How to combine cash back reward credit cards to maximize your cash rebates?

Combine Cash Back Reward Credit Cards to earn maximum rebates

Which cash back credit cards should I be looking at? Which is better, the Citi Dividend Platinum Select Card or the Blue Cash from American Express? These questions come from those who are not sure which cash rebate card is best. For those who spend a lot on their credit cards, the best way to earn cash rebates is actually to combine cash back credit cards. But how? And which credit cards to combine?

Before we get into that, you have to understand how credit card companies segment the cash rebate market based on what you purchase.

"Everyday Purchase" - These are purchases made at standalone supermarkets, gasoline stations and drugstores. Many cash rebate credit cards pay 5% on these types of purchases.

"Other Purchases" - These refer to non-everyday-purchases. Almost all credit cards pay 1% rebates - except for some, which we will explore later.

Let us now look at the type of credit cards available.

Basic no-frills cash back credit card

These credit cards pay the standard 1% cash rebates on all purchases. To maximize your cash rebates, you do not really want to be using these cards because there are other types of cash rebate credit cards that pay better rebates.

5% "Everyday Purchase" cash back credit card

For those looking for a cash rebate cards, I suggest you get one of these cards. "Everyday Purchase" cash back credit cards pay you 5% rebates if you make purchases from standalone supermarkets, gas stations and drugstores. They pay you 1% rebates on "other purchases". For a long while, this category was dominated by only one card, the Citi Dividend Platinum Select Card. Earlier this year in July, Chase introduced the Chase Cash Plus Rewards Card with basically identical reward formula. Either of these cards are a must-have for those looking for a cash rebate card.

Tiered rebate credit cards

These used to be quite a few tiered rebate credit cards in the market, but there are only a couple of these type of cards today as "everyday purchase" cash back credit cards have become more popular. The best example is the Blue Cash from American Express. Their cash rebate formula is a typical example of how these cards work. For spending up to a certain amount ($6,500 in the Blue Cash's case), you earn a certain percentage in rebates (using blue cash as an example, 1% for everyday purchase and 0.5% for other purchase). After spending beyond the threshold, you earn (again using the blue cash as an example) 5% rebates on everyday purchase and 1.5% on other purchases.

Combine a tiered rebate card with an "everyday purchase" cash back card to earn even more rebates

The most common strategy for most people with cash back credit cards is either to have one or two "5% everyday purchase" cash back credit cards, or just getting a tiered rebate credit card. This is fine and you are probably better off with these cards than a typical reward credit card.

But why not combine both types of cards are earn even better rebates?

The rationale for combining one "5% everyday purchase" cash back credit card and one "tiered rebate" credit card is that it allows to earn 5% rebates on everyday purchase items and also earn 1.5% (more than the standard 1%) rebates on "other purchases". This is how to use these cards together, Charge all "everyday purchase" items to the "everyday purchase" cash back credit card, and charge all "other purchases" to the tiered rebate credit card. You will earn less than 1% initially on the tiered rebate credit card until you spend beyond the threshold. But once you cross the threshold, you earn 1.5% rebates. The reason this strategy makes sense is because only tiered rebate credit cards pay you 1.5% (more than 1%) on "other purchases". We suggest combining the Citi Dividend Platinum Select Card, or the Chase Cash Plus Rewards together with the Blue Cash from American Express.

If you really want to take this a step further, then consider other 5% cash back credit cards that pay 5% rebates on purchases other than "everyday purchases". More example, the Discover Platinum Card pays a full 5% rebates when you make purchases with their partner merchants (also known as "Get More Merchants"). They also have a restaurant card that pays up to 5% rebates when you use your card at restaurants.

A couple of ending thoughts

Bear in mind that this strategy only works if you spend a lot on your credit card (would say at least above $30,000). It also works if you spend a lot on "everyday purchases". If you do not spend that much on your credit card, then getting a "5% everyday purchase" credit card will do just fine. You also have to be the type of person that would be diligent in using different cards for different occasions.