Earn 5% on All Your Spending (2019)
Our Optimize Rewards by Using Different Cards for Different Purchases strategy is focused on maximizing your rewards by using different credit cards for different types of purchases. Most people will want to keep thing simple, using only one to three credit cards for most of their spending. But, other people are willing to invest the effort to earn the highest possible reward rates on all their purchases.
While it takes a lot of work, you can earn 4-5% or more on all your credit card spending.
By leveraging several different strategies you can earn close to 5% on every purchase you can make with a credit card.
Step 1: Use cards with high bonus category reward rates
Many credit cards earn 4-5% or more for purchases in certain bonus categories.
By signing up for a small collection of cards, you can earn high rewards in many important categories, covering a significant portion of your credit card spending.
Your credit card choices depend on how highly you value Ultimate Reward points, other transferable reward points, or straight cash back; and whether you are willing and able to take advantage of business cards.
If you want to "cash out" your points, we value Membership Reward and ThankYou points at 1 cent each. Note that with the right combination of cards and higher annual fees, you can get somewhat more.
For Ultimate Reward points, the strict "cash out" value is 1.5 cents each. However, for the "standard" approach, we value Ultimate Reward points at a higher level (1.7 cents each), due to the ease of redeeming them at typically better values with Hyatt hotels, and the possibility of getting even more value with the right frequent flier redemptions.
If you know that you'll be able to redeem your points for frequent flyer tickets, especially premium cabin redemptions, the goal is simply to maximize the number of points or miles, as shown in the "Miles" column.
|Dining||5.1% w/Chase Sapphire Reserve ($150) or 7% with ThankYou Combination ($340)||5x w/Citi Prestige ($245) or 4x w/Amex Gold ($140 US Only)||7% with ThankYou Combination ($340), 6% with Amex Gold plus Amex Platinum, 5% w/Citi Prestige ($245), 4.5% w/Chase Sapphire Reserve ($150), 4.5% w/Wells Fargo Combination ($0), 4% w/Uber ($0)|
|Airfare||5.1% w/Chase Sapphire Reserve, 7% with ThankYou Combination ($340), or 7.5% with Amex Platinum Business Card (but no travel insurance)||5x w/Citi Prestige or 5x w/Amex Platinum Card||7% with ThankYou Combination ($340), 7.5% with Amex Platinum Business Card, 5% w/Citi Prestige, 4.5% w/US Bank Altitude Reserve ($75), 4.5% w/Wells Fargo combination ($0), 4.5% w/Chase Sapphire Reserve|
|Other Travel||5.1% w/Chase Sapphire Reserve||3x w/Chase Sapphire Reserve, 3x w/Citi Premier ($95), 3x w/Citi Prestige (Hotels and cruises only)||4.5% w/Chase Sapphire Reserve, US Bank Altitude Reserve, or Wells Fargo combination.|
|Groceries||6% w/Amex Blue Cash Preferred ($95)||4.5x w/Amex Everyday Preferred ($95), 4x w/Amex Gold ($250)||6% w/Amex Blue Cash Preferred ($95)|
|Gas||5% w/Ducks Unlimited ($0)|
|Amazon Purchases||5% w/ Amex (Biz) or Chase (personal) Amazon Prime card ($0)|
|Target Purchases||5% with Target Debit Card ($0)|
|Office Supplies and Telecom Services||8.5% w/Ink Cash (Biz, $0)||5x w/Ink Cash||7.5% w/Ink Cash|
|Sporting Goods||5% w/Ducks Unlimited ($0)|
Certain combinations of credit cards let you "cash out" your rewards at higher values.
- ThankYou combination. If you have the Citi Premier Card ($95 annual fee), you can cash out your points at 1.25 cents each (rather than 1 cent). If you have the Citi Rewards+ Card (no annual fee), you get 10% back when you redeem your points. Using the two cards in combination, you get cash out at almost 1.4 cents per point. This makes the 5x categories worth 7%, 3x categories worth 4.2%, and 2x categories worth 2.8%.
- Wells Fargo combination. If you have the Wells Fargo Visa Signature Card, you can cash out your points at 1.5 cent each. This makes the 3x categories on the Wells Fargo Rewards Card worth 4.5%. Neither of these cards has an annual fee.
- Biz Platinum combination. If you have the Amex Platinum Business Card, you receive a 35% rebate when you cash out your points by purchasing airfare for your preferred airline or for any premium-class ticket. This lets you cash out your Membership Reward points worth for over 1.5 cents each. Unfortunately, the Biz Platinum card has a massive $595 annual fee. You can take advantage of some credits to partially offset the fee, but you will wind up paying a lot for this option.
