# Jump Start Savings with Rewards Credit Cards

One of the easiest ways to get the most bang for your buck on all of your spending is by signing up for the best rewards credit cards. What this means is using your debit card for ATM withdrawals only, limiting cash transactions altogether, and not using Apple Pay. Instead, sign up for one or two all-purpose credit cards and charge everything that doesn’t require an additional credit card processing fee onto them (e.g., certain utilities, EZ-Pass (electronic toll) transactions, phone bills, etc). At the end of each month, you must pay off the balance or this strategy will cost you more in the long run due to financing fees.

While many will argue specific airline miles or hotel rewards cards are the best to use, I am hesitant to recommend any of them due to their confusing points structures and frequent points devaluations. Both of these make it difficult to estimate the true return of the rewards offered. Unless you are traveling significantly for business and receiving extra benefits for using the airline or hotel exclusively, the rewards value will at most be limited to MasterCard and Visa transaction fees charged to merchants (~2.5%), assuming the airline/hotel/MC/Visa don’t take a cut for themselves. Furthermore if you are savvy enough, you can often find better flight or hotels deals through comparison shopping than staying loyal to a particular airline or hotel chain, saving you more in the long run. The worst outcome of these cards happens to those most interested in growing their savings – since you can only redeem your “savings” by spending them.

### Cash Back Rewards Credit Cards

The simplest approach is to get leading everyday cash back rewards credit cards. As of the today, the two best cards are the Citi Double Cash MasterCard and the Blispay Visa Card, both of which offer 2% cash back on all purchases, no annual fees, and unlimited cash back. For every $10,000 in annual everyday spending (easily achievable on a per person basis, especially if minimizing cash and replacing all debit card transactions), you save$200 without much thought. You also save on time fumbling for cash or putting in your pin (in addition to credit cards offering more liability and security protection than debit cards).

Other credit card types exist, but after obtaining a 2% cash back card, they are usually not worth the hassle. The 5% cash back on grocery, gas station and/or drugstore purchases credit cards are the exceptions, but with the recent Sallie Mae Rewards Card downgrade, no such cards currently exist. The AMEX Blue Card, which offers 6% on groceries (upto a $6k spending limit), 3% gas and department stores, a one-time$150 bonus and comes with a $95 annual fee – is not worth it unless you spend big on groceries. Consider a typical American who drives 12k miles per year in a typical 25mpg car. Using the current average American gas price according to GasBuddy, $12,000 \frac{ miles}{year} \div 25 \frac{miles}{gallon} = 480\frac{gallons}{year} \times 2.26\frac{\}{gallon} = 1084\frac{\}{year} \times (3\% - 2\% \textnormal{ net savings})$ $= \10.85 / year \textnormal{ net savings on gas with AMEX Blue Card}$ $\95 - \10.85 = \84.15 \div (6\% - 2\% \textnormal{ net savings}) = \2103.75 / year \textnormal{ or }\175.31 / mo$ of grocery spending required to break even (assumes department store spending is 0). Given the$6k cap, assuming you consistently spend close to or over $500/mo on groceries, you could potentially pocket an additional $(\6000-\2103)\times 4\%=\155.88 / year.$ Same goes for rotating category cards. While you can save in addition to an all-purpose card, you hopefully value your time and energy more than to keep track of what category your credit card company is offering you a promotion on this quarter. ### Savings Overview Summary: Use all-purpose cash back rewards credit cards on all spending. The two best cards are the Citi Double Cash MasterCard and the Blispay Visa Card, both of which offer 2% cash back on all purchases, no annual fees, and unlimited cash back. Amount of time to implement: <15 minutes to apply, 15-30 minutes to update all accounts with new credit card. No effort thereafter / future time savings if not already a credit card user. Savings: 2% cash back on all spending ($200 annually per \$10,000 in spending).

Note: The above tips do not apply to those with interest-bearing credit card debt. If you have credit cards that charge interest greater than 0%, consider finding an active card with a promotional 0% interest rate and no balance transfer fees. A few of these typically exist at any given time and the transferred balance should be paid off prior to the promotional period expiration before implementing the strategy above.