How I Made $712.59 With My Cash Back Credit Card

Today’s going to be all Glamour Shed, all the time

Q: What’s the easiest way to earn extra money?

A: A cash back credit card!

I made $712.59 last year by using my cash back credit card. Not bad for buying stuff I was going to buy anyway! A cash back credit card gives you a predetermined percentage of money back on purchases you make with that card. Some cards offer a flat percentage whereby they give you the same percentage back on every single thing you buy. Others have rotating percentages or different percentages for different categories of purchases. Both options are super simple ways to make money while spending money. The percentages are typically pretty low (my card gives a flat 2% cash back), so you’re not going to make a million dollars. But hey, it’s one of the easiest ways to make a couple hundred bucks!

Come Hear Me Talk this Friday, April 8th!

Non-stop Glamour Shed

Brief unrelated note… I’m thrilled to share I’ll be speaking on a panel this Friday, April 8th at the online Mamas Talk Money: The Legacy You Leave conference. If you’re interested in attending this three-day online conference, you can save $5 off the $49 ticket price by using the coupon code FRUGALWOODS. Go here to get your ticket and register to attend. I hope to see you there!

The Catch to Cash Back Cards

I figure you probably figured there’s a catch to all this free money and here it is:

You have to pay your credit card bill in full every single month.

You should only buy things with your credit card that you can afford. Paying your credit card bill in full does not mean paying the “minimum amount due,” it means paying the full balance due. All the way down to zero. If you find that having a credit card tempts you to overspend, don’t use one. You’ll be better off in the long run if you avoid credit card debt and stick with a debit card or cash.

But if you’re confident in your ability to pay for everything you charge on a credit card, using one is a fantastic way to:

1) Build your credit.

Your credit score is based largely on your ability to service your debt, which basically means: do you pay off your debt on time? Creditors want to know you can responsibly carry debt and pay it on time.

Can’t stop, won’t stop

Perversely, if you are 100% debt-free, you might actually have a low credit score because there’s no track record of how you manage debt.

My husband and I ran into this ironic conundrum when applying for our first mortgage. Since we were completely debt-free, and always had been, banks gave us side eye when we applied for a mortgage. Banks want proof of how you handle debt and using a credit card is an easy way to create excellent credit for yourself. Last month’s Case Study subjects encountered this exact problem because they live debt-free, and I offered ideas for building credit in that post.

The inverse also applies: if you don’t pay your credit card bill in full every month, you’re likely to damage your credit score. Carrying a balance on a credit card DOES NOT help your credit score. Paying your bill in full every month, and keeping the same credit card open and in use for many years, help tremendously.

2) Track your spending.

Glamour Shed, in danger of being eaten by snow

I do almost all of my purchasing on my credit card, which makes it very, very easy to monitor my spending. I also use the free expense and net worth tracking system from Personal Capital (affiliate link). Having most of my spending on a credit card automates this tracking in a way that’s not possible if I use cash.

3) Get rewards!

Credit card companies reward customers who use their cards responsibly and it is a glorious thing. The two most common types of rewards are:

Travel Rewards: Also Great!

I have a travel rewards card too–the Marriott Bonvoy Boundless–which we’ve used for free hotel stays around the world. But on a daily basis, I’m a huge fan of cash back because it’s a reward I KNOW I will use. I think and hope and plan to one day use our flight and hotel rewards, but I know with absolute certainty I’m going to use my cash back rewards.

“When You Are Engulfed In Snow,” by: Glamour Shedaris

Travel rewards made a lot more sense for my husband and me back in our pre-pandemic, pre-children days when we reliably traveled outside of the country at least once a year. Now, with two young kids, a homestead to manage, and the pandemic, we’re less certain when we’ll next travel (although we’re dreaming of a trip to Japan… ). At any rate, travel rewards are excellent when you’re a frequent traveler and/or you’re planning for a specific trip.

Another instance where travel rewards are profoundly smart is when you’re traveling for business. If your employer will allow you to book travel with your personal card (and then submit for reimbursement), you can rack up some serious points. My husband and I did this back when we both traveled a lot for work and ended up at something like Platinum Level just from all of our business travel. Even though we both had company credit cards, our employers said they didn’t care if we booked using our personal cards. It is 100% worth asking your employer if this is ok!

As a side note, we plan to take our girls to Disney at some point in the not-too-distant future and you’d better believe I will be ALL OVER utilizing credit card rewards and bonuses for that trip. But until we have a specific timeframe in mind, I’m focusing my spending on my cash back card.

My 2021 Spending & Cash Back By Month

This chart shows our 2021 spending on our cash back credit card, broken out by month. This isn’t my total 2021 spending–you can find that in my monthly expense reports.

Not bad for not needing to do anything!

Cash Back Cards to Consider

If you’re now cash back curious, there are a number of cards on the market right now that offer pretty good cash back percentages. Here are a few I’ve found that I think are a good deal, along with my thoughts on each.