- Other Amex possibilities. The the Charles Schwab Amex Platinum CArd lets you transfer Membership Reward points to your Schwab account at 1.25 cents each. The Amex Business Gold Rewards Card gives you a 25% rebate for airfare purchases (rather than the Business Platinum's 35%). This works out to 1.33 cents each.
Step 2: Add additional categories with "Pick Your Own" category cards
Building up a small collection of credit cards will cover many important spending categories, but can you do better.
Several credit cards let you choose your own bonus categories. By getting multiple of these cards, you can add additional categories above and beyond the "normal" categories listed above.
The US Bank cash card earns 5% on two categories of your choice, with a $2,000 cap on bonus category spending per quarter.
If you can move $100,000 in retirement or investment assets to Merrill Lynch, you'll qualify for Bank of America's Platinum Honors status and will receive a 75% bonus on credit card rewards. This turns the BOA Cash Rewards Card into a card that earns 5.25% on a category of your choice, that you can change monthly. You are capped at $2,500 in bonus category spending each quarter.
Examples of extra categories include:
- online shopping
- home improvements and furnishings
- home utilities
- department stores
- gym/fitness centers
- select clothing stores
- charitable organizations
You can also try to leverage "rotating category" cards. Like pick your own category cards, these cards sometimes cover more unusual categories and there is a quarterly bonus rewards spending cap. But instead of getting to choose your own bonus categories, the credit card company decides the bonus categories for each quarter. Earn 5-10% in Rewards with Rotating Category Cards.
Step 3: Use the Altitude Reserve when it make sense
- The Altitude Reserve earns 4.5% on any digital wallet purchase. Apple Pay, Google Pay, etc. can be used in many physical stores, apps, and websites.
- If you have the right Samsung device, you can use Samsung pay at any credit card terminal that accepts swipes, allowing you to earn 4.5% at most physical locations.
- You should use the Altitude Reserve, whenever you can use a digital wallet and you aren't already earning more valuable rewards with another card. That is assuming you can get approved (try to apply before you receive too many other new cards). For example, you can always do better than the Altitude Reserve at gas stations with the right gas reward card. And if you value Ultimate Reward points, you can always do better at restaurants with the Sapphire Reserve card. But, the Altitude Reserve is your only good option for many retail locations that don't fit into other categories.
Step 4: Leverage merchant gift cards
- Many different merchants and services sell gift cards at supermarkets, office supply stores, gas stations, drugstores, and Amazon.com.
- Department stores: Sears, Nordstrom, Macy's
- Home improvement: Home Depot, Lowe's, The Container Store
- Other major retailers: eBay, Best Buy, GameStop, Nike, Sephora, Ulta, Advance Auto Parts, Bed Bath & Beyond, Old Navy. Staples and more.
- App stores and online services: Google Play, iTunes, Xbox, Hulu, Groupon, Netflix, Nintendo, Spotify, and more.
- Chain restaurants: iHop, Olive Garden (Darden), Domino's, Texas Roadhouse, Outback, Applebee's, Starbucks, and many more.
- Movies: AMC, Cinemark, Fandango and more.
- Travel: Disney, Hotels.com, Amtrak, Southwest Airlines, Delta, and more.
- Mobile phones: Boost, Cricket, AT&T Prepaid, Verizon Prepaid, and more.
- Whenever you make a purchase with one of these merchants and you don't have a credit card that earns good bonus rewards, you can use a gift card instead. By buying these gift cards at stores where you can earn good bonus rewards, you will effectively earn high reward rates on an increased range of purchases.
- If you are lucky, you may be able to buy merchant gift cards when they are on sale, saving you even more money on your purchases. In these cases, you may choose to make gift card purchases at stores where you aren't already earning a super-high reward rate, such as at Costco.
- The most lucrative option is to use the Ink Cash Card to purchase merchant gift cards at Office Supply stores. You'll earn 5x Ultimate Reward points, value at 8.5 cents per dollar. But, it is a business credit card. If you are blocked out of this card by the Chase 5/24 card, there are a number of other small business cards that earn around 5% rewards at Office Supply stores. Or you can earn 5% on merchant gift card purchases at Amazon.com or Whole Foods with the Amex Amazon Prime Card.
- The most straightforward personal card option is the Amazon Visa Card. You can earn 5% rewards purchasing a wide variety of merchant gift cards at Amazon.com or Whole Foods, without a spending cap or an annual fee. The main drawback is that the Chase Amazon card will take up one of your Chase 5/24 slots.
