Rewards Stacking: How I Build Wealth with Credit Card Rewards

Rewards Stacking: How I Build Wealth with Credit Card Rewards

so several years ago I was searching the
internet for what I have no earthly idea
and I came across a quote from Dave
Ramsey that really caught my attention
he said I’m going to I’m going to read
it so I get it right he said no one ever
says they got rich off of credit card
points and I thought for that I thought
for a minute I thought you know it’s
probably true because most people
probably just spend their credit card
rewards maybe sometimes without even
really thinking about it cash comes in
or it’s points or miles maybe you travel
with it but I thought you know he’s
wrong WR if he says you can’t get rich
off of credit card rewards that’s just
simply not true it’s just a question of
math I know he doesn’t like math but but
I kind of do and I thought it’s really
nothing more than compounding relatively
small amounts of money over time a great
way actually to get rich there’s nothing
special about the credit card rewards
per se we could save small amounts of
money from other sources like I don’t
know a job and build a lot of wealth
over time but the nice thing about
credit card rewards is it it feels like
free money right we don’t have to work
for it we if we’re just spending money
like we normally do we get credit card
rewards why not save and invest it so
that’s what I’ve been doing over the
last several years as longtime listeners
know I’ve now given it a name reward
stacking yeah I kind of like that name
but anyway that’s what I call it and in
today’s video I want to just walk
through how I do it give you some tips
on how you might do it too if you’d like
and I want to show you where my balance
stands and how I’m investing it I’ll
actually show you the account I’m using
and so that’s what we’re going to do
today I’m going Dive Right In I’m going
to actually show
you on one of my sites all cards I’ve
actually I’m kind of giving away my
balance right there this is where I walk
through I’ll link to this article below
the video but I walk through exactly my
strategy and what I’m going to also do
on this article is update it every month
with with how much in new reward I’ve
cashed in added to my investment account
which I’ll show you in just a minute uh
and in and in fact my current balance is
now slightly higher than this but we’ll
come to that and so what what I want to
do to begin with is how much can you
actually earn through credit card
rewards is it really worth it and so
what I did was I put together as an
initial matter this table let me see if
I can make it a little bigger there we
go all this is is if we assume you you
know for every 1,000
a month you put on a credit card
assuming you you save and invest those
rewards and earn
8% how much will you have over from 1 to
30 years and I just go from 1% here all
the way up to 5% and those would be your
average uh reward rate and uh and you
can see the numbers get rather rather
large keeping in mind that this is per
every $1,000 spent on a credit card if
you’re like me I put a lot more than
that uh on a credit card and I’ll I’ll
just I’ll just start with this 2% row
because as we’ll see there are plenty of
cards that play pay 2% cash back on
everything so it’d be an easy approach
just to get one card we’ll talk about
that but you can see for every ,000
spent the numbers get you know pretty
significant now you know when you’re
just starting off compounding hasn’t had
time to work and we’re still talking
relatively small amounts of money uh
$240 in rewards you know for every th000
per month spent but even at that
relatively small level over 30 years you
come up with 288,000 and here you might
say well wait a minute Rob slow down
okay 28,000 I mean not like you can
retire on that and there’s inflation and
yeah I get it but remember a couple of
things we’re only talking about for
every thousand spent and keep in mind
we’re talking about credit card rewards
we’re not talking about all of the money
you save hopefully you’re maxing out or
saving in a 401k and Ira and other
places we’re just talking about the the
free money you get from making purchases
you’d make anyway just with the right
credit card all right so what I then did
is okay let’s assume we can earn 3% back
on every purchase and again I think
that’s very easy to do uh uh or at least
come very close to and I’ll show you
that in a minute how would that work out
and so I created the second table and
I’ve got monthly spends from 1 to 5,000
and then I jumped you for you Big
Spenders uh out there I jumped to 10,000
and we’re again assuming we can average
average
3% uh rewards on our credit cards and um
and again 8% return and you can see the
numbers get pretty big and again this is
on top of all the other savings you’re
doing this is just saving and investing
your credit card rewards and I know if
Dave if you’re watching I know this is
math and I’m by the way I’m perfectly
