5 Easy Ways to Stack Up Cash Back Rewards While Spending
Credit cards tend to have a bad reputation these days thanks to skyrocketing levels of consumer debt. Anyone who has had credit card debt knows how crippling it can be. However, credit cards do have a good side to them if they are used in a responsible manner!
Reward programs are the one major benefit to using credit cards. It is important for you to note that it’s only worth it under 2 conditions: the credit card must be paid in full and on time!
Credit card rewards will be pointless if you carry a balance and are accruing interest charges. The reason being is that the interest will always be way more than the rewards being earned. It doesn’t help that cards with rewards tend to have higher interest rates.
If you have no credit card debt and understand that you need to avoid being charged interest for this to be worth it, then keep reading!
What is “Stacking” Rewards
Stacking rewards is the process of using multiple discounts and rewards programs to get the highest savings possible. You can imagine it (in a very oversimplified way) as combining multiple coupons to buy an item at the store.
While you can stack credit card rewards in brick-and-mortar stores, it does tend to be easier to do online. This guide will take you through both what you can do in-store AND online to maximize your savings!
1. Have A Couple of Cards That Reward In Different Categories
There are some credit cards that earn you a fixed percentage on every spending category across the board. These often tend to be cash-back cards. However, many will give you higher rewards in one or two categories, but lower rewards in the remaining ones.
By having a couple of credit cards that “specialize” in different spending categories, you are able to optimize your rewards. You can choose whichever card would give you the most rewards at that given type of retailer. It can be annoying to carry around so much plastic, but technologies like Apple Pay make it so easy to carry different payment methods on you in 2019.
I think the best way to explain concepts such as this is through examples. Let’s get into an example below, keeping in mind that the credit cards mentioned below are for the sake of the example only!
For example, say you’re comparing these 3 credit cards:
- Chase – Freedom Unlimited card gives you 1.5% cash-back on all purchases.
- Discover It – Cash Back card gives you 5% cash-back on a category of your choice, and 1% on everything else.
- Capital One – Savour Cash Rewards card gives you 4% cash-back on dining/entertainment, 2% at grocery stores, 1% on everything else
For the sake of the example, say your monthly credit card spending is $3500, comprised of the following:
- $500 on groceries,
- $300 on dining and entertainment,
- $2700 on everything else
Let’s examine what you would earn in a year on your spending if you get only one of these cards. The Chase card would get your 1.5% of your total monthly spend, which is $52.50.
You would arguably choose groceries as your chosen category if you get the Discover It card. Getting 5% on your groceries and 1% on everything else would earn you $55.00 monthly.
The Capital One card gives you increased rewards in two categories which you spend a lot. By earning 4% on dining, 2% on groceries, and 1% on everything else, you’re earning $49.00 monthly.
Now, what if you bought groceries on the Discover It card, paid for restaurants with the Capital One card, and paid for everything else with the Chase Card? Your monthly rewards would be $77.50 a month!
Summing it up, the annual savings are:
- Chase Card = $630 per year
- Discover It Card = $660 per year
- Capital One Card = $588 per year
- All 3 cards, optimized = $930 per year!
This is a very simple example, and it also neglects sign-up bonuses which can make your savings even higher. You can use the same process but with rotating several cards to get the maximum rewards everywhere!
Pros and Cons
- Maximize your rewards for each spending category
- Requires more effort to manage multiple cards and use the right card for each purchase
- Sometimes you need to spend a lot on one card to make the annual fees worth it. If you have multiple cards with fees, you may not have enough spending to go around!
2. Find Cards With Good Signup Offers
Some credit card companies give out very attractive signup bonuses. For example, the Discover It – Cash Back card matches all your cash back earned for the first year; there are no limits imposed! The practice of opening up new credit cards just to earn the bonus is known as credit card churning.
By getting a couple of cards with hot signup bonuses, you can easily earn a couple of hundred extra dollars worth of points and/or cash back in a year. For the example in the above paragraph, you would try to capitalize on the bonus by spending as much as you can on that card in the first year.
Once you take advantage of the signup bonus, you can either keep the card or cancel it. Many people cancel at this point to avoid the annual fee. Over time, you’ll be cycling through different cards to use whatever gives you the most benefit for each purchase.
However, you should take care of. Abusing this practice can come back to hurt you. Some companies won’t let you redeem bonuses if you’re not a new client, or if you recently owned the credit card, canceled it, and applied for it again. You can even get your application declined for having too many new credit cards in a given period of time!
Recalling The Previous Example
Remember the example we just talked about with the three credit cards? Let’s revisit it but taking the signup offers into account! The signup offer at the moment for these cards are:
- Chase – Freedom Unlimited card gives you 3% cash-back in year one, up to $20,000.
- Discover It – Cash Back card has cash-back matching at the end of the first year.
- Capital One – Savour Cash Rewards card gives a $500 bonus if you spend $3,000 in the first 3 months!
I’m going to revisit the first 3 alternatives but taking these bonuses into account for the first year:
- Chase Card =$930 , 48% more (3% on $20,000 and 1.5% on $22,000)
- Discover It Card =$1,608, 100% more (amount doubled from matching bonus)
- Capital One Card = $1,124, 80% more ($500 bonus earned)
The fourth alternative gets a little complex so let’s go over it one card at a time. You use the Discover it card to pay for groceries; this will net you a whopping $600 after applying the cash-back matching.
In order to get the Capital One card bonus, you spend $3,000 the first month (including $300 on dining), then only on dining after that. The total reward including the bonus is $671.
