Credit Card Experiment: Cash Back – Free Money Hack
Throughout the last half of 2017, the Black Sheep Family has been experimenting with cash back credit card rewards…. Gasp! Credit Cards? Yep… If you’ve been reading the Black Sheep Millionaire blog for a while, you already know that I am not a fan of debt (except a 15 year mortgage), or unnecessary overspending. But, I AM a fan of maximizing your savings on the money you already spend.
Obvious ways to do that include: 1) being thoughtful about your purchases, and 2) comparison shopping. Another way to do that is by 3) looking for rewards or cash back on the things you are already going to buy anyway.
So, read on to see how we’ve earned ~$1,000 in free money in less than 6 months!
Our Rules for Participating
- Pay off our credit cards every month – we will never carry a balance, and never make any interest payments… this is about earning, not spending more money. Credit cards are not to be used for emergencies – budgeting ahead (and accounting for your true expenses) or your emergency fund takes care of those! See: Optimizing Your Budget
- Don’t buy anything we wouldn’t normally buy – we only use these cards for our regular bills and purchases. We use YNAB Budget Software to keep up with funding amounts in our budget categories and just spend money like we normally do.
- Don’t pay any annual fees – There are some cards that offer significant bonuses/rewards, but they have annual fees associated with them. These cards may be justified by experienced travel hackers, but we decided we would avoid them because we didn’t want the extra hassle and just wanted the free money, baby!
The over-arching rule for cash back credit card usage is:
It’s about keeping, not spending more money!
Our Current Cash Back Credit Cards
Now that the rules are out of the way, let’s take a look at what which cards we are using now.
Disclaimer: The links below are not affiliate links, but I have provided referral links to sign up for the same cards we have where available. In the spirit of this cash back credit card experiment, any referrals earned will be reported back to you and used in the same way we use the other bonuses/rewards.
Credit Cards with Sign-up Bonuses:
For the cards that had a sign-up bonus, we signed up for one or two of these cards at a time. Then, we set all of our bills to auto-pay on that/those cards to meet the minimum spending requirements and earn the bonuses. Once those were earned, we took the approach of using the right cards at the right times. In case you didn’t know, I’m a spreadsheet freak, so I had to make one to help me visualize our strategy.
Credit Cards with Cash Back Bonuses by Category:
As you can see in the screenshot above, we use a handful of different credit cards, depending on what we are purchasing or where we are shopping. This does take a little extra work/organization, but we have figured out how to make it very easy to select the right card every time. We put a little round sticker on each card to indicate what to use it for. For example, our AmEx card has a sticker that reads, “Supermarkets 3%” and our Discover card has a sticker that reads, “Fuel 4%”.
So, What’s in our Wallets?
Chase Freedom Unlimited® Visa
Chase Freedom Unlimited Visa – This is my favorite all-around cash back card. In addition to a $150 sign-up bonus, we earn 1.5% cash back on everything we spend. It’s simple and if you don’t want the complexity of picking different cards for different merchants, it’s the one to go with.
There are also other benefits with this card, like Shop Through Chase. When we log into our Chase account, we might see a reward like, “Earn an additional 2% at Lowe’s.” If we were already going to buy something there, we just buy it through the Chase link, get our 1.5% back PLUS an extra bonus percentage. We don’t look at these additional rewards like cash back nazis, but they’re an added perk that has earned us extra cash back as a result.
Discover it® Secured Card
Discover it Secured w/ Cash Back Match – There was not a sign-up bonus with this card, but it has great cash back opportunities during the first year. Because Discover matches your cash back in year 1, up to $200, that effectively makes it the best card to use for our Fuel (4%), Restaurant (4%) and general purchases (2%).
This card also offers Discover Deals, similar to Shop Through Chase:
On a related note, the Discover it Cash Back card is a secured credit card that is primarily used to establish or improve credit. Historically, while I’ve personally had good credit for some time, my wife has not had many credit accounts in her name. While she’s also an authorized user on ‘my cards,’ we signed up for this one to establish a more solid credit history of her own. If anything ever happens to me, we both want to be sure that she has excellent credit, even though she will probably not need to worry about her credit score… But, just in case.
American Express Blue Cash Everyday® Card
American Express Blue Cash Everyday – This is another one of our favorites, which came with a $100 sign-up bonus and offers 3% back at supermarkets.
Like the Chase and Discover cards, AmEx also offers additional rewards online. But, instead of requiring us to shop through the AmEx site, you can scan offers and add them to your card. We recently got an additional $50 back from a $150 paint purchase at Sherwin Williams. Since we were already in the process of painting our whole house anyway, we got $50 in return (and their prices were cheaper than Lowe’s were – double win).
Don’t worry, we’ll be collecting that Lowe’s offer above soon, too 😉
Amazon Rewards Visa Signature Card
Chase Amazon Prime Rewards Visa – This card offered a nice $50 Amazon Gift Card sign-up bonus, and gives us 5% back on all Amazon Purchases! We do most of our Christmas shopping on Amazon, and buy household items every month through their Subscribe & Save feature. We connected The Prime Rewards card to our Amazon accounts; we just spend like we normally do through the site, and reap the 5% bonus every time.
FYI: You MUST have an Amazon Prime Membership to be eligible for the 5% back with this card. Try Amazon Prime FREE for 30 days by clicking THIS link (affiliate link). Amazon Prime is also one way we eliminated our monthly cable bill. With Prime, you can instantly watch thousands of movies and TV episodes, borrow Kindle books and get unlimited FREE two-day shipping – totally worth it if you shop through Amazon regularly.
Bank of America® Cash Rewards
Bank of America Cash Rewards Visa – To be honest, the $150 sign-up bonus was the most appealing feature of this card, but that’s about it. While it does offer a nice 3% cash back reward on fuel, the Discover Card at 4% (2% + 2% match = 4%) is still our go to for fuel for now.
Similarly, Bank of America offers additional cash back deals with the ability to add promotions to your card. We have earned a few extra dollars from this added perk, but have found the American Express and Chase offers to be best for us:
Our Results So Far
While we didn’t really kick off our Cash Back Money Hack experiment until June of 2017, we did have the Amazon Rewards Card for a few months prior, so I will include that just because we have the data and I can easily pull it:
|Cash Back/Bonuses Redeemed|
|July ’17||$297.88||Includes a $100 & $150 Sign-up Bonus|
|August ’17||$205.48||Includes a $150 Sign-up Bonus|
As you can see, things really picked up in July, after about a month into the experiment. Some months were a bit higher than average thanks to the sign-up bonuses or additional promotions (as mentioned above), and some because of increased spending (ie: October & November due to Christmas shopping).
What do We do With Our Cash Back?
At first, I was thinking that I would put it straight into our FIRE Fund… that is our ‘Financially Independent, Retiring Early’ fund OR our ‘F*ck, It’s Really an Emergency!’ fund. But, I thought this would be a cool experiment to update all the Black Sheep Millionaire Blog readers on periodically… So, I will just keep this in a separate investment account at M1 Finance… that way, I can also update you on the growth of all this FREE money (see also: BSM M1 Finance Review)!
There you go! Our FREE money has already made another ~$30 in its own FREE money! See: Invest Early, Retire Earlier – The Power of Compound Interest
Should you try this?
If you are already budgeting ahead several months, or have a 6 month emergency fund in place, you might want to think about doing this. BUT, please be sure that you are first disciplined enough to avoid overspending and impulse purchases. Then, set yourself some rules, like we did above (or just use those). With just a bit of effort and organization, you can keep some of that hard-earned money of yours and stretch it a little longer while you’re on your way to early retirement.