Some people don’t like credit cards. People like Dave Ramsey believe you should never use a credit card. Well guess what? The only reason he says that is because he thinks people are idiots.
Credit cards are not inherently bad; they just can be bad for people who misuse them. In reality, credit cards can be very good and can earn you a lot of money if they are used properly. The trick is to find the cards that give you the most rewards (aka free money), and then pay them off every month so you are never charged any interest or fees.
Some people argue that the miniscule rewards aren’t worth the potential losses, but I’m here to show you that the rewards aren’t miniscule at all. And I can address the “potential losses” in another post one day, but it can be summed up very simply: as long as you spend within your means and pay off your bill in full every month, the potential for loss is zero.
Below you’ll find the rewards I’ve personally received from credit cards and rewards programs over the last year. Maybe some people are rich enough that $881.85 is just a miniscule reward, but to me that’s an incredible amount of free money!
American Express Blue Cash – $214.38
I have the American Express Blue Cash card, and after a year of getting anywhere from 0.5% to 5.0% cash back on purchases, I racked up $214.38 in rewards. I can either buy stuff out of their online store, or just use the money as a statement credit for anything I buy with my Amex. I don’t really use this card anymore because you have to spend $6,500 on it before you get 5% cash back on Gas, Groceries, and Pharmacy, and it will take me so long to get to that point, it won’t be worth it for this year. This card is great for big spenders, but unfortunately, I’m not one of them.
Citi Thank You Points – $177.47
I got the Citi Forward card last year, primarily because they give 5x points (equivalent to 5% cash back) on restaurant and entertainment purchases. Unfortunately I eat out quite a bit, so this card actually helps me rack up substantial points. I also get a 5x bonus when I go to movies. It works for other entertainment like concerts, but I don’t think I’ve been to a concert in the past year. I got a ton of points as a sign up bonus, and then have been racking up points on this card for about six months now to get a hefty balance.
Marriott Rewards – Up to $130.00
I did a little bit of traveling this winter for work, and stayed two nights in a Marriott hotel. They had a promotion where if you stay two nights, you get one night free. My work paid for the hotel, so I didn’t pay a dime out of pocket, and now I get a free night in a category 1-4 hotel, which is worth anywhere from about $60 to $130, depending on how nice the hotel is. I’ll have to plan some kind of weekend vacation and put this thing to good use, as it expires at the end of September.
Chase Sapphire and Checking Account – $225.00
Chase was running a few promotions last year where they were handing out money for signing up for their services. I got a Chase Sapphire card, which was worth 10,000 points (or a $100 statement credit). Then they offered me $125 to sign up for a checking account. I did both, got my rewards, and pretty much haven’t used either product much since. I had to keep the checking account open for six months in order to keep the reward, and I closed it after about six months and one day. I still have the credit card, but I never use it. Thanks for the free money Chase!
Sallie Mae – $135.00
I honestly have no idea how my student loans got loaded with these promotions, but I had promotions on two of my loans where I receive credits after making on time payments for a certain number of months. After making on time payments for 24 months, I got a 1.5% credit on $9,000 worth of loans, which comes to $135. I actually owe much less than that on the loans, but the benefit is calculated on the original amount of the loans. Some of you might be wondering why I don’t pay the loans off entirely, and my answer is 2.47%. That’s the interest rate I pay on those suckers; you can’t find a cheaper loan anywhere! I’m looking forward to five months from now where I have a 3.3% credit due for making 33 on time payments in a row on a different loan. That’s gonna be another $79.93. woot!
Total Free Money – $881.85
It still boggles my mind that I can get close to $900 of free money for just using the right credit card and signing up for a few loyalty programs. There are lots of different credit cards that offer great rewards, so if you want to get in on some of this delicious free money action, you can either check out some of the cards I have or do a quick Google search and find some for yourself. Just make sure to pay off your bills in full every month, and you’re golden!
Rewards for Next Year
I will keep using my Citi Forward for 5% back on restaurants and entertainment. I use my Citi Thank You Premier to buy plane tickets because it gives me 1 point per mile of the trip. I’m going to get approximately 4,490 points, or $45 back, for a flight to Costa Rica that only cost me $431. That’s over 10% cash back! I also have my PenFed Gas Card so I’ll get 5% back on all my gas purchases. I should also get enough points with my Southwest Rapid Rewards to get a free flight in 2012. I love to travel, so… Booyah!
Finally, I’m hoping to get the Chase British Airways Card and get 100,000 free miles, which has a sign-up bonus that is good enough for two round trip flights to Europe! Unfortunately, I applied for that one right after I applied for the PenFed card, so my application wasn’t immediately accepted. It is being reviewed and I might miss out on this incredible opportunity. Aw shucks.
