Every year, I earn about $600 from using my credit card. How? I put every single purchase I can on my credit card and pay it off in full every month. My annual rewards earnings aren't that difficult to replicate. In fact, a lot of people can probably out earn me by following the same strategy. Using CardWisdom's rewards calculator, I put together the following example to demonstrate how easy it can be to make your credit card a source of profits. For this example, I used a credit card that offers 2% cash back on gas and groceries, and 1% cash back on everything else. Of course, you could substitute miles or points, but if we're going to discuss profits, money should be the reward.
The largest source of rewards for most people will be groceries, especially with a card that provides double rewards on these purchases. In my test, I estimated about $1,000 a month for groceries. This is likely on the low side for anyone with a large family or a taste for organic foods. Nevertheless, using a cash back credit card for groceries earns me about $240 a year.
Another big rewards area is gas station purchases. Rewards here aren't just limited to gas, but all gas station purchases, including ever so tempting gas station hot dogs and, for those who haven't quit, cigarettes. I estimate my spend here at about $300 per month which nets me $72 a year.
Now, the credit card I am using as an example only provides 2% cash back on gas and groceries, so my earnings from drug stores, airlines, hotels, and everything else only earns 1%. For these purchases, I estimated a monthly spend of $2100. This earns me $252 a year, bringing my total rewards profits to $564.
However, if you want to get creative, as I do, you can use more than one rewards card. This is especially good for frequent flyers and families that take expensive vacations. For example, if you used an airline rewards card that offered double miles on travel purchases, then a family vacation for four that costs $8000 could net you an extra $80 in rewards.
To maximize credit card rewards, you really need to do two things. First, charge everything. Then, pay your bill in full to avoid interest charges. If you follow these two steps, the right rewards credit card, or combination of cards, can really help you earn a decent amount of money every year.
To calculate how much you can save, test out the credit card rewards calculator. To learn more about rewards cards and apply online, see the credit card rewards section of CardWisdom.