comfortable being called a math nerd not
so much your name calling but hey I’ll
take it I am a math nerd
okay back to the screen so this gives
you sort of a rough idea of how much you
could earn with the right credit card
strategy depending on your monthly spend
and uh how long you save and invest this
money so that gets us now to the next
question is okay so what should our
strategy be and you know if you Google
best cashback credit card what you’re
going to get typically from the big
sites are a list of all their
advertisers uh and they’re generally
pretty good cards I’m going to show you
some of them and some of those are are
advertisers on my site all cards.com
but what you don’t get is really how to
Think Through the best cash back or
credit card reward strategy and one of
the things it’s really overlooked and I
think probably the most important
question to ask is how many credit cards
do you want to carry if it’s just one
which is a a perfectly reasonable and I
think good strategy uh then that’s going
to dictate the type of card you get but
if you’re willing to carry two or three
or more then that kind of changes things
up with the strategy and let me explain
what I I mean we’ll start with the one
card strategy if we want a One card
strategy we want the we want to get a
credit card that pays the highest reward
on all purchases and so what I’ve done
in this article uh I’ve listed a number
of cards here that pay 2% cash back on
all purchases and I think they’re all
good options I’ve carried the city
double cash card I still have it
actually uh haven’t carried the others
but they all pay 2% cash back if you
have a Fidelity account the nice thing
about the Fidelity rewards card is it
will it’ll deposit the the cash back
right into your account now that’s more
of a convenience thing with with any of
the others you can simply either uh use
the rewards as a statement credit and
then pull the same amount of money just
out of a checking account I mean money
is fungible or you can have uh in many
cases just have the money deposited
directly into your bank account and then
pull it out and and save and invest it
so that’s not a big deal but there would
be some convenience I suppose if you had
a Fidelity account and carried the Fidel
rewards Visa signature so here are some
examples 2% cash back on all purchases
now there are some cards that pay even
more than that and I’ve listed them down
here now typically make this a little
smaller so it all fits and I’ll be
adding to these lists by the way on this
page so you might want to bookmark this
this page but typically with these cards
uh that pay more than 2% at a at a
minimum there are some requirements so
for example Alliance a great card 2%
cash back I’m sorry 2 and a half% but
it’s only for the first 10,000 a month
which by the way I think for most people
that’s not a big deal uh it used to have
it be unlimited when I because I carried
this card back in the day it was
unlimited but the other qualification
now that they’ve added is you have to
have a checking account with them and
meet certain uh qualifications so you
got to bear that in mind uh a card that
I’m going that I’m going to apply for
I’m on the wait list is the Robin Hood
gold card it’s 3% cash back on all purch
purchases I think this is probably the
best deal out there you do have to be a
Robin Hood gold uh program member if you
pay it annually it’s 50 bucks so I kind
of view that as the annual fee I think
very reasonable there’s actually no
annual fee for the card itself but I
kind of view this fee for the the Robin
Hood gold program uh to be the in effect
uh an annual fee for the card although
you do get other things with that
membership uh so that’s a great card
I’ve carried the Bank of America premium
rewards card and if you qualify for
platinum honors tier which requires a
checking account at Bank of America and
and maintaining at least 100 Grand uh in
your Bank of America accounts and or
meril accounts you’ll get a minimum of
2.625% on all purchases you get a 3 and
a half% for I believe dining and travel
so that’s a good card but again there’s
requirements right and I’ll mention
Fidelity rewards plus it’s actually tied
to the Fidelity card we looked at a
minute ago if Fidelity manages a lot of
your money you can get up to 3% on all
purchases the thing I would say is that
is absolutely no reason to have Fidelity
manage your money because Fidelity
charges you an arm and a leg to do so
but if they already manage all your
money that’s a choice you’ve made for
your Investments it’s a great uh option
for their credit card so you can see
here if we go back to our our chart you
know we can easily get um if we go back
here we can easily get 2% with the Robin
Hood card 3% and with some of those
other cards probably in the 2 and 1
half% range and that’s just with one
credit card so very simple you don’t
have to worry about which card to use
where and I think you’re doing really
really well now if you’re willing to
