The first two quarters of 2020 are behind us. Good riddance!
It’s been about 9 months since I last did an audit of the BoA’s credit card strategy and I was curious to see how it was going so I ran the numbers on the past 6 month of spending.
Here are the highlights:
- Cash Rewards
- Across my five (I’m a hoarder) Cash Rewards cards, I’m averaging 5.11% cash back (weighting appropriately by dollars spent). This is primarily “online” purchases as well as in-person purchases (e.g. Costco, Walmart, CVS) funneled through online channels (Costco gift cards or Raise.com for Walmart/CVS). If I didn’t do this funneling, I’d lose 1.75% at Costco and Walmart, earning only 3.5% in the process.
- Premium Rewards
- I’m averaging 2.64% cash back, which is not surprising given that the minimum rewards on that card is 2.625% and all 3.5% restaurant and travel spending should optimally be reallocated to the “Cash Rewards” cards.
- Combining spend across all cards, I achieved an average of 4.35% cash back for the first 6 months of 2020.
- Given that our low-rewards medical spend is front-loaded in the calendar year (before we hit our deductible), it’d be interesting to recompute this for the second half of the year as well as the total year. I’d suspect that this number would be in excess of 4.5% for the second half and around 4.5% for the entire year.
- YTD, we’ve earned just over $1k in tax free money. Extrapolating, it’s $2k/year ($167/month). Not life changing money, but I’ll take it.
- Relative to a simple 2% card strategy, it’s just over twice as much.
- Given the “cash rewards” card, the premium rewards card is pretty impotent.
- YTD spend is about $7.5k on the card (mostly dr appointments, insurance, utilities, etc).
- If I extrapolate to $15k of spending on the card for the year, that provides an extra $93.75 (=$15k*(2.625%-2%)) in CC rewards relative to a simple 2% Fidelity Visa / Citicards Cash Back. Not great, but it’s greater than $0 even after dealing with the AA egift card hassle, so I’ll keep it around for now.
Less important observations:
- I put property taxes on the Premium Rewards card as well, but the swipe fee equals the rewards so I removed it from the analysis because I use CC here simply as a float play.
- Given the 5 “cash rewards” cards across Mrs FP and I, we are WELL (~50%) under the 12.5k/quarter cap (=5 cards*2.5k/card) on the 5.25% bonus. It feels good to not be constrained by that in the event that something big comes up.
- We spend a crapton at Costco.
- Not all of it is food, of course. Car tires, clothing, gas, eyeglasses. It dwarfs all other spending at all other retailers by an order of magnitude.
- The analysis does not consider any additional savings:
- 2% executive bonus at Costco (since this is independent of my CC strategy), which amounted to $350 for us last year.
- 3.5%-4.5% additional cash back at Raise.com for Walmart/CVS gift cards purchased there (since this is independent of my CC strategy). At the end of the day, we don’t spend much at retailers outside of Costco.
- What I show in the pivot table is the aggregation of purchases for the first 6 months. When something doesn’t add up to 5.25% (like Costco Gas around Row 10), this means I used the wrong card a couple of times (e.g. a non-gas “cash rewards” card at Costco gas, earning 3.5% in the process). Same thing for a couple Walmart rows. Shame on me for not optimizing appropriately.
- Mrs FP kind of hates me for subjecting her to this, but it’s a pretty simple system and she’s getting used to it now. “Tiger’s” card is restaurants, etc. When we’re running low on Costco Cash, I’ll put in another $2k order to last us another 6-8 weeks.
Recommended reading to understand the above madness:
BoA’s cash rewards cards are powerful. I’m glad we have 5 of them and have discovered how to utilize the “online” category for in-store purchases at Costco/Walmart/etc.
BoA’s premium rewards card is substantially less powerful (unless your a HUGE spender, in which case the card is the best on the planet).
Is it worth the hassle? It depends on how much you like tax-free free money and whether you have $100k of investments laying around to qualify for “platinum honors” status. I like tax-free free money, especially when it’s recurring and doesn’t take much time. Setting up the system is admittedly a pain in the butt, but once it’s up and running it’s pretty much self sustaining with near zero maintenance costs.
I’ve contemplated supplementing the above by entering the credit card bonus chasing game, but nothing I see on this Dr of Credit post is seems particularly compelling at the moment. Compared to a relatively (ha!) straight forward 5.25% cash back strategy, signing up for credit cards is somewhat of a pain in the butt, especially when you don’t have an existing relationship with a particular bank.
Is there a card with a big signup bonus out there that is worth the hassle? I have a $4k property tax bill coming due in 3 weeks….. I don’t think anything <= $500 is worth the time, but maybe I’m getting too old and lazy.