Recently, I broke down exactly how much money we spent last year and mentioned that we are pretty good about maximizing our return on that spending with the use of credit cards. I thought it would be fun to break down exactly what kind of return we got from that spending and on which cards. Between bonus categories that can go upwards of 10% back and numerous generous signup bonuses we took advantage of, I was amazed to find out we averaged just over 14% back across all expenses!
Below, I’ll break down our stable of different credit cards that make it possible to maximize bonus categories and the different cards we signed up for this year. Of course, not all miles and points are created equal, so I’ll break down how and why I arrived at the 14% number hopefully without rustling too many feathers in the process (some people are very picky about how you value their stash of miles!). Let’s dive right in.
The Important 2016 Expense Total
I broke down last year’s expenses in much more detail HERE, but the more important number here is one that focuses only on the expenses that can be put on credit cards.
Unfortunately, there are numerous expenses that we couldn’t put on credit cards:
- Gas Bill
- Various Wedding Expenses (Photographer, Venue, etc.)
- Cash/ATM/Venmo Transactions (sometimes you just can’t get around paying cash)
What’s left to put on credit cards is everything else which totals up to $55,025 (or 65% of our overall spending). If you’re able to apply some quick math based on the title of this post, that means we earned almost $8,000 this past year just by being precise with our use of credit cards for as many purchases as possible! Let’s break down exactly how that was possible.
First, The Giant Signup Bonuses
In 2016, we opened 13 new credit cards between the two of us (a big slowdown from the 24 the year before!) and every single one of them came with a large signup bonus. Several also came with annual fees which were often offset (and then some) by travel credits or other cash-based benefits, but the ones that were not I was careful to subtract out of the totals below. Let’s look at the list of new credit cards we opened in 2016, their signup bonuses, spending requirements, and any applicable annual fees:
- Citi AAdvantage – 50,000 AA miles for $3,000 in spend, annual fee waived
- Barclaycard AAdvantage Aviator – 40,000 AA miles after first purchase, $89 annual fee
- BoA Alaska Airlines Personal – 25,000 AS miles + $100 for $1,000 in spend, $75 annual fee
- BoA Alaska Airlines Personal – 30,000 AS miles + $100 for $1,000 in spend, $75 annual fee
- Citi AT&T Access More – $650 phone credit after $2,000 in spend, $95 annual fee
- Discover It – $100 after first purchase, no annual fee
- Barclaycard Arrival+ – 50,000 “miles” for $3,000 in spend, annual fee waived
- Chase IHG – 60,000 IHG points + $50 for $1,000 in spend, annual fee waived
- Chase Sapphire Reserve – 100,000 UR for $4,000 in spend, $450 annual fee offset by $600 in travel credits (net of +$150)
- Chase Sapphire Reserve – 100,000 UR for $4,000 in spend, $450 annual fee offset by $600 in travel credits (net of +$150)
- Amex Hilton Surpass – 100,000 Hilton points for $3,000 in spend, $75 annual fee
- Chase Ink+ – 60,000 UR for $5,000 in spend, annual fee waived
- Amex Platinum – 100,000 MR for $3,000 in spend, $450 annual fee partially offset by $400 in travel credits (net -$50)
To keep things simple, I’m going to treat all points as being worth 1 cent so we can average easier across all of the spending. Hilton points certainly aren’t worth 1 cent on average, but things like UR and MR are worth way more than 1 cent. From personal experience redeeming many of these types of points, 1 cent is a very conservative estimate for the value we will get out of them, so should suffice for making sweeping generalizations about our return on spend this year.
Summing all of the individual cards above up gives us 715,000 points/miles and $1,300 cash at the cost of $459 in annual fees and $30,002 in spending. Normalizing the earnings after subtracting out the annual fees gives us a return of $7,991 on $30,002 in spending or 27% back across the board! Imagine having a coupon for 27% off anything you can put on a credit cards, that’s essentially what we pulled off for this rather large portion of our spending this year!
Now that calculation assumes a fairly perfect world of spending exactly the correct amount towards each signup bonus and never going over, in reality it wasn’t quite as rosy. First, there is a bit of overage on every single card to both ensure we met the minimum spend and protect us a little in case we have to return something. The majority of this overage falls back to the standard 1% earning rate.