carry more cards you can obviously
increase this because what you can do is
you can start with one of the cards we
just looked at but then you can add one
or more cards that have even higher
reward rates for uh spending categories
where you spend a lot of money and to
that end I’ve listed a number of cards
to
consider I’ll jump down to it and I’ll
just give you an example we’ll start
with freedom unlimited this is a card
that I have if we look at the rewards so
if you carry the Robin Hood card when it
comes out uh the 3% here is not going to
help you but this would add 5% back on
travel book through Chase if you have
one of the other cards say that earns 2%
like the city double cash or or Wells
Fargo active cash then you’d get a
little bit more money on these
categories drugstores uh and and
restaurants you just have to decide for
yourself do you spend enough in those
categories to make a second card worth
it um but there are other options for
example uh Blue Cash preferred it does
have a $95 annual fee although it’s wave
the first year but you can see you get
6% back on groceries with a spending cap
per year you also get 6% back on
streaming again you have to decide is it
worth worth it to you based on how much
you spend uh on streaming uh but you
also get 3% cash back for gas stations
and for Transit so this is a good
example of a card that’s going to give
you higher than normal reward rates on a
number of spending categories the other
one I’ll mention briefly is City Custom
cach this is a great card what it does
is it gives you 5%
cashback on a number of different
commonly used spending categories the
way it works is it will look at those
categories see where you’ve spent the
most money each billing cycle and apply
this 5% to that category up to $500
spent so this can be a good card
particularly let’s say you um spend up
to 500 bucks on gas I guess I don’t know
you do a lot of driving or some other
category that qualifies it could be a
great way obviously to elevate your cash
back but again it’s limited to $500 a
month in spending so so you’ll decide
whether it’s worth it uh to you now one
of the things I’m working on on all
cards is um uh organizing the credit
card data based on the reward rate so we
looked at cards that pay 2% on all
purchases for example what I’m going to
have for for you uh hopefully soon will
be a way to filter cards to say show me
all of the cards that offer 5% or more
at drugstores or at groceries or that
kind of thing uh I’m working on that
data in the meantime what what I did
include in this article and I’ll show it
to you now is a list of cards that pay
5% uh cash back on at least one category
so here they are so Chase Freedom is
travel uh Freedom Flex is travel plus
what I call bonus uh category uh we
mentioned City Custom cash Amazon Prime
card I carry that I get 5% back for
example on all of my amazon.com
purchases uh we mentioned the uh uh
blueash preferred here’s one you might
not have heard of AAA daily Advantage 5%
cash back on groceries there’s some some
caps um here’s one another AAA card you
get 5% on um gas and EV charging up to
7,000 spent each year uh here’s another
abound Platinum 5% gas uh cash back on
on gas so I’m going to be adding to that
list I’m also going to uh create a list
for 4% cash back so that you can look at
the different cards that have these
higher cashback uh rewards uh for
different spending categories look at
how you spend money and find cards that
that make sense the other thing uh that
I’ll mention is there are a lot of store
brand cards that are great so if you
shop at Target or Walmart they’re going
to have cards that that get great cash
back Kroger is another example I worked
at Kroger back in the day uh and they
have their own card that gives you 5%
cash back and then all of the
Kroger uh owned uh grocery stores like
Harris Teeter same thing you can get a
separate card for each of the Kroger uh
brand stores and get great cash back so
again it’s going to depend on where you
spend your money uh and if it’s worth
the extra effort to get another car and
carry it of course you know today you
just put them in your your Apple pay or
or do you carry an Android I guess some
people do and you can just use it that
way so I’ll have more data on that and
I’ll add it to this article as well as
others on the site uh I’m actually
working this year to try up my average
cash back reward uh with you know sort
of strategically getting a couple of
extra cards and I’ll let you know how
that goes uh down the road so enough
chitchat what do I actually have what’s
it look like I’ve been saving and
investing this for a number of years I
will add that I also do this with my
business that’s helped these numbers uh
uh quite a bit and in fact I’m going to
add to that article that I just showed
you a section for small business owners
CU I know a lot of you uh you know you
could own your own business you could
just you know you could be doing uh
