 in rewards with this card so far this year. After the card fee, that is $280 in net dollars.
American Express Blue Cash Everyday
The American Express Blue Cash Everyday was the first card I had my wife apply for and while it is not our main Am Ex or even the most used, it is still valuable and provides an excellent option if you want a no-fee card.
With this card you get 3% back on grocery store, online retail, and gas purchases and 1% back on everything else.
This is usually our go-to card once we hit the $6,000 mark on the Am Ex Preferred 6% grocery benefit. Instead of only getting the 1%, we take advantage of the 3% for the rest of the year before switching back to the 6% in January.
A relatively new benefit to the card is the 3% on online retail purchases. This means purchases made with this card at Walmart.com, Amazon, Target.com, etc will result in 3% cash back. It’s better than nothing, but because I take advantage of gift cards at my grocery store to get 6% cash back and gas rewards, I really only use this benefit for smaller purchases.
Another benefit American Express offers is online offers to get statement credits for certain purchases. For instance, when I purchase flowers for my wife and/or mother from 1-800-Flowers, I usually get $10 back for every $50 purchase just for adding an offer to my card. There are many, many of those offers available.
I usually get around $100 per year from this card.
Chase Freedom Unlimited
The Chase Freedom Unlimited is my go-to card for eating out if I don’t have a gift card, and every purchase that doesn’t fit into a particular category.
With this no-fee card, I get 5% on Lyft rides and travel through Chase.com (I have a specific card for this), 3% at restaurants and drug store purchases and 1.5% on everything else.
This is one of three Chase cards I have, and I do that because I am able to combine all my points and utilize them to make travel cheaper. I’ll get into that shortly.
Chase, like American Express, has offers that can be added to your card for statement credits. Some of the current offers are 10% back at McDonald’s and Five Guys, and 5% at Under Armor.
So far this year, I have accrued just under $400 in cash back rewards with this card.
Chase Freedom Flex
The Chase Freedom Flex is the only rotation card I have in my wallet. It provides 5% back on rotating categories each quarter and 1% for everything else.
This card gets the least amount of use for me, but when I’m in the right quarter, it’s a nice thing to have. In 2023 the rotation schedule was:
January-March: Grocery Stores, Fitness & Gym Memberships
April-June: Amazon.com and Lowe’s
July-September: Gas Stations, EV Charging, Select Live Entertainment
October- December: Paypal, Wholesale Clubs, Select Charities
You get 5% back on $1,500 worth of purchases each quarter. I got most of that in the first two quarters, and in quarter four I am going to town on Sam’s Club purchases, so I’ll get close there.
So far this year, I am at $125 in rewards.
Chase Sapphire Preferred
The Chase Sapphire Preferred is the only travel rewards card I have. This is an excellent credit card, and although we didn’t do much traveling this year because of our daughter being so young, we look forward to taking advantage of it more in the future.
The card offers 5% on Chase.com travel, 3% on dining, online grocery and select streaming purchases, 2% on travel, and 1% for everything else. There is also a $50 hotel credit annually and some limited-time benefits like a Dash Pass subscription.
The beauty of the card is that I can use the points from my other two Chase cards, combine them and then spend all of it on travel with a 1.25x boost. That means if I have $1,000 in rewards, it it worth $1,250 if I spend them on travel at Chase.com. Not bad!
This card doesn’t get used too often on purchases and there is a $95 annual fee, but the bonus I got from the card and the 1.25x boost has paid the annual fee many, many times over and will continue to do so.
Capital One Walmart Rewards
The newest addition to my wallet is the Capital One Walmart Rewards card. Based on the name, you can probably tell that it’s main purpose is to be used at Walmart.
The card is a no-fee offering that gives 5% on Walmart.com purchases (including Walmart+ delivery), 2% back inside Walmart stores, at restaurants and for travel, and 1% on everything else.
I am not a fan of Walmart’s physical locations and never will be. Walmart+, however, is a completely different animal. I’ll wrote an article about my subscription, but to summarize my experience—amazing.
A conservative accounting for my Walmart+ spending is $400 a month. Extrapolate that out to a year and that is a shade under $5,000 to account for about $240 cash back. Walmart+ is about $110 for me including taxes, so we’re netting $130 or so in cash back on top of the low grocery prices and convenience of ordering groceries on my phone and having someone else deliver them to my house.
This card is a big winner!
Summarizing How I Take Advantage Of Cash Back Credit Cards
When all is said and done, my use of cash back credit cards accounts for over $1,000 in net cash back per year just from the percentage rewards. Add in the Walmart+ subscription being paid for, a $50 hotel credit, credits for Am Ex and Chase purchases, and ancillary benefits like discounted Ubers, Dash Pass, my card being primary insurance for a rental car, and other features, and it’s truly amazing what these cards can do.
Again, in order to do this you need a good credit score, the ability to pay off your bills every month, discipline and a strong attention to detail. Carrying this many cards can be confusing—just ask my wife who sometimes mixes up which card does what. But once you nail it down, it’s easy to realize the benefits.
Whether you’re a new father or one who has been doing it for a while, most of us aren’t in the position to bat away four figures in cash back rewards and numerous other benefits associated with these cards. Hell, if you took my advice here you would have saved enough to cover more than half the cost of outfitting and assembling your nursery, pay for a big chunk of baby clothes, purchase a stroller or two, or buy more than a year’s worth of diapers!
So fathers, who else is ready to join me in taking advantage of cash back credit cards?
