Getting More Than 5% Back On All Lifestyle Expenses

Getting More Than 5% Back On All Lifestyle Expenses

What If I told you that I get at least 5% back on all of our family’s lifestyle expenses.

Even though it sounds a bit preposterous, it’s actually true.

The reason for this is plain and simple.

I’ll give you a hint. It’s starts with a “C” and rhymes with Reddit Ards. 😉

Here’s how we do it…

Credit Card Rewards

First of all, we always try to use credit cards for everything we purchase.

In general, we don’t buy a lot of stuff. We always try to be very intentional and deliberate with what we buy so that every purchase is aligned with our values. By living this way, we simply just don’t buy a lot of material things.

That said, whenever we do decide to buy something, I see every purchase as an opportunity to get some money (or points) back with every swipe. Credit cards can be so rewarding! You just have to be responsible with them by not spending more than you actually have and paying the balance in full on time, every time.

Last year I posted an article detailing all 24 odd credit cards I had opened up in the past few years. Some of the information is currently outdated (I might do an update on that some time in the future), but it’s a great example of how I have leveraged credit cards to earn rewards and cash back.

My current line up is down to 21 credit cards. (I have since canceled a few cards with high annual fees that are no longer rewarding).

Why so many cards?

Anyways, most of these cards are not rewarding for everyday purchases.  So banished to the sock drawer they go. But I do keep many of these cards because:

• Some cards are old. My oldest cards increase my average length of credit history and therefore improves my credit score (which has always been in the high 800s).
• Other cards have a high credit limit with no annual fee.  Keeping them decreases my credit utilization which further improves my credit score.
• Several cards have amazing benefits that outweigh their annual fee. A prime example of this is elite status and/or an annual free night certificate.

What’s in my wallet?

I don’t like to be weighed down by a fat wallet. It’s very uncomfortable, especially if you’re wearing fitted jeans! Therefore, only the most rewarding credit cards for everyday spending deserve a place in my pocket.

Currently, the cards in my wallet include:

• Citi Prestige
• Chase Freedom
• Chase Ink Business Cash
• Debit Gift Card (purchased with Chase Ink Business Cash)

Other than that, I have my driver’s license, medical license, and a card from the American Heart Association certifying me as an Advanced Cardiovascular Life Support provider. Oh yeah, and a few dollars in cash. That’s it. Yes, my wallet is thin and sleek!

Citi Prestige

This card has a permanent place in my wallet because it offers 5x Thank You points on spending at restaurants, which is a new benefit that started in January this year.

In 2018, we didn’t really eat out at restaurants much. One reason for this was that we were limiting our overall restaurant purchases as part of our buy nothing challenge last year. Another reason is that we didn’t have the opportunity to go out as much with a young baby at home.

Now that our daughter is older and eating everything we can eat, we are going out to restaurants more. Plus our little girl is so active that it can be exhausting to watch her AND cook a decent meal. Lately we have given in to the convenience of going out to eat and outsourcing the cooking and cleaning to someone else. Yeah, it may seem lazier. And it’s definitely more expensive. But it doesn’t hurt to earn 5x points for every dollar we spend on restaurants.

The Citi Prestige card also offers 5x points on air travel too. But unfortunately, air travel is not an everyday expense like eating out at restaurants is.

I value Citi ThankYou points at about 1.8 cents per point. So really, I calculate that for every dollar I spend at a restaurant, I’m getting 9% back in return.

Chase Freedom

I love this card. It has no annual fee and it earns 5x valuable Chase Ultimate Rewards points on a different rotating bonus category every quarter.

During the first quarter (Jan-Mar), the bonus category was gas stations and drugstores. This means that during the first three months, I earned 5% cash back (or 5% Ultimate Rewards points, which is even better) for every dollar spent in gas stations and drug stores up to $1,500.

Yes, I know that there is a limit of $1,500. But the truth is we only spend about $20 a month on gas because my wife currently doesn’t commit to work (she’s still on a long maternity leave) and my primary commuting car is a Tesla. And if in case you were wondering, the cost to charge the Tesla is minimal because I charge for free at work and we have solar panels that produces more energy than we consume.

In a few weeks, however, my wife is returning to work and one of us will be driving the gas guzzler secondary car. I project that our monthly gas expenses will likely go up to about $120. Because I anticipated this, I stocked up on gas station gift cards last quarter that should last us for the rest of the year!

Below is the Chase Freedom cash back calendar

This quarter, the bonus category is grocery stores and home improvement stores. In the past, our grocery spending use to be less than $200 a month. But now, it’s closer to $300. Maybe more. But that’s okay because I’m earning 5% cash back (or 5x Ultimate Rewards points) for every dollar spent. And just like in the first quarter, if we don’t hit the $1,500 maximum, I’ll probably buy grocery store gift cards to last us a good part of the year.

I project our total grocery spending for 2019 to be somewhere between $3,500 and $4,000. So up to $1,500 in grocery gift cards will not be enough. We are bound to run out of grocery gift cards some time in the summer. My plan for the rest of the year (after using up the grocery gift cards) is to purchase groceries using Visa gift cards. I’ll explain this later.

I value Chase Ultimate Rewards points at 2 cents per point because they can be transferred to partners and redeemed for outsized travel rewards. So, doing the math, I calculate that for every dollar I’m spending at the grocery store, I’m getting about 10% back.

But what about the first quarter?

Did we not earn 5% back on groceries from January to March???

Actually we did.

I don’t talk about my wife’s line up of credit cards much. She has about eight of them. But one credit card she has that I don’t have is the Discover It card. It’s similar to the Chase Freedom card, but issued through Discover and earns straight cash back (no points).