contract work getting paid to $10.99 you
don’t even have to have an LLC or some
official business name you can just put
your own name in and your Social
Security number uh for the application
and get a business credit card so I will
be adding that so where does all of this
stand well I’m going to show you what I
ended up doing was investing this money
in Robin Hood remember I did the video
on uh Robin Hood’s uh match for an IR
IRA Transfer and I I’d initiated in
initiated it and then changed my mind
because some limitations on
beneficiaries well I didn’t put a stop
to it fast enough and it went through uh
and that’s not this account it’s a
different Robin Hood account but it it
went through it was extremely easy I got
my
3% uh uh uh bonus and I’m leaving it
there it’s invested in the same uh
Schwab tips ETF it was invested in in at
the other broker very easy to do I got
3% but this that you’re looking at this
is my CR card rewards uh balance $$
38,866 190 and actually it should be
higher than that because if longtime
listeners know at one point I had all
this money in m one and then I moved it
to to vanguard’s digital advisory
service just to test out their service
uh then I moved it to let’s see here
betterment just to test out their
service uh and um and now I moved it to
Robin Hood but for like a year I just
assumed zero growth even if I just put
it into savings account it’ be higher in
any event I ended up investing this in
Burkshire hathway a Shar so I can invest
in a shares which now trading at
$615,000
but I could do that because through
Robin Hood I can invest in partial share
so I don’t know if you can see the fine
print I I currently am the proud owner
of
061 1919 shares of birkshire hathway a
shares with a current value of just over
$38,000 so my goal is to use credit card
rewards to get to the point where I own
one share of birkshire Hathaway A
shares uh that could take me a while but
I’m going to email Dave Ramsey when I do
I kind of doubt he’ll respond there you
go that’s sort of my strategy it’s How
to Think Through should you get one card
two cards 10 cards that’s kind of up to
you but it’s an important question it
will dictate I think which credit cards
you get I do think no matter which
strategy you choose the the foundation
has to be a card that pays as high a
rate as possible on everyday purchases
because even if you get other cards that
give you good rates on gas and groceries
and travel there’s still going to be a
lot you put on a card that doesn’t
qualify for those enhanced you know uh
bonuses for different spending
categories and so the foundation is that
card that pays as higher rate as
possible uh on all purchases as I
mentioned uh I’m moving towards the
Robin Hood card I will put a link to
that card below this video it’s it’s not
an affiliate link it’s a referral link
and you say What’s the difference well I
don’t get any money from it but if I can
refer 10 people when I do get my card
it’ll be solid gold so I have that going
for me and you say well Rob that’s great
for you but what about me well if you
can refer 10 people I guess they’ll send
you a solid gold card too so there you
go yeah it seems kind of shallow anyway
if you have any questions about all of
this just leave them in the comments
below be happy to help you out any way I
can and until next time remember the
best thing money can buy is not
a solid gold Robin Hood credit card not
even close it’s Financial Freedom

Several years ago, I stumbled upon a quote from Dave Ramsey about credit card rewards. I’ll never forget those 11 words. :

“No one ever says they got rich off of credit card points.”

As I read his words, I knew immediately that he was wrong. One could build wealth through credit card rewards. In this sense, credit card rewards aren’t special. Saving and investing small amounts of money from any source over time will turn into piles of cash. We just need to allow compounding to work its magic.

It was then that the idea of Rewards Stacking was born. Over the past four years, we’ve saved and invested all our credit card rewards. Our balance now stands at $37,834.55.

While that doesn’t make us rich (yet), it’s an impressive sum, particularly when you consider that it required no sacrifice on our part. It wasn’t about cutting back or working harder—just saving and investing the free money credit card issuers send us every month.

In this video, I’ll share exactly how we did it and, more importantly, how you can do it, too.

Rewards Stacking: https://www.allcards.com/rewards-stacking/
Robinhood Gold Card (Referral Link): https://robinhood.com/creditcard/?referral_code=55b7675f

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ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I’m the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

I’m also the author of Retire Before Mom and Dad–The Simple Numbers Behind a Lifetime of Financial Freedom (https://amzn.to/3by10EE)

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