Doubling Up Credit Card Rewards
If you follow my gold credit card portfolio to get your share of $1,000 cashback rewards every year, you might notice the biggest bottleneck to squeeze even more cashback dollars is the caps put in the top two cards. Specifically, Citi® Dividend Platinum Select® Card has an annual cashback cap of $300, effectively limiting the 5% cashback priviledge to the first $6,000 grocery and gas station spend every year, and MBNA Cashback Card has a monthly cap of $25 for 10% cashback opportunities for grocery and dining charges.
How to break such barriers? If you have a family, you might want to get a second card of each type by applying in your spouse's name. That's what I did last month -- now I have two Citi Dividend cards and two MBNA Cashback cards.
The next challenge is how to allocate the charges. Based on my recent spending patterns, my family charge around $750 in groceries, $300 in dining out and $130 in gas refilling. (Around $250 monthly spend on groceries is on Walmart or Target, which does not fall into the eligible 5% or 10% cashback category.) Besides, we also have around $500 credit card charges in other categories.
If you run some calculation based on these numbers, you may realize I have no way to max out the reward caps from the four cards. The best choice I have, is to max out the $25/card monthly cap on two MBNA Cashback card by charging $300 dining out and $200 groceries, and leave another $300 groceries and $130 gas filling to Citi Dividend. Assuming any other credit card charges give me 1% cash back, I should be able to earn $500 * 10% + ($300 + $130) * 5% + ($250 + $500) * 1% = $79/month.
I must recognize that the incremental benefit from such cashback arbitrage is diminishing, and it isn't worth more time to squeeze the last reward dollar, but if you have a larger family to support, or have a larger spending base than mine, a second card should help your bottom line much more. Good luck!
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Reward credit cards are GREAT if you can pay them off quickly! But watch out for those higher interest rates and annual fees. If you plan on carrying balances for a long-time, those rewards might not be worth it!
Here's a tip: only use your reward credit card for short-term purchases. This would include just the items you know you can pay off in a short period of time. For longer term purchases, use your "main" credit card with the lower rate!
