Cash Back Projections and Analysis

VanderSnoot · ‎06-15-2019

I projected cash back after Alliant's introductory 3% cash back promo ends (for me, in 2020). Following a maximizing strategy, I would earn about $825 (net of AF) on $30k spend, or 2.75%. With only four cards, I can capture 99% of the earnings: $818 or 2.73%.

One big caveat: I excluded category cards because I don't know what categories will be selected in 2020. The category cards are playing a significant role in 2019, largely because I earned 5% on groceries for 6 months with no AF. Using numbers from Q2 and Q3 of 2019, but applying Alliant's regular 2.5% rate, shows that I would earn 2.88% and 2.74%, respectively, net of AF. The Q3 earnings are within the range of what I can achieve with a simple, non-category card approach, but the Q2 earnings are substantially higher. [I haven't re-calculated Q1, but my recollection is that it was even higher - perhaps 3.53% with Alliant's 3% rate, which would adjust down to around 3.1% (or about $230 for the quarter, ) applying Alliant's 2.5% rate. The blended annualized rate would be around 3.9% or $870, which is $45 more than I would earn without category cards. However, these calculations exclude Q4 earnings, which is shaping up to be a rather ho-hum quarter lacking any big earning categories.]

Another learning: putting 100% spend on the 2.5% Alliant card earns $655 or 2.18%. In other words, I pay myself about $170/yr to juggle multiple cards each quarter.

My take-away right now is that simpler is better and @pinkandgrey is on to something. It's just easier to have a designated groceries card that you use 12 months of the year rather than waiting for an announcement and then slotting cards in and out of rotation every three months in order to earn an extra $20-50 over 12 months. Long-term I'll probably go with a modified four card approach, with some concessions to keep TLs open, especially if I can grow certain cards north of $40k (to maintain total CL).

Feedback?

Anonymous · ‎06-15-2019

One thing I found helpful, is the store brand gift card. I have been using delta, subway, uber, playstore cards for the extra 5% on top of their own reward program (10%, 4%, 1%, 0% respectively). Raise also has almost constant 5%+ sales on everything.

I will have to look back at the end of the year. I am hoping for 5%+ rate, althought I have a big chulk of spending in rent (10k/yr), which is at 1.5% due to credit card fees with each payment.

edit: after some thoughts, here is my rough estimate for 2019:

Travel: 7k @15%=1050 /// propel, csr plus skypesos
Grocery+dining+amazon+gas: 10k@5%=500 ///gold, propel, csr plus whatever rotating category comes up
Rent: 10k@1.5%=150 ///cfu with csr minus fee
Business: 20k@3%=600 ///ink business plus first year of DFS It business
SUB: Gold+delta Gold+mileup+propel=2150

Rate w sub=9.4%

Rate w/o sub=4.8%

Anonymous · ‎06-15-2019

That read like a financial statement disclosure, and you lost me a bit in the middle there.

The one one thing that is completely clear is that it takes some work to really maximize your return, especially when you go the cash back route and have lost any incentive to stay within one rewards system. It’s really up to you if it’s worth the effort. Personally, I’d forget to check quarterly and end up with several months at 1%, wrecking the strategy entirely.

That 2.5% baseline is pretty solid. I’d probably add a couple of non-rotating cards to it and call it a day.

kdm31091 · ‎06-15-2019

You've discovered what a lot of people have, which is that there are diminshing returns with more and more cards. It sounds fun to add a card for this category and that category, but the reality is unless your spend is large we are talking a couple dollars extra a month or so, definitely nothing life changing. For that reason I find a streamlined stategy makes much more sense, especially since most programs have redemption thresholds, which takes forever to reach if you're using a dozen cards for various areas of spend.

To me the couple dollars a month aren't worth over analyzing it. You can easily save that same amount of more by cutting out one Starbucks run or something. The point is not to overthink it for such a small amount of money.

longtimelurker · ‎06-15-2019

@kdm31091 wrote:
You've discovered what a lot of people have, which is that there are diminshing returns with more and more cards. It sounds fun to add a card for this category and that category, but the reality is unless your spend is large we are talking a couple dollars extra a month or so, definitely nothing life changing. For that reason I find a streamlined stategy makes much more sense, especially since most programs have redemption thresholds, which takes forever to reach if you're using a dozen cards for various areas of spend.

To me the couple dollars a month aren't worth over analyzing it. You can easily save that same amount of more by cutting out one Starbucks run or something. The point is not to overthink it for such a small amount of money.

Right, the exception being if you get enjoyment out of doing this, in which case money saved is less of an objective. (Although you have to claim that that is the point, to friends and family, otherwise you look like you are wasting time on a stupid hobby!) So I assume that those that spend lots of time with spreadsheets, and check accounts daily etc, either are having fun, or discount the value of time spent to practically zero.

VanderSnoot · ‎06-15-2019

For anyone interested, the four cards are:

Ducks Unlimited/FNBO
Barclays Uber
Amex BCP
Alliant Cashback

YMMV. It also makes good sense to keep a fixed low APR card for emergencies; so a five card wallet in total.

VanderSnoot · ‎06-15-2019

Before applying for new cards in May, I ran the numbers and got so excited about an extra $20 here and there, but the complexity is losing its luster. We'll see how the actual numbers line up against projections for the rest of this year (it's a bit muddled because of SUBs and some anticipated work changes).

Additional thoughts:

- I haven't thought through which of my current cards to keep. My first thought is to close/allow to be closed all except the cards/issuers with the highest CLs (for me, Chase and Navy). This would include closing my oldest card (which is 10 years older than my 2d oldest card).

- I'm a wee embarrassed about the new cards. They seemed like a good idea at the time, and I reasoned that even if I didn't want the cards longterm, they're all with large issuers and I could PC them down the road. But none of them have longterm utility for me, including PC options, and I look like a churner. Still, I added $120k in TLs, so that's a win (I think).

- I think my mistake was looking at the cards I had in my wallet and asking how can I do better, instead of asking what the optimal lineup is and how to shift to those cards.

- However, I picked up $750 in SUBs, which almost equals my annual cash back. Churning has it's pluses.

- The two cards I picked up in January (before coming to myFICO) are both winners. I've seen the myFICO effect mentioned on this board, and I guess I can confirm that it's real.

- I am even more firmly in the garden.

Kforce · ‎06-15-2019

I also like simplicity, 4 cards :

-------------------------------------------------------------------------------------------------------------------------

Bank of the West Cashback -- (3% Grocery, Gas, Fast-Food, Restaurant)

FNBO 2% Caskback Visa -- (General and Costco)

US-Bank Cash+ , -- (5% Gym, Utilities, Internet, Streaming Services)

Travel Elite, (3% Air, Hotel, Car Rental, etc) & ($100 credit - bags, food, drinks, wi-fi)

I average real close to 3% and have tracked it for 3 years.

Anonymous · ‎06-15-2019

I dislike dealing with cards with rotating categories. The cards you have are pretty ideal for high coverage with high simplicity. At that point I would just add cards where I specifically like to shop a lot like an Amazon Card or a Cash+ to capture any outlier categories potentially capturing $400 max in cash back.