Optimizing Your Spend
- “What card should I use at restaurants… or on gas … or on groceries?”
- “Is cash back better or credit card points?”
These are questions I hear often from friends and family, and it’s a good one. Getting in the habit of responsibly putting your spend on a credit card can save you big money in the long run. A few percentage points here or there seems small, but they quickly can become impactful over time thanks to the power of compound interest. Earning just 2% cash back (my recommended bare minimum) on an annual expense budget of $50,000 would yield $1,000 cash back! Think of what you can do with that.
It’s also important to remember to do your own math on these categories. Depending on how you value different types of currencies based on your goals can make a big difference in how you decide to optimize your categorical spending. Here’s my quick rule of thumb:
If you have future travel plans and want to minimize flight/hotel expenses, then go with a program that earns you credit card points.
If you don’t plan on traveling much and would rather have cold hard cash now to spend on other things, then go with a card that earns you cash back.
For me, I opt for points because I know I want to travel in the future. Imagine instead of earning 2% back on a $50,000 budget, you instead earn 2x points. That’s 100,000 points. What does 100,000 points get you if you’re into traveling?
- Two roundtrip flights to Tokyo on Japan Airlines. Cash value $2200!
- One roundtrip flight to Australia in first class. Cash value $3000+!
- Two nights at the Park Hyatt hotel in Paris. Cash value $1400!
- 10+ nights at various mid-tier hotels like Hyatt Regencies, Holiday Inns, Crowne Plaza, etc. Perfect to offset the costs of all the weddings I know you’re going to this year :). Cash value $1000+!
As you can see, points go much farther than the $1,000 you would receive from using a cash back card, but only because your goals were aligned with traveling.
Here’s what I think are the best cash back and point earning cards in each category right now:
| Category | Top Cards with Bonus Category | What I Use | Alternative Choices |
|---|---|---|---|
| Restaurants | American Express Gold: 4x Membership Rewards Points Chase Sapphire Reserve/Preferred: 3x/2x Ultimate Rewards Points Citi Prestige: 5x Thank You Points Hilton Honors American Express Aspire: 7x Hilton Points | Chase Sapphire Reserve Although 3x isn't as compelling as 7x Hilton points, I value 1 Ultimate Reward points much higher than 1 Hilton point. When redeeming through the Chase Travel Portal, you can redeem awards at a flat 1.5c cents per points (cpp) - meaning a flight that is $500 would only cost 33k points. Since I value UR points at a minimum 1.5cpp, earning 3x at a restaurant effectively equals a 4.5% return (1.5cpp * 3c). Most of the time when I redeem UR points, I transfer to airline partners and have redeemed at almost 4cpp before, effectively making my return from restaurants 12%! Hilton points are typically valued at ~.5cpp, which cuts the return to ~3.5%. | American Express Gold Amex points, like Chase Ultimate Reward Points, are highly flexible and transfer to a plethora of transfer partners. Depending on the airlines and destinations you frequent, MR points are just as valuable as UR, so this will be my next card at restaurants. |
| Flights | American Express Platinum: 5x Membership Reward Points (booked directly with airline) Chase Sapphire Reserve/Preferred: 3x/2x Ultimate Rewards Points Barclaycard Uber: 3% Cash Back Wells Fargo Propel: 3x Points Citi ThankYou Premier: 3x Thank You Points | Chase Sapphire Reserve The nice thing about Chase and Visa is that they're pretty liberal on what codes as flights/travel. From hotels to AirBnBs to flights booked direct with the airline or Expedia, the Reserve will earn 3x. Chase also has strong trip cancellation/interruption/delay insurance when a portion of the flight is booked with the card. The Reserve also provides $300 in annual travel credit, which can be credited towards flights. | American Express Platinum Like Chase, the Plat has some of the best trip cancellation/interruption/delay insurance when a flight is booked via the card. 5x is a strong multiplier. |
| AirBnB/Hotels | American Express Platinum: 5x Membership Reward Points (booked directly with airline) Chase Sapphire Reserve/Preferred: 3x/2x Ultimate Rewards Points Wells Fargo Propel: 3x Points Citi Prestige: 3x Thank You Points | Chase Sapphire Reserve Again, I use the Reserve for its simplicity as it codes AirBnB/hotels as "travel" and earns 3x. | Citi Prestige Earns 3x TY points, but the best benefit in my opinion is the complimentary 4th fourth night hotel stay when booking a hotel. Essentially, you'd book 4 consecutive nights at a hotel through Citi, and they'll credit you the cost of the last night. Back in the early days, this benefit was limitless(!) and could be used to book fantastic redemptions such as getting a NYE or Christmas night for free. |
| Uber/Lyft/Bird | Barclaycard Uber: 5% (Uber) Chase Sapphire Reserve/Preferred: 10x/5x (Lyft), 3x otherwise Citi Prestige: 3x Thank You Points | Chase Sapphire Reserve Uber/Lyft/Bird codes as "travel" so I use my CSR. | Barclaycard Uber 5% cash back is solid if you're a frequent Uber user. The Amex Plat also gets a shoutout here because of its $200 annual Uber credit. |
| Groceries | American Express Gold: 4x Membership Rewards Points American Express Blue Cash Preferred: 6% cash back American Express Blue Cash Everyday: 3% cash back | American Express Blue Cash Everyday Simple, no frills, no annual fee card for groceries. We don't spend too much on groceries as we shop at Costco, which unfortunately doesn't code as grocery 🙁 | American Express Gold 4x is solid if you spend a decent amount at groceries. What's nice is you can also buy gift cards for other parts of your life (Amazon/AirBnB/Home Depot, etc) at a grocery store and effectively earn 4x in those categories as well. |
| Gas | Chase Freedom: 5x (rotating categories) American Express Blue Cash Preferred: 3% cash back American Express Blue Cash Everyday: 2% cash back Citi Double Cash: 2% cash back Chase Freedom Unlimited: 1.5% cash back / 1.5x UR if you have a CSR | Citi Double Cash Simple cash back. 1% when you spend + 1% when you pay your bill. I usually carry the Double Cash in my wallet since it's an excellent card to use for "everything else" spend, and I don't have any other cards that earn higher than 2% on gas currently. I also don't drive that often, so gas is a minor category for me. | American Express Blue Cash Preferred If you're someone who spends a lot on gas, it might make sense to have a card that earns at a higher rate such as the Preferred. It does carry an annual fee, so you'll have to do the math to see if you'll net out positive. |
| Everything Else | Citi Double Cash: 2% cash back Chase Freedom Unlimited: 1.5% cash back / 1.5x UR if you have a CSR Capital OneSpark: 2% Cash | Chase Freedom Unlimited Although it looks like it earns at a lower rate than the other cards, when you pair the CFU with a card like the Chase Sapphire Reserve, which earns 1.5cpp in the travel portal, you'll effectively earn 2.25% (1.5% * 1.5cpp = 2.25%). The CFU's points easily transfer to the Reserve or a Preferred or to anyone else in your household, making the CFU so much more powerful. | Citi Double Cash Easy and you don't have to think about anything. This is the card I recommend first for anyone wanting to optimize their spend without diving into the more advanced techniques/math I talk about in this post. |
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