“Little Shed,” by Glamour May Shedcott

1) Blue Cash Preferred® from American Express:

• 6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%).
• 6% cash back on select U.S. streaming subscriptions.
• 3% cash back at U.S. gas stations and on transit (including taxis/rideshare, parking, tolls, trains, buses and more).
• 1% cash back on other purchases.
• Earn a $300 statement credit after you spend $3,000 in purchases on your new card within the first 6 months.
• $0 fee for the first year; $95 annual fee thereafter. Rates and fees details here.
• Terms apply.

My thoughts:

• While it’s kind of a hassle to keep track of these different categories, 6% cash back is incredibly high!
• I also like that you automatically get 1% cash back on all other purchases, so you’re not totally losing out when you buy stuff outside of those categories
• A major downside is that this card is free for the first year, but then has a $95 annual fee. However, if you reliably spend at least $6k at the grocery store over the course of a year, that’s $360 right there, which makes the $95 annual fee seem totally reasonable.
• The $300 statement credit bonus is nice too! Note: that only applies in your first year of having the card.
• Summary: I’d say this is an excellent choice if: 1) you’re able to remember those categories; 2) you spend at least $6k at the grocery store annually (which is $500/month); 3) you commute (3% back on gas and transit is excellent!).
  • Furthermore, if you’re an advanced credit card user, you might consider having this card exclusively for groceries and transit and having another card that offers a higher percentage than 1% for all other purchases.
  • Now that I’ve researched this card, I’m considering applying myself… we easily spend $6k on groceries and also a lot on gas, so hmm…. I love doing this research for you all and then realizing I need to re-optimize my own self!

“The Picture of Shedian Graymour,” by: Daffodil Wilde

2) Blue Cash Everyday ® from American Express:

• 3% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%).
• 2% cash back at U.S. gas stations.
• 1% cash back on other purchases.
• Earn a $200 statement credit after you spend $2,000 in purchases on your new card within the first 6 months.
• No annual fee. Rates and fees details here.
• Terms apply.

My thoughts:

• This is the no-annual-fee version of the first AmEx card we looked at and it’s also a great deal.
• The emphasis on groceries and gas mean this card makes the most sense if you–like me–spend a lot in those two categories. By the way, knowing what you spend in each category is yet another reason why I recommend everyone track their expenses judiciously!
• I also like that you automatically get 1% cash back in all other categories.
• Summary: A great choice if: 1) you want to avoid the $95 annual fee of the Blue Cash Preferred; 2) you spend heavily in the grocery and gas categories. The $200 statement credit is also nice!

“Sheds of Wrath,” by: Glam Shedbeck

3) Capital One Quicksilver Cash Rewards Credit Card:

• 1.5% cash back on every purchase, every day.
• $200 cash bonus after you spend $500 on purchases within 3 months from account opening.
• No annual fee.

My Thoughts:

• This is as easy as it gets: a flat cash back percentage that doesn’t change based on where or when you’re spending your money.
• The downside is that 1.5% isn’t as high as those category-specific percentages offered by the AmEx cards. But, this is super simple and there’s no annual fee.
• Summary: A good choice, especially if you’re not sure you’d spend heavily in the grocery and gas categories offered by the American Express cards. 1.5% across the board is excellent and means you don’t need to keep track of categories!

4) Capital One SavorOne Cash Rewards Credit Card:

• Unlimited 3% cash back on dining, entertainment, popular streaming services and at grocery stores (excluding superstores like Walmart and Target).
• 1% back on all other purchases.
• 8% cash back on tickets at Vivid Seats through January 2023.
• $200 cash bonus after you spend $500 on purchases within the first 3 months from account opening.
• No annual fee.

My Thoughts:

• 

  “The Shedmaid’s Tale,” By: Glamour Madeofwood

  If you spend a lot in the 3% categories (dining, entertainment, streaming services and groceries), this is a nice option. The fact that it’s unlimited 3% on groceries alone is awesome! However, I’d want to know which superstores are excluded, especially if you do most of your grocery shopping at one of those. Depending on which stores are excluded, this card could be much less appealing.

• I have no idea what Vivid Seats are, but if that’s something you spend on regularly, 8% cash back is fantastic!
• Plus, the flat 1% cash back on everything else is nice to have.
• Summary: if your spending categories align with the 3% and/or 8% categories, this is a fantastic option with no annual fee. If you’re less certain of your category-specific spending, I’d go with the flat percentage offered by the Quicksilver Cash Rewards.

5) Chase Freedom Unlimited:

My Thoughts:

• This card is an interesting cash back/travel hybrid and I think the major value is if you’re booking travel through Chase Ultimate Rewards.
• That being said, 4.5% back on drugstores and restaurants is also pretty nice, as is 3% cash back on all other purchases. However, it’s important to remember that these high percentages end after you’ve spent $20k/had the card for a year.
• Summary: Definitely something to consider if you’re looking for a travel/cash hybrid, particularly if you’re planning to book travel through Chase Ultimate Rewards. As a purely cash-back card it’s not bad either, but do note that you’re reverting to a 1.5% (and 3% on drugstores and restaurants) after the first year/$20k spent. Still, a flat 1.5% back is great!
  • If you’re more interested in travel rewards, you may want to instead explore the Chase Sapphire Preferred, which a lot of people consider to be the gold standard of travel cards. Many people (me included) have both a cash back and a travel rewards card because usually, a card is only really advantageous for one reward or the other. 