Well, below is the calendar. And as you can see, grocery stores was the bonus category for the first quarter. Needless to say, we put all of our grocery purchases on my wife’s Discover It card for the first three months.

Chase Ink Business Cash

This card is a vital player in my wallet for one primary reason. It earns 5% cash back (or 5x Ultimate Rewards points) for every dollar spent in office supply stores.

Now, you might be wondering: Why is that valuable? What’s so good about 5% back at office supply stores?

The short answer is office supply stores like Staples and Office Depot/Max often have promotional deals where you can buy Visa or MasterCard debit gift cards with no activation fee for a small profit. You can read about my strategy of manufacturing spending and points here.

In fact, there’s a deal this week (4/21/19 to 4/27/19) in which you can buy fee-free MasterCard gift cards at Staples.

Fortunately for me, there is a Stapes a mile from my work and there’s another one a few miles from my home. It makes it super convenient to take advantage of these promotions!

As an added bonus, The Chase Ink Business Cash card also earns 5% cash / 5x points for every dollar spent on our internet and cell phone bills. Another sweet deal.

Debit Gift Cards

Whenever there is a promotional deal for these debit cards, I typically buy several of them (as you can clearly see below) with my Chase Ink Business Cash card.

The beauty of Visa and MasterCard debit gift cards is that you can use them in most places where Visa and MasterCard credit cards are accepted.

And because I earned 5% cash back (or 5x Ultimate Rewards points) when I originally purchased these cards, it pretty much means that I get 10% return (valuing Ultimate Rewards at 2 cents a point) every time I’m able to use one of these cards to buy something.

My wife and I typically use these cards for everything, including: groceries, online shopping, retail stores when shopping for gifts, etc.

 

Credit Card Sign Up Bonuses

Okay, by now you can see that we are earning a cool 5-10% return on many of our lifestyle expenses from food, groceries, restaurants, and gas.

Food and transportation are two major categories for expenses.

But what about housing? We have a mortgage that is about $4,000 a month. And when you account for property tax and insurance, total housing costs for us are about $6,000 a month. So yeah, our lifestyle expenses with respect to housing comes out to be about $72,000 a year. That’s huge.

The truth is that there is no profitable way to earn points by paying your mortgage with a credit card. As far as I know, all viable options incur high fees that make it completely insensible and not worth it.

HOWEVER, paying taxes using a credit card DOES make sense. The fees are relatively low compared to your rewards earning potential.

But taxes are not a lifestyle expense

Now I am well aware that many people would not categorize taxes as a lifestyle expense. I don’t either.

While this may be the case, it is still an expense that I can capitalize. And I do so in big ways.

Every quarter, I have to pay quarterly estimated taxes. For simplicity sake, let’s just say I pay $25,000 a quarter.

Because I want to maximize my returns, I typically apply for new credit cards (about two or three a quarter) and use those cards to pay my taxes in order to meet the required spending needed to earn lucrative signup bonuses.

An average credit card sign up bonus would look something like this: Spend $4,000 in the first three months and earn 50,000 bonus points. And usually, these points would be from one of the major banks. Think: Chase Ultimate Rewards points, Amex Membership Rewards points, and Citi Thank You points. I value all of these points more than 1.5 cents per point. So really, I see it as earning $750 (or potentially more) after spending $4,000.

Earning $750 after spending $4,000 (in my case, taxes, which is something I was going to have to spend anyway) equates to a whopping 18.75% return. Not too shabby.

Here’s an example

Okay, it’s just assume I open three cards every quarter with an average sign up bonuses as referenced above (spend $4,000 and earn the value of $750). That would mean every quarter I’m earning roughly $2,250 by paying $12,000 worth of taxes. Again, a return of 18.75%.

But what about the rest of the $13,000? Remember, let’s assume I am paying $25,000 a quarter in taxes.

Well, I pay the rest of my taxes (presumably $13,000 a quarter) with my Amex Blue Business Plus card, which earns 2x Membership Rewards points on any purchase up to $50,000. And because I value these points at about 1.9 cents per point, that earns me a return of 3.8%. When you factor in the fees though, I value the net return at 2%.

When you crunch all the numbers, I earn about an 18% return on half of my taxes, and 2% on the rest of it. My net ret return in paying taxes comes out to be about 10%. Even if I wasn’t using a credit card to pay for the rest my taxes, my average net return would still hover around 9%.

As you can see, the $100,000 (or so) I pay in taxes a year is significantly more than my the housing aspect of our lifestyle expenses, which I mentioned earlier is about $72,000. This is how I rationalize my claim that I am earning at least 5% in housing expenses too. 🙂

 

Bottom Line

I try to pay for all our lifestyle expenses on a credit card whenever I can.

By leveraging bonus reward categories, buying gift cards, and earning sign up bonuses throughout the year I am earning about a 5-10% on all our lifestyle expenses. In real numbers, that equates to more than $10,000. And that’s a conservative estimate.

I covered several our major lifestyle expenses including: housing, food, transportation, and gifts. (I don’t include clothes because that’s just not a major expense for us.)

But what I didn’t include is travel, which could be one of our biggest expenses.

Interestingly, even though we travel semi luxuriously, it’s really not a huge expense for us. And the reason for this is because most of the 5-10% return from our lifestyle expenses goes directly to paying for travel through earning travel rewards!

I should cover our travel expenses and how we leverage travel rewards to reduce the costs to almost free. But that’s another post for another day.

 

Do you earn a decent return from your lifestyle expenses?