And it’s a habit you can start right away: spending money on credit cards whenever you can.
Over the last 10+ years, this simple habit has earned me thousands of dollars in free money, just for buying the stuff I would have bought anyway.
And because I pay my balance in full every month, they’ve never made a dime off me.
Some say banks and credit card companies are evil. I think they’re awesome. Just be smart about it.
In this post, I want to outline the two main flavors of credit card rewards (cash back and travel), and make the case that if you routinely withdraw and spend cash, you’re literally leaving money on the table.
Most credit cards offer some sort of cash back program, usually 1% on all purchases.
That means if you spend an average of $465 a month (the national average according to one report), you could earn $55.80 a year in cash back rewards.
It’s obviously not a lifestyle-changer, but then again, it’s free money.
My favorite cash back card is the Capital One Venture card, which offers “double miles” on all purchases. You can trade in your miles for statement credits, gift cards, or travel purchases. There’s a $59 annual fee after the first year and a 40,000 mile sign-up bonus after you spend $3000 in the first 3 months.
You can look at your spending history and see your “breakeven” point on the annual fee. (Another reason I love credit cards is having a consolidated record of my spending.)
Where the cash back rewards get really fun is when you can put all your business expenses on the card. For instance, when I was running my shoe business, I was spending $500-1000 a day on advertising, and racking up a ton of credit card points.
And where it gets really fun is certain cards offer 3x points on advertising spending.
I’ve found the Amazon FBA business great for this as well, especially when it comes to meeting your minimum spending requirements for a sign-up bonus. (More on sign-up bonuses below.)
Action: If you don’t already have a cash back card, get one. If you already have one, see if you can move more of your monthly spending on to it.
I love to travel, but hate paying for plane tickets. Quite a conundrum, right?
The best way around that little predicament is earning a ton of free frequent flyer miles with credit card sign-up bonuses.
My wife and I just booked tickets to Japan and back ($2400) for free using this habit. Once or twice a year, we look for cards that offer a healthy sign-up bonus (think 50,000 miles or more).
For “traditional” airlines, 25,000 miles will get you a domestic roundtrip, and 60,000 will get you an international roundtrip. The Japan tickets were 70,000 each, which we covered one United Mileage Plus card sign-up bonus, and one Chase Ink card sign-up bonus, where the Chase “Ultimate Rewards” points were able to transfer to my United Mileage Plus account.
For domestic travel, we’re all about Southwest. In fact, last year we flew to Seattle, Chicago, Washington DC, Dallas, Orange County, Charlotte, and Las Vegas, all free on Southwest points.
For me, that helps take some of the monetary sting out of traveling for conferences.
If the 1% cash back habit didn’t get you excited, maybe this will.
Last year Chase was running a deal with Southwest where new credit card sign-ups were good for a 50,000 point sign-up bonus after meeting a $2k minimum spend.
For your $2000 in spending (on stuff you were gonna buy anyway), you just earned 52,000 points (2k on purchases and 50k in bonus), enough for $500-900 worth of free travel. That’s a great value — the equivalent of 25-45% cash back!
To earn the bonus, you have to spend $2000 in your first 3 months. In the past, I’ve bought Costco or Amazon gift cards to pull forward some spending to meet the minimum requirements.
Action: If you haven’t received a travel credit card sign-up bonus in the last 6 months, it’s time to sign up for a new card and get to work.
Two Rules for Responsible Credit Card Hacking
1. Don’t spend money you don’t have.
Maybe this isn’t a truly entrepreneurial side hustle, but I figured it was worth mentioning because it IS one way my wife and I save money each year — dollars that go directly to our bottom line.
And that’s the same as earning more, right?
Are you a travel hacker? What’s in your wallet? What’s been your best credit card success story?
When I was in college, I signed up for a credit card and the bonus was some stupid hat. Hold out for a better sign-up bonus!
One of our better scores was 2 free nights at the Park Hyatt Tokyo (regularly $400/night).
It’s getting to the point where if I’m not working toward a new sign-up bonus, I almost feel like the purchase was a waste. It also eases the pain of some bigger purchases, like when I had an unexpected car repair, I was like, “Oh well, at least it’s getting me closure to my 50k bonus.”