cash back

Maximize your cash back

Cash back used to be simple – 1% back on every purchase. Nowadays, you need an accounting degree to track all the tiers, quarterly bonus categories, and more. 

Some cards are still super straightforward. The Citi® Double Cash Card offers a blanket 2% cash back on everything, you don’t really have to worry about how you use your card on a daily basis. 

But your card may be more complex. The Chase Sapphire Preferred® Card, for example, has six reward tiers, some as granular as “3X points on online grocery shopping.”

So if you’ve got a card with messy, scattered rewards, what’s the best way to track it all and maximize your cash back?

1% to 1.5% cash back shouldn’t influence a purchase decision

Credit card companies don’t offer cash back out of the goodness of their hearts. Rather, it’s psychology. They want you to feel comfortable spending more so they earn more. And if you spend too much, they get to charge you fees and interest. 

That’s why it’s critical never to let small cash back rewards influence a purchase decision. “If I put my Peloton on my credit card, I’ll get 1.5% or $15 cash back – free lunch!”

Adjust where you make everyday purchases to maximize your 2% to 5% cash back categories

Credit card rewards are so competitive that we’re now seeing cards offering 5% cash back with no annual fee. WIld. 

Even still, 5% cash back shouldn’t influence how much you spend – but it’s definitely enough to consider where you’re spending. 

For example, if your Discover card is offering 5% cash back at Target, it’s probably worth switching from Publix to Target for a few months. Or if you’ve never used PayPal before and you’re now getting 5% cash back, it’s worth setting up an account and checking the PayPal box during online checkout. 

See what I’m getting at? Credit card companies offer 5% cash back because they want you to spend more. If you spend too much, they even get to charge you a high interest rate and a late fee. 

So the key to maximizing cash back isn’t to spend more – it’s to spend more strategically. 

Mind which rewards are unlimited (and which aren’t)

At present, no credit card company can afford to offer unlimited 5% or even 3% cash back. Hopefully one day soon. 

Until then, any card that offers 5% cash back will typically cap it after about $1,500 worth of spending (depends on your card, though). 

That means the most you can earn in three months is $1,500 x 5% = $75. Something to keep in mind before a big purchase – if you’re considering a $2,000 Peloton, you’ll only get 5% on the first $1,500.