SUB Math

[Anonymous]

Perhaps this is well-known, but in case it's a new concept for some . . . 

To maximize any SUB, you want to use your WORST cash back/rewards spending categories FIRST.

If I am working on a SUB valued at $600 requiring $3K in spend, then my gross reward is 20%.  My NET reward depends on which spend I use.  If I get 6% back on groceries and use only grocery spend to meet the SUB, then my NET reward is 14%.  If I get 1% back on my car insurance, then only using car insurance spend nets 19%.

Now, net 14% is fine for some or all of the SUB if grocery spend is REQUIRED for you to meet the SUB.  But in most cases it is not. 

[simplynoir]

Some people can't afford to put just non-category spending to meet a SUB though. They have to put any/all charges to make sure they reach the spend or otherwise waste a new account/HP. I agree though if you can afford to spread your spend over like that it's most beneficial to put non-category purchases (insurance, taxes, etc.) before putting others on there.

[Kree]

I don't understand this. why is your net 14% instead of 26%?  I thought SUB were independent of other earnings on a card. So shouldn't they be added?

[Anonymous]

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@Kree wrote:

I don't understand this. why is your net 14% instead of 26%?  I thought SUB were independent of other earnings on a card. So shouldn't they be added?

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Example: I spend

1. $500 on gas & groceries per month where I already earn 5%.  

2.  $500 on  restaurants & bars each month where I already earn 4%.  

3.  And $1000 in miscellaneous spend where I earn 2% 

I get a new card with a SUB valued at $600 if I spend $3K in the next 3 months.

Option 1

I use my SUB card to buy gas, groceries, meals and drinks at $1000 per month.  I use my Citi DC to earn 2% on the miscellaneous spend each month.

At the end of 3 months, I have earned $600 + $60 (2% on $1000 * 3 months) in misc bonus = $660.

Option 2

I use my SUB card on misc spend, and buy gas, groceries, meals and drinks on my 4-5% cards.

At the end of 3 months, I have earned $600 + $60 (4% on $500 * 3 months) + $75 (5% on $500 * 3 months) = $735.

[Anonymous]

To complete the example, had I no SUB card, I would have earned $60 + $60 + $75 or $195 those three months.

735-195 = 540 / 3000 = SUB net 18% bonus in Option 2

660-195 = 465 / 3000 = SUB net 15.5% bonus in Option 1

[Anonymous]

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@Anonymous wrote:

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@Kree wrote:

I don't understand this. why is your net 14% instead of 26%?  I thought SUB were independent of other earnings on a card. So shouldn't they be added?

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Example: I spend

1. $500 on gas & groceries per month where I already earn 5%.  

2.  $500 on  restaurants & bars each month where I already earn 4%.  

3.  And $1000 in miscellaneous spend where I earn 2% 

I get a new card with a SUB valued at $600 if I spend $3K in the next 3 months.

Option 1

I use my SUB card to buy gas, groceries, meals and drinks at $1000 per month.  I use my Citi DC to earn 2% on the miscellaneous spend each month.

At the end of 3 months, I have earned $600 + $60 (2% on $1000 * 3 months) in misc bonus = $660.

Option 2

I use my SUB card on misc spend, and buy gas, groceries, meals and drinks on my 4-5% cards.

At the end of 3 months, I have earned $600 + $60 (4% on $500 * 3 months) + $75 (5% on $500 * 3 months) = $735.

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You are using faulty logic.  To get optimal earnings all spending should be on sign up bonuses.  In your scenario you spent 3000 dollars and got 135 dollars back because you used category spending bonuses.  That isn't good at all.  In your scenario you have 6000 spend in 3 months. Get 2 sign up bonuses that require 3k spend and you will be a head and you won't have to remember what card to use with which spend.   

Say you get two 600 dollar signup bonuses on your spend.  Plus you get at least 60 dollars of value for your spend on your 2 cards you would have at a minimum of $1260.  That beats your plan any way you slice it. I think you are just over thinking this stuff. 

[Anonymous]

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@Anonymous wrote:

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@Anonymous

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You are using faulty logic.  To get optimal earnings all spending should be on sign up bonuses.  In your scenario you spent 3000 dollars and got 135 dollars back because you used category spending bonuses.  That isn't good at all.  In your scenario you have 6000 spend in 3 months. Get 2 sign up bonuses that require 3k spend and you will be a head and you won't have to remember what card to use with which spend.   

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I said in the OP it's OK to use high reward spend on SUBs if it you must do so to meet the SUB.

But most people are going to have some spend left over when trying to meet a SUB or SUBs.  It's not "overthinking" it to suggest that leftover spend needs to be in your high rewards category, not your low rewards spend.

[Anonymous]

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@Anonymous wrote:

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@Kree wrote:

I don't understand this. why is your net 14% instead of 26%?  I thought SUB were independent of other earnings on a card. So shouldn't they be added?

---

Example: I spend

1. $500 on gas & groceries per month where I already earn 5%.  

2.  $500 on  restaurants & bars each month where I already earn 4%.  

3.  And $1000 in miscellaneous spend where I earn 2% 

I get a new card with a SUB valued at $600 if I spend $3K in the next 3 months.

Option 1

I use my SUB card to buy gas, groceries, meals and drinks at $1000 per month.  I use my Citi DC to earn 2% on the miscellaneous spend each month.

At the end of 3 months, I have earned $600 + $60 (2% on $1000 * 3 months) in misc bonus = $660.

Option 2

I use my SUB card on misc spend, and buy gas, groceries, meals and drinks on my 4-5% cards.

At the end of 3 months, I have earned $600 + $60 (4% on $500 * 3 months) + $75 (5% on $500 * 3 months) = $735.

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While your point is correct (and also as you say, should be obvious!) your calculation is a little wrong in that you assume you are not earning ANY spending rewards on the SUB card.    In reality, you would probably be earning at least 1% on the $3K spend, reducing the difference a little

[UpperNwGuy]

But if the card with the 5% category spending is the same card for which you are seeking the signup bonus, then your logic falls apart.

[fittiger]

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@Anonymous wrote:

Perhaps this is well-known, but in case it's a new concept for some . . . 

To maximize any SUB, you want to use your WORST cash back/rewards spending categories FIRST.

If I am working on a SUB valued at $600 requiring $3K in spend, then my gross reward is 20%.  My NET reward depends on which spend I use.  If I get 6% back on groceries and use only grocery spend to meet the SUB, then my NET reward is 14%.  If I get 1% back on my car insurance, then only using car insurance spend nets 19%.

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This makes no sense.  If you put earn your SUB by placing spend on 6% categories rather than 1% categories, you will earn the SUB just the same, but you will earn 6x on reward category spend more than 1x category spend.  

You should always place spend on highest/BEST categories, unless additional spend requirements are needed to obtain the SUB.