How I earn over 4% back on all credit card spending.

By Brad Beckstrom

You read that correctly, over 4% return on credit card spending. This includes rewards points on business and personal spending. Quick disclaimer: if you carry debt on credit cards, or don’t pay your bill off (in full) each month, any gains you have from points will be likely negated by interest charges. Once you have zero credit card debt and are ready to use cards to earn rewards points/cash back, then you’re ready to put together your rewards points plan. Here’s mine.

To keep this simple, I’m going to use Chase credit cards as examples. They have one of the best rewards programs out there that meet both my business and personal credit card needs. This program can be put together with other cards, but my best experience so far has been using a combination of Chase cards to get the 50% point bonuses and benefits, I’ll describe here.

Like many cool things, I stumbled upon the Chase Ultimate Rewards program while reading about travel hacking on personal finance sites. I was consistently seeing the Chase Sapphire cards and their Ultimate Rewards Program listed at the top of most lists for high reward, high credit rating cards.

My Ultimate Rewards set up

My setup with Chase utilizes one personal card and two business cards. The personal card is the Chase Sapphire Reserve that came with a monster 100K point sign up bonus. Normally I would not pay annual fees over $95 for a reward credit card, however, this high fee card applies $300 of the of the $450 annual fee to the first $300 in travel expenses each year. It also includes 3X bonus points on all travel and dining with another 50% point boost when you book travel through Chase. It includes an additional $100 credit for TSA Pre / Global Entry programs, travel insurance, sky clubs, and other perks. So after doing the math, this is a great value. See points bonus calculation red boxes. 

To get the 50% point bonus, I look up flights on Kayak then punch that information into the Chase rewards travel search to make sure I get the same pricing. I generally get better prices on hotels from other sites, but I’ve had great luck with Chase on airfare, so I primarily stick with that. Points can be used any time on any flight, no blackouts, unlike airlines. You can also use points to reduce trip cost, if you don’t have enough for a full ticket. As an added incentive, my Sapphire Reserve card came with a 100,000 point bonus that is effectively worth 150,000 points when you book through Chase. The points can also be transferred 1:1 to airline and hotel partners. The point transfer feature was useful when I needed to add some British Airways Avios points to get to a reward ticket. Chase card sign-up bonuses range from 50,000 to 100,000 points, so every few years if a better card comes along, I simply apply for a new card to replace the old one. Their top-tier cards all have no international transaction fees, airport club access, and trip/purchase protection.

I have two Chase cards that I use for business. The first is Chase Ink Business Preferred. This card comes with great 3X bonuses on travel, cable, telephone and media purchases that include Ad spending on Google and Facebook.  If you spend money on Google Adwords, the 3X bonus really comes in handy effectively reducing your media costs by 3%. That can really add up. This card gives you a 50,000 to 80,000 point sign-up bonus (bonuses vary throughout the year).  For everything else business-related, I use a no annual fee card, Chase Freedom Unlimited, that gives me 1.5% cash back all purchases. This card is great because I can add bonus points with all types of transactions like health care, vendor payments, PayPal, Amazon etc. These really add up, so it’s nice to be making a 50% point bonus on all purchases. In order to really kick this system into high gear, make sure you use vendors that offer automated online bill payment. Points on my health care payments alone add up to nearly $700 per year.

How does this all add up to 4% return?

The secret to this lies in the ultimate rewards program website.  With the three cards linked to my chase.com account I’m earning anywhere from 1.5 X to 3X on all business purchases.  My average shakes out to about 2.6 points per dollar spent. (not including sign up bonuses) Once those points appear in my Chase ultimate rewards account I can then instantly move them to the card with the highest redemption award bonus (Chase Sapphire Reserve). Once the points are in the account, I can use them like cash to pay for airline tickets, hotels. I look for the best rates on Kayak then book the tickets with Chase to get the additional 50% points bonus.

So the current points balance below is worth $6361 in cash towards awards travel. That goes a long way when the average cost of my international plane tickets is about $550, and hotels and AirBnb rentals in places like Lisbon, Mexico City, and Athens, can be had for $60 a night.

Here is the math

2.6 (points average) x 1.5 (bonus rewards multiplier) = 3.9%  The IRS does not tax rewards points earnings, giving me a tax free equivalent return of about 4.8%!  That’s before I add in the 50,000 to 100,000 bonus points per year, which pushes the return well over 6%. One additional travel hack: When I buy tickets, I’m also getting airline points, upping the return by another percent or more. I save all my airline programs in one password so I can easily search and add hotel or airline point programsFor info on some of these cards check out this travel credit card rating tool from the Mad Fientist.  Just click on Chase to see all the cards mentioned here. 

This all sounds a bit complicated, but really it’s not. Once you have the credit cards linked to Ultimate Rewards and use an online accounting system like Freshbooks or LessAccounting to automatically import and categorize all transactions. It’s really just a new way to bank. Instead of writing checks and taking out expensive lines of credit, the banks now work for you.

 

The Frug

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