The U.S. Bureau of Labor Statistics released their Consumer Expenditures report for 2022 in September, 2023. The report shed light on where Americans are spending their hard-earned money.
Some spending patterns that caught my eye were the annual increases on food (+12.7%), gasoline, other fuels, and motor oil (+45.3%), and lodging on out-of-town trips (+38.6%). Some reasons for these increases include inflation and the return to pre-pandemic spending habits. It will be interesting to see what the 2023 report will show.
In this blog post, I break down how much the average American can earn in credit card rewards and explain my process for finding the right credit card for our clients.
To set the stage, I will refer to the main spending categories most American spend money in and how much was spent in 20221.
Groceries: $5,703
Restaurants: $3,639
Gas: $3,120
Travel: $837
I will cover three scenarios:
Scenario One: Using cash, debit cards, or credit cards that do not earn any points, miles, or cash back.
Scenario Two: Using a flat rate 2x points, miles, or cash back credit card.
Scenario Three: Using a different credit card (or portfolio of credit cards) that optimize each category’s earning potential.
How much will the average American get back in rewards in each scenario based on their average spending in 2022 on groceries, restaurants, gas, and travel?
Scenario 1: Using cash, debit cards, or credit cards that do not earn any points, miles, or cash back.
This user would net $0 in total credit card rewards. Pretty straight forward.
Scenario 2: Using a flat rate 2x points, miles, or cash back credit card.
This user would earn $114.06 from groceries, $72.78 from restaurants, $62.40 from gas, $16.74 from travel. They would earn a grand total of $266 in credit card rewards.
Scenario 3: Using a different credit card (or portfolio of credit cards) that optimize each category’s earning potential.
The user would earn $285.15 ($5703 x 5%) from groceries, $181.95 ($3639 x 5%) on restaurants, $156 ($3120 x 5%) on gas and etc., and $41.85 ($837 x 5%) for a grand total of $664.95.
Conclusions:
What we see here is that just by utilizing a 2x flat rate credit card, the average American can earn around $266 on these spending categories by switching to this credit card.
If this person wanted to go above and beyond to find credit cards to match their spending categories to fully capitalize on their earning potential, the results are even better.
This user can earn around $664.95 on these spending categories by switching to other credit cards.
This demonstrates the potential earnings the average American can earn from credit card points, miles, or cash back when spending on things you pay for anyway. Imagine what you could do with an extra couple hundred dollars back in your pocket. It could be used for building up your emergency fund, investing, or saving for a home. The possible uses are unlimited!
My Process For Maximizing Rewards For Clients:
What does this process look like for clients that I work with on maximizing their credit card rewards??
I start by breaking down your spending categories into granular numbers.
Then I take that information and plug it into the extensive calculator I created on Excel.
My customized spreadsheet compares over 130 personal credit cards and finds the card that will maximize your rewards based off your spending habits.
I can help both individuals and business owners replicate my unique process.
For business owners, I analyze spending for over 90 business credit cards.
Important Reminders: Always make sure to pay the full balance each month to ensure you do not pay any interest on unpaid balances. Keep in mind that using a credit card is borrowing money from the bank or issuer. They expect you to pay the balance back. If you do not pay them back, there are a slew of consequences that follow such as interest payments, lower credit scores, and higher interest rates. If you pay interest, you lose out on all the benefits of earning credit card rewards. Also, not everyone is guaranteed to be approved for the new card you desire (this is up to each lender and card issuer).
It's important to have a knowledgeable professional guide you in this process.
To apply my unique process to your own finances, CLICK HERE to schedule a credit card consultation with me.
1 U.S. Bureau of Labor Statistics. 2022. https://www.bls.gov/news.release/cesan.nr0.htm