Second, I manage to put a few other types of spending on credit cards that I certainly wouldn’t count as “Regular Spending” as I advertised above. These include business expenses, gift card arbitrage, booking travel for other people, etc. Some of that spending helped us reach the minimum spend amounts, so I probably shouldn’t count those entire bonuses towards our regular spend return either. Instead I’ll opt for a % split based on how much was regular spending versus other types.
Third, a couple of the minimum spend periods for the cards above overlapped the year so it wouldn’t feel right to put the entire signup bonus towards just the 2016 spending. If you haven’t figured it out yet, my accounting principles are both precise and chaotic depending on how I feel different things should be categorized. (I’d love to hear why you think I did it wrong in the comments below.) I’ll also do an even % split for how much fell in the year of 2016.
With all of that taken into account, a more realistic view of how precise we were with our purchases towards minimum spends has us putting $22,866 towards the minimum spends themselves with $1,306 in overage. This brings the $7,991 number above back down to $6,090, but we then get to add in all of the points we earned from the spending itself! In addition to the big round signup bonus values I listed out above, the actual spend required (and any overage) also earns points as the regular earning rates.
The $24,172 in regular spending we put towards signup bonuses and overage resulted in earning 32,764 in various points and miles (some fell into 2x, 3x, and 5x bonus categories for a sort of double-dip effect). Adding this back into the $6,090 number above and we have a total of $6,418 earned on $24,172 in regular spending or 27% once again!
Total Return on Signup Bonus Spend:
- $24,172 in regular spending put towards signup bonuses
- $6,418 returned via various points, miles, and cash
- Running tally of 26.55% back on regular spending
Next, The Big Bonus Spending Categories
In addition to the credit cards that we sign up for every year, there are several that are worth keeping year after year and using. These cards include the Discover It and Chase Freedom that offer rotating 5% back categories every quarter, not to mention the Discover It will double that to 10% for the entire first year! Other consistent winners are the Blue Cash Preferred which offers 6% back on groceries and the Chase Ink Plus/Cash which offers 5% back on internet, cell phone bills, and office supply stores year-round. While the return doesn’t get near the large % you can get from signup bonuses as seen above, it’s simpler in that you don’t need to apply for a new card to take advantage of the increased return.
Our go-to credit card for groceries is the Amex Blue Cash Preferred for it’s 6% back on groceries year-round. Our favorite store, Fred Meyer, doesn’t actually code as a grocery store for Amex, but we found a roundabout way to make it work anyway through buying gift cards at a different Kroger brand (QFC) and then using those gift cards at Fred Meyer. A small pain, but it actually bumps our return up another 1% thanks to Fred Meyer’s loyalty program! (I chose not to include any fuel points towards our overall return although that does save us a little extra on top.)
- Total grocery spend on the BCP – $3,133
- 6% return for the BCP – $188
- 1% bonus return from Fred Meyer Rewards – $31
In addition to the Amex BCP, we also took advantage of the Chase Freedom’s 5% category of groceries in Q2. Because the Freedom earns UR points that can then be transferred to other Chase cards and then on to travel partners for better than 1 cent of value, we would definitely rather earn 5 UR per dollar than 6 regular cents. Plus, Chase does code our local Fred Meyer as a grocery store so we no longer have to play the gift card game at checkout AND still earn the 1% loyalty bonus.
- Total grocery spend on the Freedom in Q2 – $922
- 5% return for the bonus category – $46
- 1% bonus return from Fred Meyer Rewards – $9
Restaurants (and some Movies)
Restaurants and fast food is one of our larger expense categories year over year, but fortunately a lot of credit cards offer bonus categories for those purchases. In particular, the Chase Freedom and Discover It often feature it for a quarter and this year they were separated which made it easy to earn 5% for half of the year when we were between signup bonuses. First, let’s look at the Discover It in Q2 which featured both restaurants and movies as their 5% back category. I was able to take advantage of Discover doubling all of my cash back for a year when they briefly opened it for existing card holders, so we were actually earning 10% at this time!
- Total restaurant/movie spend on the Discover It in Q2 – $1,340
- 10% return for the bonus category (5% doubled) – $134
Next, the Freedom card featured restaurants as the bonus category in Q3 and thanks to the timing of our wedding were able to max out one of our Freedom’s $1,500 cap in one purchase! Most of our regular restaurant spend went on the other card where we almost capped out again by the end of the quarter.
