What to Do with Your Credit Card Cash Back Reward

by Kevin on July 30, 2008

(Photo by Jeff Belmonte)

This will be the last update in a while on our American Express Blue Cash credit card. I’ve been telling people about how much cash back we’ve been earning for a while now. Our credit card year runs August to July, so we were inching closer and closer to getting our cash back onto our statement.

Well, the big number finally hit our statement and we jumped past last year’s total of $432. We officially earned $470.70 in cash back in the last twelve months.

Obviously I’m pretty pumped about that — nearly $500 in free money.

How We Earned a Ton of Cash Back

  1. We charged every purchase we possibly could onto our American Express card. We charged in the low five figures on the card. That’s a lot of purchases and it all adds up over a year. Stick of gum at the grocery store? Yup, I’d charge it.
  2. We stuck to a budget and did not spend more than we normally would. This is a major concern that anti-credit card advocates like Dave Ramsey have. Studies show you spend 12-18% more when you use a credit card. That has not been a problem with us. We’ve got a budget, we stick to it. Would we spend less with cash? Eh, maybe, but I seriously doubt it.
  3. We did not pay a single finance charge or late fee. We actually came close a couple of times. I’m not perfect. If you’re interested in how we got out of some of those charges, subscribe to the blog and check back later this week. I’m going to write about asking for forgiveness from your bank and credit card issuer.

What to Do with Your Cash Back Reward

Now that you’ve charged so diligently — and carefully — you’re about to get your reward. What should you do with it? For starters, let’s talk about how you’ll get your money. As far as I know there are generally two ways to get your cash back reward from the credit card company.

Some issuers cut you a check and mail it to you. Others credit it to your statement account. Either way, we look at that money as you would any other surprise income (like a bonus from work or something like that): it goes into the budget and drops to the bottom line.

Remember, if you’re working through my No Debt Plan, all money goes into the budget in some shape, form, or fashion. You’re looking at Income minus Expenses = Free Cash Flow. Any surprise money like a credit card cash back reward goes in as income. If you’re consistent with your budget and don’t have any extra expenses, the full amount of the cash back should pop out the other side in free cash flow. In turn, you apply that toward your savings goals. (If any of this seems confusing, check out Step #2 of the No Debt Plan — or just comment and I’ll try to answer it.)

So what should you do with your cash back? I’ll answer that question with a question: what are your savings goals? Apply it toward them.

What are We Doing with Our Cash Back?

Every last cent is going straight into our emergency fund. The $470 was about 42% of what we had left to hit our three month mark. We’re that much closer now. And the exciting news is when I do the budget at the end of this month we are going to finish off the emergency fund. That is incredibly exciting to us and we’ve made substantial progress this year.

Some say credit cards are evil. I say thanks for the $500 in free money. Have any of you readers earned substantial cash back? How much? Leave a comment and let’s talk about it!

{ 6 comments }

Livingalmostlarge July 30, 2008 at 3:54 pm

They aren’t evil, people who use them are foolish. I made $503 last month in cash rewards alone, and $434 the month before. In 3 months on one card I made $1k+ back. And no I did not overspend by 12-18%. I simply paid my DH’s tuition for his MBA on a credit card.

Think the school is going to give me 5% cash back? No. Well the CC did. So I took it, why not get a 5% discount count on $15k? That’s $750 in free money.

I just spend mine on paying off my credit cards. Never a late fee, never paid interest.

Morp July 31, 2008 at 12:06 am

I made $131 on my Visa last year. It’s not $500 but it’s going right into my IRA. One step closer to fully funding it.

Todd the Bod July 31, 2008 at 3:40 am

We put ours in savings.

Russell August 2, 2008 at 6:49 am

I was reading my BP-Visa statement yesterday, from CHASE bank, and noticed (in small print among the detailed area) my 5% rebate on BP fuel purchases, and 1% on other purchases, had accumulated to nearly $75. There was a note that I’m supposed to call them or go online to claim this rebate.

I think Discover Card was the first to invent the rebate as credit on your statement, and they filed some sort of trademark or patent on the CashBack idea. After other companies jumped into the rewards game, Discover filed suit over giving cash credit on a statement, and most of them had to come up with some other way of giving the awards.

I didn’t realize with Chase you have to take action to claim these rebates. I do have the Chase Freedom card which applies the rebate automatically every month, but the others you have to claim them.

At least when I went online all my Chase credit cards showed up in one place, with all the rewards listed. Several options were presented including a check. For the BP Visa I chose a $50 fuel card, although now that I’ve said it, I realize that was a mistake. I will only get $50.00 of fuel with that card. With the BP Visa I could get $52.63 of fuel, and another $2.63 rebate for the same $50.00.

One of my other Chase cards had enough reward to order a $25 rebate check. I’m not as agressive as some of you about looking for ways to earn the rebates, but I need to pay attention to when I’ve earned one and take action to claim it.

JoeTaxpayer August 2, 2008 at 3:51 pm

I have a Fidelity affinity card that puts 2% into a 529 account for my child. New applicants only get 1.5%, but so far they haven’t cut us back.
That 529 account now has $9,000 in it, and I think we are on track to pay nearly a semester of college with that money. A chunk of our monthly cash flow are business expenses for which we are reimbursed. We’ve (both my wife and I) have had the account about 7 years.
I doubt Dave Ramsey cares about this success. I haven’t paid CC interest in nearly 20 years, and our only debt is our mortgage, which will be paid off by the time I’m 52 (45 now). Dave’s “there is NO responsible use of credit cards” is simply wrong. This may very well be true for many or most people, but as you’ve shown, if you pay in full each month, why not grab the cash back/points/miles?
Joe

MITBeta @ Don't Feed The Alligators August 10, 2008 at 10:07 am

We use the rewards from our Chase Freedom card to fund our daughter’s 529 plan. You can read all the details in the article I wrote about it.

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