How I earned more than $2,500 using credit cards in 2020
I racked up $1,732 in cash back from my 2020 credit card spending (a 2.8% return). If you include the $500 introductory bonus I earned on one of those cards, the total increased to $2,232 (a 3.6% return). Using a credit card that offers purchase protection, I also received $299 to repair a broken Apple Watch. Throw that in, and my total was $2,531 (a 4.1% return).
All of this proves why credit cards can be so valuable. I didnât pay any interest in 2020, which is key to any good credit card rewards strategy, because the average credit card interest currently sits above 16%. I also only paid one annual fee ($95), which I factored into my calculations.
That was for theÂ Blue Cash PreferredÂ® Card from American Express, and it was well worth the fee. I used the card mostly for groceries because it offers 6% cash back on up to $6,000 of annual spending at U.S. supermarkets, then 1% after that. I maxed out that limit, which was worth $360 of cash back all by itself.
I also benefited from the card’s 6% cash back on select streaming subscriptions and 3% at U.S. gas stations. Â And I nabbed another $43 in cash back viaÂ Amex Offers. Even after accounting for the annual fee, I earned a total of 5.6% cash back on this card in 2020.
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The other cards I used
I also earned 5.6% cash back on my spending on theÂ Wells Fargo Propel American ExpressÂ® card. That surprised me, because the COVID-19 pandemic cut substantially into my travel and dining spending (this card gives 3% cash back on both categories). I did take one big trip in early 2020 though.
Later in the year, I took advantage of a few 10% cash back grocery promotions through the Wells Fargo Earn More Mall. The biggest surprise I uncovered while preparing this year-end recap was how much the card-linked offer promotions added up on my Propel and Blue Cash Preferred cards.
MyÂ Chase Freedom Flexâ Â card yielded a 4.4% total return. I started the year with the Chase Freedom and switched to the Freedom Flex once it debuted in September. I maxed out two of the four quarterly 5% cash back promotions (cardholders need to activate these and theyâre capped at $1,500 in spending, then you earn 1% after that). I came close in another quarter and hit roughly half of the limit in the other. This is also the card I have to thank for my $299 purchase protection claim.
For categories that I couldnât maximize on one of these cards, I started the year putting everything else on theÂ Capital One Quicksilver Cash Rewards Credit CardÂ (1.5% back on all purchases). In February, I signed up for theÂ Capital One Venture Rewards Credit Card, and that became my primary âeverything elseâ card because it gives 2 miles per dollar on all purchases.
While this is technically a travel card, Capital One expanded the card’s redemption options soon after the pandemic hit to include statement credits (akin to 2% cash back) on eligible takeout, delivery and streaming services.Â The promotion has been extended through April 30, 2021, and it has worked out very well for me.
got at least some relief in 2020.
I think Iâm an especially good candidate because I use this card a lot. If Iâm turned down, Iâll have to consider switching to a no annual fee 2% cash back card like theÂ PayPal Cash Back MastercardÂ theÂ Fidelity Rewards Visa Signature card or the CitiÂ® Double Cash Card, which gives you 1% when you make a purchase and 1% when you pay it off.
My top card suggestions for 2021
Someone who wants even more simplicity might opt for theÂ Alliant Visa Signature Card. It gives 2.5% cash back on all purchases, although thereâs a $99 annual fee (waived the first year). The 2.5% rate is capped at $10,000 in monthly spending. Factoring in the annual fee, you need to spend $20,000 or more annually to come out ahead with the Alliant Visa Signature, compared to a 2% cash back card.
In your first year as a cardholder, the Discover itÂ® Miles card is also particularly lucrative. The card offers 1.5 miles on all purchases, but Discover will automatically match any earned cash back in your first year as a cardholder, effectively earning you 3 miles per dollar. After the first year, the rewards rate drops to 1.5 miles per dollar.
If you have at least $100,000 in eligible savings or investments, Bank of America has a couple compelling options through its Preferred Rewards program. At that threshold, cardholders earn a 75% rewards bonus. That means the Bank of AmericaÂ® Cash Rewards credit card would offer 5.25% cash back on a monthly category of your choosing, 3.5% on grocery and wholesale club purchases and 1.75% on everything else (the top two categories are capped at $2,500 in combined quarterly spending).
Meanwhile, the Bank of AmericaÂ® Premium RewardsÂ® credit cardÂ would give 3.5% cash back on travel and dining and 2.625% on everything else if you have that six-figure savings or investments balance.
Iâm not ready to sign up for a new card just yet, but I expect 2021 will be an interesting year. If the COVID-19 vaccine rollout progresses well and the economy rebounds, there should be a lot of compelling credit card offers on the market.
Have a question about credit cards? E-mail me atÂ [email protected]Â and Iâd be happy to help.