- Total restaurant spend on the Freedom(s) in Q3 – $2,847
- 5% return for the bonus category – $142
Amazon.com and Department Stores
At the end of the past two years, both Amazon and department store spend has been the featured category on both the Freedom and Discover It in an attempt to get everyone’s holiday spending on their bank’s card. At the end of 2015, Discover was really promoting the 5% back being doubled to 10% and the Freedom decided to change course mid-quarter and start offering 10% back as well! Of course this was in 2015, but we didn’t need to spend $4,500 at Amazon that quarter, so we banked a lot of it in the form of Amazon gift card balance that we carried into the new year. I only count spending when we actually use the gift cards purchased at a discount (not at time of purchase), so a lot of that 10% bonus was realized in 2016 and thus I’m counting it.
Now the total below wasn’t all in gift cards rolled into the new year, because we once again took advantage of the Discover category of Amazon in Q4 2016 on Becky’s new Discover which had a fresh year of doubling the cash back ahead of it.
- Total Amazon/department store spend on the Discover It and Freedom – $3,104
- 10% return for the bonus category (and doubling) – $310
Gas and Ground Transportation
Both the Discover It and Freedom cards had this category for Q1 last year and have done the same thing to start 2017. We don’t have a lot of expenses in this category, but do our best to optimize it when the right quarter comes up.
- Total Gas and Ground Transportation spend on the Discover It and Freedom in Q1 – $179
- 5% return on the Freedom part – $7
- 10% return on the Discover It part – $5
Internet and Cell Phones
The Chase Ink Plus card is the only one I actually use for auto-pay anywhere because it has these as 5x earning categories year-round. All of our other bills get put on the newest card we signed up for to get that sweet signup bonus return. The 5% category also applies to office supply stores, but I don’t think we spent a single dollar at them this year in our regular spending. It does come in handy for reselling the gift cards that Staples often discounts though!
- Total Internet and Cell Phone spend on the Ink+ – $1,523
- 5% return for the bonus category – $76
Everything Else in Q4!
Now you’ve probably heard of the 5% bonus category cards above, but this one is probably new to you. I got an amazing surprise in my email this past October that said I was selected for a “Special Holiday Offer” on the very first credit card I ever opened, my Purdue Federal Visa Card! Now keep in mind I haven’t used this card for almost a year at that point, so they were probably eager to get me using it again. It was my go-to card for a couple years before I stumbled into the world of churning and then it took a backseat really quick. This is the first time they’ve offered me a promotion that was actually worth pursuing, but hopefully they keep up the new trend.
The “points” they mention earning can simply be cashed out for 1 cent a piece, and thanks to that “Member Perk Points” part of the earning, we were actually able to earn 5.5% back on all of our November and December purchases this past year! The cap on the bonus was at $20k in spend which I’m sure at least some of you are curious about.
- Total spending on the PFCU card in Q4 – $4,966
- 5.5% return on all of the spending – $273
Totals for the Big Bonus Category Spend
- Total spent in 5-10% back categories in 2016 – $18,014
- Total return on that spend – $1,221 (6.8% avg return)
- Running total spent up to this point – $42,186
- Running total of the return on that spend – $7,639
- Running tally of 18.1% back on regular spending
NOTE: To simplify my calculations, I ignored some of the smaller 2x categories like those offered on airline cards for purchasing something through the airline directly. We had a few of these expenses, but they didn’t have a big enough impact to make them worth breaking out separately.
The Regular Non-Bonused Spend
Regardless of how precise you are with your application timings or knowledge of the bonus categories at any given time, there will always end up being some regular un-bonused spend. We looked at some of it above in the form of signup bonus “overage” which is expected, but this grouping is on all of the other un-bonused spend. The other bonus I was targeted for this year was to spend $1,000 on my Amex Hilton no annual fee card to get a free weekend night at a Hilton. Definitely jumped right on that, but it doesn’t show up anywhere in this post as a return (although it probably should…) and just appears below as regular spend.
The primary card we try to use for this type of spend is the Citi Doublecash for 2% back on everything, but the SPG card and some others mix in as well depending on where we are in the world and what’s in our wallet at the time.
- Total spent in non-bonused categories – $12,839
- 1-2% return on that spend – $231
The Total Return On Our Regular Spending
- Total spent on credit cards in 2016 – $55,025
- Total return on that spend – $7,870 (14.3%)
2016 turned out to be a really solid year for us in the world of earning miles, points and cash back. We were able to put a large percentage of our regular spend (44%) directly towards large signup bonuses which really carry a large portion of the out-sized return we got overall. Another large percentage (33%) was able to go towards bonus categories of 5%+ which adds up quickly without us having to juggle new cards constantly, but there was still a larger portion than I expected (23%) that was simple non-bonused spend. Looks like we should have applied for at least a few more cards last year to reduce that number and focus on the huge returns that signup bonuses offer!
