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The Frugal Way to Maximize 5% Cash Back


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If you are like me and have 5% cash back cards from Chase, Citi and Discover, you no doubt like the slew of 5% tax-free rebate dough in different categories every three months.  But what happens when your frugal ways don’t spend enough to take full advantage of that quarterly rebate?  Two words: “Gift Cards”.

For example: From April thru the end of June, Chase Freedom pays 5% at these Grocery Stores & Movie Theaters on purchases up to $1,500 total for the quarter.  That’s $75 back in my wallet!  I know from looking at my card statements under “Bonus from 5% categories: Apr – Jun”, that I have spent $900 in those categories.  Because Chase will give me 5% on a total of $1,500 per quarter, I can still get 5% cash back on $600 spent in those categories.  Since I don’t want to waste this opportunity or frivolously blow $600 on an impromptu shopping spree…  Hello, gift cards.

Checking this list, I see that my ArcLight Cinemas qualify.  I will buy a $100 gift card before the end of June.  That leaves me $500.  My big grocery store, Vons (on the list), sells gift cards to a slew of merchants.  If your grocery store sells gift cards to a merchant you use, that is an option.

My grocery also sells Visa or MasterCard gift cards.  I used my Chase Freedom 5% card to buy one and load it up with the maximum $500.  There is a $5.95 fee, but then I have a $500 gift card that I can use to pay for anything, ANYWHERE in the U.S. where Visa or MasterCard are accepted.  Because there is a $5.95 fee on a $500 gift card, paying that fee brings the effective cash back rate on that $500 gift card down to just under 4% (3.81%).  Still pretty sweet, Chase Freedom!

Citi’s 5% cash back categories limit you to $6,000 per calendar year, unlike Chase and Discover’s $1,500/quarter.  That means you could use up your 5% cash back in one purchase!  Until the end of June, Citi’s categories include Home Depot.  Heck, if you are a contractor or are planning some major remodeling someday, you could walk into Home Depot with your 5% cash back Citi card, and buy $6,000 worth of Home Depot gift cards.  That would max you for the year and get you $300 cash back from Citi.  When it’s time to use those gift cards, check out this post about how you can get another 10% off at Home Depot.

Discover’s 5% cash back categories until the end of June are for Restaurants and Movies for purchases up to $1,500.  Discover told me that gift cards qualify for them as well, as long as you buy the gift card stores.  From July through September, Discover’s 5% categories include Gas Stations.

If you don’t have these cards, you still have time to apply for Chase, Citi, and Discover 5% cash back cards and use them before the end of June.  These cards never have an annual fee.  Right now, both Chase and Citi will give you $100 bonus if you spend $500 in the first three months of account opening.  Jeepers how will you be able to spend $500 so quickly?  Hmmm…

Once you have the cards, you must take 30 seconds to “sign up” for the 5% cash back rewards every quarter on the card’s website.  Then you are good to go spend on the card(s).

Please, remember to pay your credit card balances off in full.  Otherwise, you will most likely pay more in interest than the 5% cash back, tax-free rebate.

Click on Chip’s Favorite Credit Card Offers for up-to-date deals, terms, and conditions on these cards and more.  Email me if you have any questions about which card might be right for your situation.

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  1. Jesse Bean
    Jesse Bean06-26-2012

    Chip, I have been trying all your suggestions. They worked out fantastic! I made an easy 600 bucks just spending money I was already going to spend. Jesse

  2. Chip
    Chip06-26-2012

    Excellent. I like it when a plan comes together!

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