Finally, you use the Chase card for everything else. The remaining spend for the year is $29700; you’ll earn $745.50 cash back.
The total you get for optimizing the cards with sign up offers? A whopping $2,016.50! Given that your annual spend on credit cards is $42,000, this is an effective savings rate of 4.8%. Not bad!P
Pros and Cons
- You can increase your rewards earned, even as much as doubling it!
- Hard to keep track if you do it with too many cards
- Must read the fine print, as companies are starting to make things more difficult for credit card churners.
3. Purchase The Item Through A Cash Back Site
This is a great tip for online shopping. It is one of the easiest ways to stack up multiple rewards! Quite simply, you enter an online store through a web portal. You make a purchase on the store (while your purchase is being tracked) and then your later receive cash back!
Two examples of these web portals are Ebates and Swagbucks. They offer anywhere from 1 to 10% cash-back. Wondering what stores you can apply these online shopping hacks too? Here is just some of them:
- E-commerce mega giants (Amazon, eBay, etc)
- Clothing (Macy’s, Old Navy, JC Penny, etc.)
- Health and Beauty (Sephora, Bath and Body Works, etc.)
- Electronics (Best Buy, Dell, Samsung, etc.)
Personally, I use both Swagbucks and Ebates for online shopping. They feature a lot of the same online stores, but the rates sometimes fluctuate. The same store can be 2% cash-back on Ebates but only 1% off on Swagbucks.
However, it is important to note how these two popular platforms do payouts. Ebates sends you checks quarterly, While Swagbucks lets your redeem your SwagBucks (SB for short) for gift cards. 100 SB is equivalent to $1. They do offer Paypal payment but in $25 intervals.
Pros and Cons
- Little to no effort required. Just remember to enter the website through the portal, or you can also download a browser extension
- Yet another company who’s tracking your habits online. You need to have tracking cookies enabled for it to work! Most people don’t care, but it is a cause of concern for some online privacy advocates
4. Buy Gift Cards Online
Many people are shocked to hear this: You can buy gift cards at a ‘discount’ and use them to save money while shopping! This so-called ‘discount’ comes in the form of cash back from your gift card purchase.
Swagbucks and Ebates, the two cash-back websites mentioned above, both offer gift cards on their site. This is NOT the same as going on the store’s website and buying the gift card from the store itself. There is also Giftcards.com where Ebates will give you cash-back on.
Many gift cards are available either in digital format or physical cards. Digital cards are great for online shopping while physical cards make it easier to purchase in-store.
Digital cards also allow you to triple dip on savings when online shopping. More on that later!
Pros and Cons
- Easy way to save money on a retailer you spend a lot on (grocery stores, gas stations, etc.)
- You have to buy the cards in large increments (ie. $100, 200, …)
- You need to stick to the one retailer you’re buying the card for (ie. the one grocery chain)
5. Search for Promo Codes Online
This one is a small extra step that can pay off handsomely. First off, look around the company site. Many places will give you 5 to 10% off just for signing up for their newsletter! I do this everywhere, but I have one designated “junk” address which I use to sign up for promotional content.
The next place I look before buying is this same inbox! I have notifications disabled on this email and only check it when online shopping. A quick search query in the inbox for the retailer can help you see if there are any promo codes in your inbox!
The final step is to scour the web for any codes. My favorite is Honey, a Google Chrome extension that searches the web and tries to find promo codes for you! If you implement this, it truly is an effortless step.
Pros and Cons
- Minimal effort required (just Google search or use a browser extension)
- None really!
Putting It All Together
Now, let’s put it all together to show how you can stack your way to some serious savings!O
You want to make a $200 purchase at Wal-Mart’s online store. You know that Giftcards.com sells Wal-Mart gift cards and that Ebates gives 1% cash back on Giftcards.com. Then, you use your credit card with a sign-up offer of 3% cash-back to buy two $100 gift cards.
After that, you then visit Wal-Mart through the Ebates portal knowing Wal-Mart gives 5% cash-back on the department your item belongs to. Right, when you’re about to check-out, the Honey extension finds a promo code online on Wal-Mart’s Facebook page for 5% off your purchase You pay for it with the gift card you bought.
How much did you effectively pay for the $200 item?
- $6.00 cash-back on your credit card for buying the gift cards
- $2.00 cash back on Ebates for buying the gift cards
- $10.00 reduction in purchase price for the 5% promo code
- $9.50 cash-back on Ebates for making the $190 purchase
Your effective purchase price is $172.50, meaning you saved over 13%.
Had you NOT used sign-up offers (only get 1.5% cash-back instead), nor any of the other tips for stacking rewards, you would’ve effectively paid $197.00!
Note that this was a simplified example that didn’t even take tax into account. Cash-back on these online sites (ie. Ebates) is often determined using pre-tax amounts!W
Wrapping It Up
Overall, there are plenty of ways to make the most of credit card rewards. The beauty of these tips is that they are relatively effortless, and can be used in any combination.
However, the truly best part you can put is any or all of these tips into practice today. What are you waiting for?
Dan is a financially savvy Canadian in his early 20’s. He founded the blog Early 20’s Money in March 2018 as a source of information for all young people out there who are looking to improve their financial situation. On Early 20’s Money, you can find information about earning, saving, investing, and other personal finance aspects (taxes, debt, etc.). Want to learn more? The best place to start is by checking out 6 Financial Literacy Topics You Should Understand By Your Early 20’s!
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