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Cashback Cards ARE Worth The Effort

June 4th, 2014 at 11:15 am

Some people think that there is not enough money in cash reward cards to go to all the trouble of managing them. Of course, I do not see it that way at all.* Check this out.

I just placed a $2692 order for 16 new windows. I made sure to charge that purchase on my Discover cashback credit card, which is running a special 5% cashback promotion on home improvement store purchases.* By doing so, I got a $135 credit in cashback dollars from Discover. And I will leverage those cashback dollars** to get anywhere from $168 to $270 in good-as-cash gift cards to use on goods and services I would buy anyway.

To score all that free money, all I had to do was (1) know that Discover was running that special promotion, (2) sign up for the promotion, and (3) make sure I carried that card in my wallet when I went to buy the windows. It just took a little credit card management on my part to capture a big cashback payout. It is worth the effort. Here is more on that.

In the first place, cashback card management is just another fun round of the Frugal Game*** that I love to play to save money without really giving up anything.

Second of all, it is not chump change I am getting here. My annual baseline living costs are around $18,000**** and I figure about $8000 of that is credit card billable. At a conservative 2.5% average cash back on that $8000, that is 200 cashback dollars. Factor in a modest 25% average redemption leverage** and my found money goes up to $250 a year. But that is just from my baseline living expenses. I also spend another discretionary***** $10,000 a year for fun stuff. And all of that is credit card billable. So add another $300 to my yearly found money from putting in a little effort into the management of my cash reward credit cards. That means that in total I am adding $550 a year to my discretionary fund for just taking an hour or less every 3 months to check a few credit card websites and rotate a couple of credit cards in and out of my wallet. I am getting over $100 an hour for my effort.

No, I do not pay more in order to get cashback rewards. For example, I bought those 16 windows at a big box home improvement discount store. I timed the purchase to get a 15% special sale discount that saved me $475 over and above the store's already discounted price. And I used a $25 store coupon to push down my cost even further. So the 5% cashback I got from Discover was on top of the $500 I would have saved without using the card.

And, yes, I will pay off that window purchase charge when the credit card statement comes in. Which is what I do with all the purchases I charge on cashback cards. It is all good.

The takeaway: Doing cashback credit cards is worth it to me in principle because I never leave money on the table. That would not be very frugal.

# # #

* Raking In Credit Card Cashback:
http://retired-to-win.savingadvice.com/2014/03/11/raking-in-...

** Leveraging Up CashBack Rewards:
http://retired-to-win.savingadvice.com/2014/03/18/leveraging...

*** Playing the Frugal Game is Fun!
http://retired-to-win.savingadvice.com/2013/12/14/playing-th...

**** My $18K Annual Baseline Budget:
http://retired-to-win.savingadvice.com/2013/12/29/my-18k-ann...

***** A Discretionary Fund, Not a Discretionary Budget:
http://retired-to-win.savingadvice.com/2014/03/29/a-discreti...

3 Responses to “Cashback Cards ARE Worth The Effort”

  1. Dental Floss Tycoon Says:

    I am late to the CC rewards and cash back game, plus the signup bonuses. But I do see the potential of using the right cards for the right purchases. That's what I like about this website. I just need to get with the program and start keeping up with which month we are in, which cards have the best current rewards, and schedule purchases better to ensure maximum cashback. I may have to start a new page in the sidebar to better track it all.

  2. TheCudder Says:

    @DFTycoon, even smaller purchases are worth putting on credit. I put 98% of my purchases on credit (Chase Freedom + CaptialOne QuickSilver). The only time I don't is for my rent & electric bill & car payment, because they all charge a processing fee for credit cards. I use Chase for the rotating bonus categories (5%) & CapitalOne for everything else (1.5%). These amounts add up over the course of a year. For example, I receive $1 back off every month I pay just my cell phone bill, thats $12 at the end up the year. Now consider that for insurance bills, utility bills, refueling, groceries, shopping etc. Plus cards like Chase has Reward Store for even better deals. I just brought a 60% off Groupon via Chase that gave 5% cash back for purchasing through the Chase site. I track everything via Mint, so there's never a question of if I've gone over budget or over spent on a card. I ensure there's a zero balance before interst is accured.

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