Compared to a credit savvy individual who doesn’t take part in the churning game, but is smart enough to put all of their purchases on a 2% back card and pay everything off on time, I out-gained them by 12% this year. That’s $6,770 extra that went back into my pocket and can be put towards investments or my other goals, travel in particular for a good amount of the earnings.
If you’re someone that wants to pick up a side-gig in your spare time and are responsible with credit, it’s tough to beat that kind of return for the time investment required. Everyone has regular expenses they can shift to credit cards and if you love to travel, it’s even better because I was really conservative in my valuation of the various points and miles. If I apply them all towards travel, we’re talking about a baseline of $12,000 worth of travel or so that could extend to $15k and beyond if you really optimize the redemption side. I prefer to keep the high level numbers like these in terms of cash because “Cash is King”, but it would be silly to ignore the extra value offered by the points completely.
I know some people in the miles and points space all but ignore regular spending (*cough*) as they focus on MSing large volume of spend through credit cards, but I enjoy the game of trying to optimize the majority of my purchases, regular spend in particular. For the fairly small effort of staying organized, we were rewarded with over half a million miles and points (the majority of which were flexible bank points) and a lot of cash this year without having to do any crazy MS (not that there’s anything wrong with that!).
I dabble in some of the crazy stuff (gift card arbitrage in particular), but I don’t think I will forever. Maximizing the return on our everyday spending using signup bonuses and bonus categories on the other hand? I think I’ll do that for as long as possible.
P.S. Did you find this break-down of our miles and points earning on regular spending useful? Do you track anything like it yourself to measure what kind of return you’re getting with credit cards or am I the only one crazy enough to get to this level of detail?
P.P.S There’s a few other items I could have added to the return and I’m wondering how high I could get the % without it sounding outlandish. Shopping portal returns and the points actually earned from paying cash for some flights and hotels is an easy bump. Add in the fuel points I left out and assume that free weekend night goes to a top-end Hilton and that’s another good chunk on top. If I were to then do something crazy like use The Point Guy’s valuation of the different currencies on top of all that, we’d probably be looking at 30%+ of return in that case! This calculation is left as an exercise for the reader (you will have to make some assumptions). Enjoy!
11 thoughts to “How We Averaged 14% Back On Our Everyday Spending Last Year!”
Good read but some things went over my head. I like the idea of stretching the little I have and maximizing every dollar in living expenses. Like I told my wife “all that cabbage we’re eating is going to get us a free trip to somewhere, hotel included. I have no CC to sign up for big bonuses [used up my quota so to speak] but I’m thinking maybe now is the time to do a small business venture to get business CC’s. Love those big bonuses. Hate those hard inquiries. For now, doing Bluebird [5K a month] on my wifes account [they froze my account, no question asked, none given] until that gets frozen for suspicious activity. Not going to argue with them since they wrote the book on “suspicious activity. Was thinking of getting their Serve card and whatever else cards they have to continue increase spending on my CC’s.
Hitting the lottery would change my game plan, but for now, I’m nickel and dime-ing my way to make ends meet and then some. Like I said earlier, you were a good read.
Thanks for reading Nate!
If you’ve really used up all of the cc signup bonuses that you can make use of, then that’s impressive. I can think of at least a dozen or so that we can still get, but we do have the advantage of having 2 people, one of which can sign up for business cards freely.
Sounds like you’re using some standard MS to fill in the points and miles for your trip, best of luck keeping it going and scaling it up to the volume you want.
For this exercise I like the 1cpp valuation. A good chunk of what you’re getting back are travel related points (as you mention), so it’s not really a “return of ~14%” on your spend IMO (unless you want to sell your miles/points on the black market for cash). A return signifies cash in hand, again IMO. You choose/desire to travel and you do a helluva good job on turning your spending into almost-free travel. I personally only like to think about real cash that I earn (Doublecash, Discover, cashback portals) as a return on my spending b/c that is the stuff that I can put towards bills/retirement. Everything else is just travel hacking. I think this just comes down to me viewing traveling as a luxury/ or an “extra” (that I’m losing out on 2% cash back to do) whereas you’re viewing it as an almost necessity making your miles/points very similar to cash. Or maybe I’m over thinking this 🙂
If you want to focus on the cash aspect of the return, then I think it’s important to count the UR and MR as being actually worth 1cpp in addition to the actual cash back like on the BCP and Discover cards. Travel is one of our goals, so the signup bonuses we go after reflect that. I’m certainly not against turning points into cash though, and I cashed out a lot of TYP at 1cpp last year.