6) Chase Freedom Flex:

My Thoughts:

• If you’re up for keeping track of the rotating categories each quarter, 5% is a stellar percentage. I think this is a great option if you’re interested in parceling out your purchases during the year to try and align with the 5% category each quarter.
• Do keep in mind, though, that it’s only $1,500 each quarter, which is $6k per year, so the total you could earn through those rotating categories is only $300 for the entire year (5% of $6k = $300), which makes this less of a stellar deal than it originally appears. That being said, you’ll still get unlimited 1% cash back on all purchases.
• Summary: I think this card is ok if you’re into rotating categories, you intend to spend on travel through Chase Ultimate Rewards, and you do a lot of spending at drugstores and restaurants. But again, keep in mind the $6k annual cap on the high percentages.

7) US Bank Altitude Go:

My Thoughts:

• This card operates on a points system, as opposed to percentages, which I find annoying because you have to dig around and figure out how much each point is worth. Google revealed to me that each point = $.01.
• What I further deduced is that you get 1 point for every $1 you spend (this is a really confusing way to structure a card, but no one asked me… ).
• At any rate, if I’m reading this correctly, you get:
  • 4 points for every dollar you spend on dining, takeout, and restaurant delivery, which is $0.04.
  • 2 points for every dollar you spend at grocery stores, grocery delivery, gas stations, and EV charging stations, which is $0.02
  • And so on for each category.
• Summary: if you’re up for keeping track of categories, and converting points to dollars, this card seems like a good option IF you spend a lot on restaurants and takeout.

What If I Have Bad or Nonexistent Credit?

The best rewards cards–like the seven I just reviewed–all require good or excellent credit. If you have bad or nonexistent credit, you can improve your credit with a “credit building” card, which you can use essentially as a ladder to good credit. It’s a conundrum: you can only get a great credit card if you have great credit and one of the ways to get great credit is by having a credit card…

“The Great Glamour,” by F. Shed Glamgerald

Fear not, there are several categories of credit cards designed for people with bad/no/poor credit, including:

1. Credit-Building Cards
2. Secured Credit Cards

If at all possible, you want to get a credit-building card as those operate more like regular credit cards. However, if your credit history is too minimal (or your credit score too bad), you may need to start with a secured credit card.

A secured credit card is kind of like a debit card: you have to make a cash deposit with the credit card company in order to open an account.

You then “spend” the amount you deposited via the credit card. The whole point of a secured card is to launch your credit history and it’s a fine thing to do if you have nonexistent or bad credit. However, if possible, you want to start with a credit-building card.

1) Credit Building Cards. Start here and see if you qualify for either of these:

• Petal® 2 “Cash Back, No Fees” Visa® Credit Card:
  • I like this one because you can earn 1% cash back on eligible purchases right away and up to 1.5% cash back on eligible purchases after making 12 on-time monthly payments (although after a year with this card, you may be able to apply for a better cash back card).
  • No annual fee.
• 

  “Shed [in open] Eyre,” by: Shedlotte Glamte

  Petal® 1 “No Annual Fee” Visa® Credit Card:

  • This one also has no annual fee but doesn’t offer a specified opportunity for cash back.
  • The upside: it is supposedly available for people with worse credit, so if you don’t qualify for the Petal 2 card, you very well might qualify for the Petal 1.

2) If you don’t qualify for a credit-building card–don’t worry–you can try for a hybrid Secured/Building Card:

• Self – Credit Builder Account + Secured Visa® Credit Card:
  • This is a combined credit builder account and secured card
  • No credit check and no credit history required.
  • If you make at least 3 monthly payments on time, have $100 or more in savings progress in your account, and are in good standing, you’ll automatically be eligible for the Self Visa® Credit Card, without a credit check.
  • Your savings progress from your Credit Builder Account acts as your refundable security deposit.

3) If you don’t qualify for that card, move onto Secured Cards:

Summary

“The Curious Incident of the Shed in the Nighttime,” by: Glam Sheddon

If you’ve made it this far, congratulations! You now know more about credit cards than most folks!

Today’s top takeaways:

1. Responsible credit card usage means paying your bill in full every month and not charging more than you can afford.
2. Only use a credit card to buy things you’d buy in cash. A credit card is not an invitation to overspend.
3. Using a credit card responsibly is an excellent aspect of a healthy financial life: it builds your credit, helps you track your spending, and you can earn rewards.
4. Find a credit card that offers rewards you will actually use.
5. Consider carefully if a card with an annual fee is the best option or if you can get similar benefits with a no-fee card.
6. If you have bad/nonexistent credit, consider getting a credit-building or secured card to help you ladder up to good credit. Having good credit is important as it determines things like your ability to qualify for a mortgage.

Do you use a credit card? What type of rewards do you find most useful?

Advertiser Disclosure: I partner with CardRatings for coverage of credit card products. Frugalwoods and CardRatings may receive a commission from card issuers at no extra cost to you. Here’s a boring (but important) explanation of how Frugalwoods makes money. The credit card links in this post are affiliate links.

Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.