Rewards Stacking: How I Build Wealth with Credit Card Rewards

Amazon Prime card only pays 5% on Amazon purchases if you maintain your prime membership, so that’s what, a $120 annual fee? Otherwise it is 3%.

Sams card pays 5% reward on gas, Costco, 4%.

I own a ton of real estate and sometimes I pay all utilities. It’s so much money back it’s crazy. I have a spread sheet that tracks what to use and when. Probably average around 3-4% cash back. At the lowest it’s 2% and the highest is around 5%. I cashed them all out in 2020 after they banked up for a while and it was around $46,000. Now I do it monthly to take the money upfront and save/invest now due to inflation.

Insta put them all on autopay full like all my mortgages.

Be careful about those category-specific cards. The second it causes you to buy something you otherwise wouldn't, the benefit is wiped out. Find cards that give you enhanced rewards for things you are already buying. Groceries and gas are your friend. Dining and travel, not so much. The Amex Blue Cash preferred is a no-brainer at 6% on groceries.

Love it!

Dave Ramsey doesn't like math because it lets people call him out on his mistakes. In math, the concepts of "right" and "wrong" actually exist.

Figured this out after college and started rolling all my credit card / bank bonuses and cash back to a dividend fund to generate more income. Built it up to the point of covering 3 months of expenses. This year my wife and I used our bank bonuses to pay for our wedding.

How about "No one got rich tossing $20 bills into the trash"? My 2% cash back card funds my daughter's Roth account. I started her Roth when she started earning income babysitting, at 12. Just over 25 now, and the rewards alone have resulted in $125K in the Roth. Nice that at 10% average, investments will double every 7 years. 3 doubles in 21 years. So, this money, with no other deposits, will be near $1M by the time she's 46. Is that rich? It's more than 2/3 of Americans will have at retirement.
There's no effort for me to also carry a card that gives 4% back on gas purchases. 2 cards is enough for me at this point in my life, 61, retired, and don't travel much. When my daughter had a year of college that was a plane trip away, I got an airline affinity card, and had my wife do the same. The bonus points were enough to cover all the flights we took that year. Cancelled before the 1 yr anniversary and annual fee. How much effort to sign up for the 2 cards? Minutes. And we saved a few thousand dollars. The David would have you look at $100 bills on the ground and just walk by.
(There's carrying a card or two, and there's also playing the game, getting a huge return on your effort churning cards. But there's also everything in between. Easy to say "can't be bothered." For me, easier to know I've literally helped my daughter get $1M, from all those 2 cent rewards.)

Great Information!!😅

Hey Rob - When I was 16 (I'm now 67) my father, a banker, cosigned for a credit card for me with a stipulation. That being, if I didn't pay it off every single month and even had to pay one cent in interest he was going to cancel it. So with the fear of Dad in me I followed his direction. But he also told me never to have more than one credit card, however, make sure I have a "good one". Well back then credit cards did not give cash back because if that was in place I'm sure he would follow your advice. That being said I still only have one credit card (Bank of America Cash Rewards - chosen category with 3% back are online purchases). After watching this I need to rethink what I want to do based on your recommendations. So my question to you is at any given time, how many credit cards do you have?

Please talk about airline miles and credit cards.

@rob_berger, what are your thoughts on using the cash rewards in an IRA/tax deferred account to purchase TIPS (obviously as part of a balanced portfolio). I've got a small IRA which I'm unable to contribute to because of having an employer sponso401k. For the past few years I've been using my cash rewards to buy dividend stocks but have been thinking about other options. Cash rewards are not taxable.... yet. Thoughts?

I'm definitely a 1 card person - just don't want to spend the mindshare on spending categories. But even that one card with 2% back adds up!

I want to get the Robinhood Gold card too, but saw that they are only giving out five thousand solid gold cards. I can't understand whether they are giving out cards beyond the five thousand that aren't solid gold to other Robinhood Gold members, or if only five thousand of this kind of card offering 3% cash back on all purchases will be given out at all. I hope that they will continue to give out more beyond that five thousand that offer the same benefits and just aren't made of actual gold.

Kinda wondered why not also mentioning churning credit card sign-up bonuses in addition to getting rewards. Yes spending $1k/month at 2% will get you $240/yr in free money but many credit cards have sign-up bonuses in that same range for minimal requirements. Many of these sign-up bonuses can be done every other years in addition to getting rewards for using them. These additional strategies can get you relatively easily $3-5k rewards each year for reasonable spending levels (say $20-30k/yr).

Laugh. I'm maxing my 401k this year through Membership Rewards points!

