How to Save an Extra $1,094.86 a Year
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A typical American family can save over $1,000 a year by using these four credit cards.
Because credit cards try to differentiate themselves, they specialize in different spending categories. You win by using the right card for each everyday purchase you already make.
To come up with the $1,094.86 total annual cash back earned, I use actual numbers of what the average American household is already spending (according to the government Bureau of Labor Statistics), then choose the best credit card for each category. I take into account the cash back percentage, annual fee, and sign-up bonuses; and assume you keep the card for two years.
(For more details about the cards, click on the card name to read Wise Bread’s review.)
- Best Card: BankAmericard Cash Rewards™
- Why: 3% cash back at gas stations; $100 sign-up bonus.
- Annual Rewards: $124.04
The BankAmericard Cash Rewards™ card offers 3% cash back at gas stations on a combined $2,500 spent each quarter on gas, groceries, and wholesale club purchases. (You get 2% at grocery stores and wholesale clubs.) It has no annual fee. There is a $100 sign-up bonus (after $500 spend within 3 months).
Since the average American spends $2,468 on gas, that works out to $74.04 in cash back. Combined with the $100 sign-up bonus, that gets you $124.04 in earnings each year for the first two years.
- Best Card: Blue Cash Preferred® Card from American Express
- Why: 6% cash back at grocery stores; $150 bonus.
- Annual Rewards: $174.13
Blue Cash Preferred® Card by American Express offers a whopping 6% cash back on up to $6,000 spent at grocery stores each calendar year.
The average American household spends $3,971 on food at home. This works out to $238.26 in cash back on groceries alone. It’s worth even more if you count all the non-food items that you can purchases at a grocery store that will still qualify for the 6% cash back.
It also comes with a $150 bonus after new cardholders spend $1,000 within three months of account opening. After subtracting the $95 annual fee ($75 if your application is received by 8/3/16), this card offers $174.13 in earnings at grocery stores each year for the first two years.
- Best Card: Chase Sapphire Preferred®
- Why: 2x points on dining and travel; 50,000 points sign-up bonus.
- Annual Rewards: $334.00
Chase Sapphire Preferred® offers 2x points on dining and travel, a 50,000 point sign-up bonus offer, and has a $94 annual fee (waived the first year).
Americans spend an average of $2,787 on food away from home each year. This equals 5,574 points just on dining out. Any travel purchases will earn more rewards, but we won’t include them in our calculations, and not counting any rewards earned from travel purchases.
What makes this card special is the 25% bonus you get when you redeem these Chase Ultimate Rewards points towards travel reservations. So every dollar spent earns you 2.5 cents worth of travel, making your annual rewards worth $69.68.
In addition, this card offers new applicants 50,000 points (after spending $4,000 within three months). That’s worth $625 in travel at the Chase Ultimate Rewards portal.
There is a $95 annual fee for this card, but it is waived the first year.
Adding up the rewards, sign-up bonus, and annual fee, the Sapphire Preferred offers $334 in rewards each year for the first two years.
- Best Card: Citi® Double Cash Card - 18 month BT offer
- Why: 1% cash back at purchase, plus 1% upon payment.
- Annual Rewards: $442.69
The Citi Double Cash card from our partner Citi offers cash back twice — 1% on purchase, and 1% when you pay — on all purchases with no caps. It’s the ideal card to use for anything not covered above, or if you run into the rewards caps of the other cards.
According to the BLS report, the average household has annual expenditures of $53,495 after taxes. Subtracting the $9,226 we’ve accounted for in groceries, gas, and dining, that leaves $44,269. Let's say that half of that goes to things that can't be charged to credit card such as car payments, savings, and mortgage or rent.
This leaves $22,134 in expenses to earn cash back on, giving us another $442.69 in annual cash back. There is no annual fee or sign-up bonus for this card.
Easy Way to Save a Thousand Dollars
Adding up our annual rewards calculated above, we see that the average American household can save $1,094.86 (or more) each year just by using these four cards on regular day-to-day purchases. The best part is that it’s so darn easy. Of course, this only works if you pay off your balance in full, every month. Otherwise, no amount of rewards could outweigh the interest you'd be paying.
Pro tip: write the spending category (gas, groceries, restaurant, all) on the card with a permanent marker to help you remember which card to use.
If you’re already spending this money on everyday purchases, there’s no reason not to save an extra thousand dollars a year.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any bank, card issuer, airline or hotel chain.