Cashback Optimization

According to a Bankrate Sept. 22, 2021 survey, the national average interest rate for savings accounts is 0.06%. Not much, but did you know the cashback offering is 1%-2% with most banks, cards, and apps? Even on the low end, that means theoretically you are “earning” about 17x more when you are spending money than when it’s in savings. This is not meant as a justification of spending outside of one’s budget, but it does suggest one should be optimizing savings as well as spending. This article is intended to provide some ideas on the latter, although there will be a decision to be made on what you do with these funds once they’re captured.

Let’s start with cashback reward cards. These cards are typically the simplest of reward cards as there are no points, discounts, or redemption calculations to make. One simply gets an amount of cash for each dollar spent. Cards will offer tiered rewards, rotating categories, or flat-rate cashback. There are a number of options out there and what card you use is only the beginning. If you already have a few cashback cards in your wallet, there is an app called MaxRewards (https://maxrewards.co) designed to let you know which card is going to give you the edge in any buying situation so there is no need to guess. It may also help you maximize other benefits offered with those cards.

A cashback card is one tool at your disposal. Although Motley Fool recently suggested average annual consumer cashback for cards was just over $650 per year, you’ll want to be sure you pay these purchases off within the statement period to retain that profit. ?To see all cards or bank accounts in one place there are a myriad of apps available such as Mint, Personal Capital, and TrueBill to name a few.

The second thing you can use to optimize cashback is linked apps. These are similar to the money management apps listed above, where you link your debit or credit cards through an encrypted service that provides read-only activity access to the apps. The apps themselves are never given Username, Password, or account access. ?Link virtually any card, including cashback cards, spend and get additional cash. The great thing is that you can stack these to get cashback from each for a single purchase. As an example there is Dosh (Dosh.com). Dosh, at the time of this writing was offering 4% back at Dunkin or 7% at KFC. Finally there’s Bumped.com. Bumped works in a similar fashion but with a twist; Their cashback comes in the form of fractional shares of Stock in some of America’s leading companies.

The interesting thing is how all of these resources can work passively together. For instance, I used the Chipotle app last week to order food for some friends, who paid me back for their portions. On the whole order I received points from Chipotle for free food, cashback from my card, fractional shares of stock and cashback from Dosh. By leveraging a card that was linked to these apps some time ago, I automatically earned money to put aside in a Savings, Date Night, Vacation or Guilt Free Spending account all from one purchase I’d have made anyway. A final consideration is that saving in this way is generally treated as a discount or rebate for tax purposes. Therefore, funds can be set aside as true guilt free money you wouldn’t have ordinarily had without such a passive cashback payment strategy in place.

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Last updated?July 01, 2021

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