For the 14% “return”, I think the points and miles that can’t be cashed out have a non-zero value so I assigned the generic 1cpp to them all. I can see arguments to either lower or raise that, but I don’t think it’s fair to exclude any kind of value on the “return” completely.
As far as our net worth goes, I don’t count any of our points/miles towards that total, even if they could be cashed out easily like in the case of UR. It’s only once the cash hits the bank account or card that it gets bucketed into my “creative income” category. I think in that way we’re pretty similar, because that is the only “return” I can actually use towards bills or investing as you mentioned.
Thanks for commenting, we’re both probably over-thinking it 😉
You forgot to deduct lost opportunity cost of that $24K spend done for CC bonuses. If you had done same spend on 2% card, would have earned $480.
You conflate a return on investment with a discount on spend. Not at all equivalent. I dare you to sell your MRs and URs for 1c rather than using them as a way to discount discretionary spending. You couldn’t bring yourself to do it, could you? So stop deluding yourself you’re earning a return rather than simply enjoying a discount on unnecessary spending.
Don’t forget that several of the signup bonuses themselves were cash based, especially if you count some of the travel credits. The point of foregoing the 2% was too earn something more valuable in most cases.
I don’t think I ever called it a return on investment and I agree that doesn’t make sense. Rather I look at all of the miles/points/cash as a bonus form of “income” each year that is related to our expenses, but that’s more of a personal choice than something concrete. It’s the reward for the effort we put into signing up for and maintaining a bunch of different credit cards each year which is a non-zero effort.
As for cashing points out, I’ve certainly taken 1cpp for TYP multiple times and would probably do the same for MR if they had an easy way to do it. UR on the other hand I find much more valuable for our needs and don’t see any reason to cash them out right now. This doesn’t mean they aren’t worth at least 1cpp though.
I disagree on the “unnecessary spending” comment because I kept this post entirely to our regular expenses. Credit cards or not, there are a lot of things we spend money on each year. All of the cc earnings above are the result of making a deliberate effort to put that spending on credit cards in a strategic way. Even if we used a non-rewards debit card for everything, we would still be spending the money.
That’s why I look at these rewards as a bonus on top rather than a discount, but I can see the argument for the opposite.
An interesting analysis, but I agree with other posters regarding the slight of hand accounting. There is a 2% opportunity cost to those points. Also, you neglected to mention the Blue Cash Preferred comes with a $95 annual fee. Subtract $95 from your $188 grocery savings, divide by $3133 and you get 2.97%, which is under the 3% cash back you could have gotten with a no fee card offering 3% on groceries.
I chose to leave out the annual fee of the Blue Cash card because we make well more than $95/year on average from Amex Offers. Even if this card didn’t have 6% back on groceries, it would still potentially be worth keeping for us. More info here:
As for the “sleight of hand accounting”, I feel like I was very clear about how I determined the 14% number. There are certainly different ways to do it, but I’m not trying to hide anything. I even mentioned the 2% alternative in the final section.
What % back would you say we earned last year given the data above?
I don’t mean to imply that you weren’t clear about how you went about your calculations. I am suggesting (as other commenters have) that you are viewing things through rose colored glasses. For example, when I pointed out the inferior return you got on the Blue Cash card after the fee, you justified the fee by saying it was more than offset by Amex Offers that you received with the card. However, there are Amex cards such as a Hilton Amex that provide those same offers without an annual fee. So really, the offers do not justify the fee.
Maybe I wasn’t clear on the Amex Offer thing. It’s not just about having a single card, it’s the value of having many. There are often offers that can be loaded to any number of cards, so each additional one adds value. We do have several no annual fee Amex cards that we use in addition to ones like the BCP.
Even if we ignore that benefit and subtract out the $95 annual fee from the final return number, it changes the percentage from 14.3 to 14.1. Is that really what we’re debating here?
I still think the overall 14% number is very conservative, especially considering that the majority of the points/miles earned were either flexible (MR/UR) or airline miles (AS/AA) which are commonly valued well above 1 cent per point.
I’ll ask again, given all the information above, what % do you think accurately represents our earning last year?
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