Do you use rewards and loyalty programs to your advantage, or do you believe in paying cash only?
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
Hmmm…I don’t know how much I got in free money last year. I should add it all up! I bet it’s not $800, but it’s surely a couple hundred. I love credit cards for that stuff!
Hey, even a few hundred is more money than you had last year! 🙂
That’s awesome! I really should start keeping track! I use my Schwab 2% Cash card for everything, and I get about $50 a month from that alone!
$50 a month is $600 a year. That’s not bad from must one card. I bet if you have a few other loyalty programs, you might break $1,000 in a year!
Now that is what I call a great tax refund bonus paycheck
It’s my way of “sticking it to the man”. I’m making money off big banks instead of them making money off me!
I use an AMEX Blue reward card as well to great benefit but remember, they are making 6%-12% off the merchant transaction and that cost is passed on to the consumer. A 6% cash discount is better than the 1.33% reward, so do that at places you can, then card the rest.
Good job. Be careful to protect yourself. Discover Card ripped off the benefits they owed me. So don’t count what you have been promised until you actually get the benefit. But I agree with you if you find a company that is honest (or one you can at least protect yourself if they try to avoid paying what they promised to) these offers can be good deals.
That’s a tough story. Luckily, I don’t use Discover (no one accepts them anyway), so hopefully I’ll have better luck with the companies I use.
I completely agree that credit cards can be worth the benefit if you do not spend over your limit, are within your means, and pay it off in full each month. I have a Southwest Card for this very reason – I always hit the mark for a free flight within one year and that is worth the $60 fee each year to keep the card open (although I’m still looking at it this year as they changed the program).
However, I have never distinctly opened an account or credit card for this purpose. Can’t it affect your credit to be opening and closing cards and accounts so frequently just for the rewards points? I know that credit is directly affected by the length of time your accounts are open for… so I wonder if it is still worth it to open cards to get a free $100 if closing that account or leaving it unattended could negatively affect your credit.
That is a good point. Opening new lines of credit can be bad for your credit score. I think that’s why I wasn’t instantly approved for my British Airways card (because I had just applied for a different new card less than a month ago). I try to keep it at one or a max of two new cards a year, and I only get cards if I think I will actually use them or the deal is phenomenal.
For example, that British Airways deal is way too good to pass up if I can get it. Two roundtrip flights to Europe is worth well over $1,000
Same here! We get 2% cash back from Costco on everything we buy there, that was $100 and then we get cash back from Amex. I don’t remember now how much we got back, I think it’s about $600 or so.
Love free money!
I wish I had a 2% card. My main card is my Citi Forward, that gives 1%. Then I get 5% on gas, restaurants, and entertainment. A 2% would be a nice addition.
this is the only reason i’ve been holding on to my credit cards! they do wonders for me – give me free shopping vouchers at my local hypermarket, gifts, interest free promotional period, dining specials.. it all does add up but i’ve not done my math yet.. maybe i will now jsut to see what i’ve ‘made’ in the last year… thanks!
It’s great to do the math and see how much you’ve earned. Let me know when you get the number; I love to see other people saving money too!
Nope, I’m with you. As long as I have to spend money to live, I may as well get something back for it. http://wp.me/pkA5D-1s3
It’s amazing how much you get from these card rewards! But they can afford to pay that to you because they are making so much money charging fees to other customers who for some reason continue to pay them. So keep it up, at least someone is benefiting!
Man, that is a lot of “free money”! I only have two cards, a corporate card and my personal. I guess I rack up a couple thousand or so as well, but I can’t really tell. One goes directly to paying off some mortgage principal. The other, I just let accumulate.
Sam
Mixed feeling about this. We use Upromise rewards card which all rewards go into my daughters 529 account quarterly, it also can go to pay Sallie mae loans as well. I also opened a Sallie Mae high yield savings account which currently pays 1.15% interest and matches 10% of my Upromise awards annually. We use this one card for everything and pay off every month. Last year we had $437 go into the 529 as rewards from Upromise and the high yield account got the matching $43.70 in February. BUT for most people credit cards are not good and they would be better off sticking with their check card. I’ve seen dozens of people rack up massive credit card bills, go bankrupt, spend over their monthly limits, incur all types of fees. In 20 years I’ve never incurred a bank or credit card fee, basically never in my life, by being extremely diligent. Having worked in the financial services industry the bread and butter are the fees that are gained by people not paying attention to their finances and interest charges (which are large) is only 1 component. Plus time and time again I see people use the reward component as a crutch or an excuse for spending money that otherwise could have been saved.