My main 3 cards: Discover 5% for whatever category active, Amex for 3% categories, Fidelity 2% for everything else. I’m building the Discover/Amex rewards as a rainy day fund or maybe to help with a vacation.

I'm sticking with our Costco Visa card at no annual cost and great cash back rewards. We also have Marriott and Delta cards, but they may not be worth it unless you travel a lot.

Dave Ramsey has great common sense advice for getting out of debt. However, his advice for investing is irresponsible and could really hurt people by telling them to hold only stocks in retirement. His advice on credit cards is great for those who struggle with discipline and debt, but makes no sense for those of us who use credit cards to our advantage by paying no interest and earning rewards!

I use my 2% cash back Fidelity card on everything and just auto deposit it into my Roth IRA. Not much but its free money.

100% onboard with you.....I have been doing this for many years.

What about cards like discover that will let you convert that money into a gift card and save 2,5, 10% on store cards? I go to home Depot and Lowe's a lot. I can just buy gift cards with my rewards money and save another 5% right there.

Great video. However, I think you and Dave Ramsey are BOTH correct. One can definitely take advantage of the cash back from credit cards and spin them into a positive thing, IF (and only IF) one is relentlessly DISCIPLINED in their approach and is unwavering in their process. That is where Dave is correct. The MAJORITY are NOT disciplined and credit cards typically wreak havoc on most people because of this lack of discipline. Dave is hardcore in his approach because he is playing to the largest part of the bell curve of people who require extreme guardrails to maintain this discipline. Those that ARE relentless can take advantage as you say. Again you are BOTH correct in my opinion. I have used credit cards my entire life and have paid them off monthly, never incurring interest fees, yet reaping the benefit of rewards along the way. I choose to accumulate my cash back and every December, dump my annual cash back accumulation directly to my CC bill since that bill is usually higher due to Christmas purchases. In turn, the money I saved by not coming out of pocket for that increase, I turn around and invest. Same approach as you suggest, but with less complexity.

Nice, Rob, but I gotta stick with Dave because he'll let me withdraw 8% yearly from my retirement funds and I can't ever go broke 😂😂😂

One thing to be mindful of is that if you get new credit cards, it can temporarily lower your credit rating until they age. So maybe wait to get 10 store cards to get everything at 5% until after getting that mortgage or car loan. 😉

You aren’t going to outsmart a multinational bank. Not a chance. Credit card debt is ridiculously stupid and expensive. Most people don’t have the discipline to pay it off every month. When you don’t, those banks are making far more off of you than you are off of them. And that’s before they sell your information to hundreds of other companies.

Totally agree with you Rob. Have specific cards for specific areas giving me the highest return (ie food 5% card). On the 1st of month go into each CC on line and prepay all in full for the month. Now also looking at the Robin Gold card.

I use 3 primary no fee CCs, usage is based on cash back points, 5X gas, 3X eating out and grocery, 3X utilities, and 2X on everything else. Last year, more than 2,500 cash back. But, I didn’t invest it, I spent it! Overall, I still have over 20nCCs in 50 years. Never close them because it would ding my perfect credit score. Just need to remember to charge at least 1 small item per card per year so they don’t cancel you.

That sounds like a lot of work for small benefits over a long period of time. I’d rather spend my time finding ways to hone my skills and make more money in my career. The number one wealth builder. Of course he is retired and has the time to do these things as a hobby.

Some very good information here, thanks.. I do it slightly different and just use rewards to pay off basic necessities and sometimes larger purchases, which is nice when you make a big purchase for "free".
I wasn't aware of the options like 6% CC's for groceries, etc, but when I did the math (math nerd here too), it was only coming to around $100 or so more a year from my current rewards card (when you add in the $95 annual fee for AmEx, you essentially get nothing). For those of us that greatly watch spending, getting 2% or 5% doesn't make too much of a difference on specific categories for the year. So yeah, for extreme penny pinchers, it's good, but for me carrying that extra card or cards just might seem like a hassle bulking up my wallet.

Rob, can you clarify why you’re saying Fidelity costs a whole lot to manage your investments? I’ve always understood them as a low cost provider

Well there's lots of study that says you over spend the body 18% when you use a credit card, so few times 18 percent by what you banged out on the credit card, you spent more than you made

0:33 "...we'll use math..."

"Oh, no! Here come these goobers with calculators in their mommas' basements again!!" ( oДo) —Dave Ramsey

I do love the convince of credit cards and rewards. Though I have to admit if we used cash only we would probably spend less at the stores on unnecessary things. My wife treats the free gift cards (from credit cards rewards points) as free money and can easily spend $1,000 on "stuff".