- Another reliable option is to use a Target Red Card. You'll receive 5% off merchant gift cards. You can even get this with their debit card, which doesn't require a hard pull.
- There are several good options to earn high rewards for gift card purchases at supermarkets, which often have a wider range of gift card options. You may even want to get the Amex Gold Card just to earn 4x Membership Reward points (on your first $25,000 of grocery store spending). It should enable you to purchase all the merchant gift cards that you are likely to nee, without hitting the spending limits of the somewhat more lucrative Everyday Preferred Card or Blue Cash Preferred Card. With all of these cards, you should typicall subtract about 1% from the reward rate to cover the annual fees.
- With some gas credit cards, you can purchase gift cards at gas stations that sell them. Bonus category rewards for gas stations are often as high as 5%, some gas stations sell gift cards, and sometimes these gift card purchases are registered as cash purchases, rather than some other category. Do a quick search online, as we haven't tested most of the combinations. Drugstores are another option, but the only way to get a great reward rate is with promotional offers or by "using up" one of the categories from a pick your own category card, so you are usually better using an office supply, grocery, or gas card.
For example, if you purchase a gift card at the supermarket with a card that earns 6%, and then use the gift card instead of your credit card at Best Buy, you're effectively earning 6% on your BestBuy purchase. You won't get any rewards when you make your purchase, but you already received 6 cents per dollar when you bought the gift card.
Step 5: Use Visa / MasterCard gift cards everywhere else
Once you've filled out your quiver of high reward rate cards and taken advantage of merchant gift card options, much of your spending should be earning 4-5% or more. But, there are likely to still be credit card payments that don't fit into any of these categories. That's where Visa, Mastercard, or Amex Gift cards can be used.
- Rather than buying merchant gift cards, you can also buy Visa and Mastercard gift cards, and use them anywhere you could have used a credit card. Since these are actually debit cards, you can even use them in some places that only accept debit cards (or in some cases pay lower "convenience fees"). By buying these flexible gift cards at stores where you earn good bonus rewards, you can effectively extended your high bonus reward rates to all of your remaining credit card purchases.
- The only issue is cost. Unlike merchant specific gift cards. there is a fee to activate Visa, Mastercard and Amex gift cards. If you purchase $500 gift cards, the fee is usually a little over 1% (rates are higher with lower denomination cards). If you purchase $200 gift cards, the fees can be higher than 3%. That's why you should use merchant gift cards, which don't have activation fees, whenever you can.
- Grocery stores often sell gift cards which can be loaded with up to $500. The fees for these will only take a little more than 1% of the reward rates of cards like the Amex Gold, Blue Preferred, or Everyday Preferred card. Unfortunately, Whole Foods only sells lower denomination gift cards that have higher fees, so the Amazon card isn't a great option.
- Most office supply stores only sell gift cards that can be loaded with up to $200—but they frequently go on sale. The activation fees on these cards are usually too high. However, at stores like Office Depot, Office Max, and Staples, there are frequent promotions where you can buy fee-free cards or receive a small rebate that offsets the activation fees. You might also get lucky and find a local store that stocks higher denomination cards. These stores are great for the Chase Ink Plus and Amex Simply Cash card.
Instead of making the effort to take advantage of credit cards with high bonus category reward rates and merchant gift cards, you could focus exclusively on Visa, Mastercard, and Amex gift cards.
If you are willing and able to get business credit cards, the Chase Ink Cash card earns 5x Ultimate Reward points at office supply stores. These points are worth 7.5 cents per dollar when used to purchase travel, and usually considerably more when you transfer to Hyatt or use them to purchase frequent flyer tickets.
Either find an office supply store that sells $500 gift cards or stock up when the $200 cards go on sale, and then use the Visa, Mastercard, or Amex gift cards for all your other purchases.
Without a business card, you can't quite get a 4-5% reward rate. You can use the Amex Gold card to to earn 4x Membership Reward points when purchasing $500 gift cards at supermarkets. But, you'll need to offset some of these rewards to pay the activation fees on the gift cards and the annual fee on the credit card. On the other hand, if you are going to use your Membership Reward points to pay for frequent flyer tickets and/or can take good advantage of supermarket reward programs (often for fuel points), you can earn enough more to bounce back up to the 4-5% range.
Unfortunately, the high reward rates on all these cards are capped at $25,000 of spending per year. If you spend more than that, you can sometimes get multiple copies of these cards, especially the Amex ones. You can also use more than one of these credit card options. Or, you can take advantage of some of the other approaches for some of your spending, such as getting a few credit cards with high bonus category reward rates.
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