It's no surprise that US shoppers spend a lot of money. According to the Bureau of Labor Statistics, the average consumer spends $25,985 yearly on what we consider "credit card eligible" expenses. That's an average of $2,165 monthly on purchases like groceries, dining out, entertainment, gas, car expenses and more.
In this post, I break down each expense and explain how easy it really is to earn between 2% and 5% back on your purchases. Those numbers sound small, but over the course of the year they can add up to more than $600 in rewards on average. And if you feel as if you spend more than what I have listed below (this breakdown doesn't include travel as it wasn't listed on the BLS expenditure report) you're likely to earn even more.
Tip: If you'd like to save the hassle of crunching the numbers, Birch will do it for you. It's free and takes less than 5 minutes to sign up.
The spending in the chart above calculates yearly expenses and only assumes purchases made are credit card eligible - meaning that you can use your credit card versus having to use a debit card, cash or a check. Darn you, rent!
Ideal Wallet Breakdown
Without looking at specific merchants, since there are thousands that offer reward multipliers as well, the three cards I would have in my wallet are:
- Chase Sapphire Preferred
- American Express Blue Cash Preferred
- Discover It Card (rotating 5% categories)
Let's crunch some numbers
|Category||Best Card||Earn Rate||Yearly Spend||Potential Rewards|
|Amex Blue Cash Preferred Card||6% on groceries up to $6000 per year, maxing out at $360||$4,015||$241|
|Chase Sapphire Preferred or Discover It||2x points on dining or 5% cash back rotating||$3,008||$126|
|Chase Sapphire Preferred or Discover It||Either 1x points or 5% rotating cash back on certain stores||$1,846||$39|
|Chase Sapphire Preferred||1x points on everything (auto)||$3,997||$84|
|Chase Sapphire Preferred or Discover It||2x points on travel (gas included) or 5% cash back rotating||$2,090||$88|
|Chase Sapphire Preferred||1x points on everything (healthcare)||$4,342||$92|
|Chase Sapphire Preferred||1x points on everything (entertainment)||$2,842||$60|
|Chase Sapphire Preferred||2x points on everything (education)||$1,315||$28|
|Chase Sapphire Preferred||1x points on everything else||$2,530||$53|
Whoa! $811 worth of rewards! It sounds great but we're missing one key calculation. Let's take out the annual fees
- $95 for the Chase Sapphire Card (waived year 1)
- $95 for the Amex Blue Cash Preferred Card
The Discover It card is free of charge.
So after our annual fees, we net $621 in rewards. That's basically 2 roundtrip flights at $200 each + 2 nights in a hotel at $100/night free on your next vacation, just by spending what you'd normally spend and optimizing your rewards.
Remember, if you travel a lot the rewards can add up even quicker. The American Express Platinum Card recently bumped their bonus on flights to 5x points/$1 spent and cards like the Citi Thankyou Prestige offers 3x points on travel purchases.
And that's about all there is to it. Sound confusing? It's not. Sign up for Birch and let us take the complexity out of credit card rewards.