This Spending Habit Has Earned Me Thousands of Dollars in Free Money

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spending habitAnd 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.

You can dive as deep as you want to into the world of travel hacking. Check out The Points Guy or Extra Pack of Peanuts to get started.

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.

Cash Back

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 rewards 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.

Capital One is currently offering a 50,000 mile sign-up bonus (worth $500) after you spend $3000 in the first 3 months. The $95 annual fee is free for the first year.

Click here to learn more about this card.

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, like the Chase Ink Business Preferred card, offer 3x points on advertising spending. (And it comes with a fatty sign-up bonus.)

Click here to compare this card with others.

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.

credit cards

Travel Rewards

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.

If the 1% cash back habit didn’t get you excited, maybe this will.

Chase is running a deal with Southwest where new credit card sign-ups are 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! 

Click here to compare this card with others.

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.

2. Don’t buy crap you don’t need.

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?

Your Turn

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.”

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11 thoughts on “This Spending Habit Has Earned Me Thousands of Dollars in Free Money

  1. Someone with incredible self control might pull this off, but using a credit card registers little pain when making purchases. It’s easy to rack up debt thinking you are getting free money. That’s why they offer it. The ROI on credit cards is usually negative for most consumers. Please don’t encourage this behavior. It might work for you, but for the majority it spells disaster. Get a debit card from a bank that offers rewards instead, or just use cash….you’ll probably save the same amount annually anyway

    • David, you’re absolutely right. The rewards are paid out on the interest profits from people who carry a balance. If the programs weren’t profitable the banks wouldn’t offer them. I think ALL side hustles require incredible self-control and admit this isn’t for everyone. But if you can abide by the responsible usage rules above why not take advantage of the free monies?

  2. I did a lot of comparing when starting the business. Everyone recommends the AMEX card, but Chase Ink is almost identical benefits with a much lower annual fee (free the first year). The cash back is great and now your points even link directly into your Amazon account so you don’t even need to bother “ordering” your rewards (unless you want to use it for travel, which does go slightly further in point value). As for changing credit cards every 6 months to chase the best deal, I can appreciate it, but I know I personally lack the patience to update my gazillion profiles with new cc data that often. It’s bad enough when a card gets compromised or renewed with a different number!

  3. That is great advice, I was always wondering why I even bother about those points when that is such small amount not worth of thinking. Never taught that I should manage all payment over single card. I have several cards and every use for different purpose. That was not such good idea of mine!

  4. Love these tips on traveling for free by putting expenses you were already planning on credit cards to get points! I’m curious though how it affects your credit score having so many cards open. Do you shut the old cards down when you open new ones?

    • If there’s no annual fee, I’ll generally keep the card open. Reason being, your “utilization percentage” (balance/available credit) is a factor in your score. The more cards you have open, even if you never use them, help give you a bigger available credit number to divide by.

      My understanding is that each application may give you a temporary 3-4 point ding, but if you’re at a 700+, that seems like a pretty insignificant dip percentage-wise.

  5. $55 in cash back a year against how much prices have been increased to account for our shift to credit card spending over cash.

      • It’s a catch-22 for sure. Although I have heard of obtaining discounts for using cash. I’m honestly too lazy to really care about such a piddling amount really. I don’t spend enough to earn any real serious rewards, and right now airfare is so insanely cheap I’d rather just pay for whatever airline I want.

        I used the paypal debit card for the 1% cash back for years, but even that just got to be a bother after a while

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