Frequently I get e-mails from readers (or people that have been referred to me by a reader) asking what card is the best option for them. The twist is that these people have incredibly high spend (six to eight figures that can be put on a credit card per year).
I thought I’d answer the question on the blog so I can go into some detail and then reference this post when needed.
Contents
Calculating & Separating Your Spend
The first step is to calculate how much you actually spend (per month, per year, whatever). Only include money that can be spent using a credit card. Also good idea to take note if certain large purchases do not accept certain payment networks (e.g American Express or Discover).
You’ll also want to separate that spend into different categories. The categories/stores that are particularly important to separate are:
- Bookstores
- Charities
- Department stores
- Drug stores
- Everyday purchases
- Gas
- Grocery store
- Hotels
- Office supply stores
- Telecommunications
The reason that you’ll want to separate into those categories is that there are several cards that offer bonus points for spend in those categories (just pay particular attention to any caps they have). For example, if you spend a lot at office supply stores then a Chase Ink Cash would be a good idea as it earns 5% cash back per $1 spent (limit of $25,000 annually, better if you can get the Chase Ink Plus with a $50,000 limit but also an annual fee).
If you don’t spend much in a particular category, you can just forget about that category and add that to your non category spend total.
Set Aside Spend For Minimum Spend Requirements
The best return you ever get on credit card spending is from the sign up bonus credit cards offer (best offers found here). A typical offer will be something like 50,000 points after $3,000 in spend, that works out to be ~16.5x points/miles per dollar spend. You can’t really beat that, so make sure you’ve leaving credit card spend for meeting these minimum spend requirements.
The amount you’ll want to set aside for this will vary by person, some people will just want to not worry about it at all and others will want to aggressively peruse these promotions. That decision is up to you.
Work Out How Much You Value Certain Benefits
Several cards offer additional or anniversary spending bonuses. Everybody will value the benefits you get from these differently, some examples include:
- 10,00 SkyMiles & 10,000 MQM for spending $25,000 on the Platinum Delta cards.
- Mercedes-Benz giving you a $500 certificate towards a future purchase or lease when you spend $5,000+
- You can find a full list of these bonuses here.
It’s worth having a look to see if you like the look of any of those additional spending bonuses and if you do, assigning a cash figure to those bonuses (this will help you determine if they are worth spending for).
Pick A Card For All Other Purchases
By this stage you should know how much credit card spend you have in each category, how much you want to set aside for minimum spend requirements and any additional spending bonuses you value. Now you just need a card that can be used for all other purchases, frequently people will just want to skip all the noise above and focus on this.
We discuss the best credit cards for all other purchases in this linked post. Basically you should be aiming for one of the following:
- 2%-3% cash back on all purchases
- 1.5x Chase Ultimate Rewards or 1.5x Membership Rewards points per $1 spent
- Full list of options here
What you prefer will really depend on how much you value loyalty points and how much you can feasible use. The other thing to consider is that a lot of the high cash back cards give you relatively low limits and this can be a problem for those spending six figures+ monthly. Most card issuers will be happy to work with big spenders like this, but Chase & American Express in particular are eager to capture these “whales”.
Other Tips
- Make sure you call in retention and ask for bonuses. If you’re spending a lot then chances are credit card issuers will be eager to retain you as a customer. We discuss this more here.
- Doing something is better than nothing. It’s easy to get analysis paralysis but trying to decide what the best option is for you. If you currently spend $1,000,000 a year on a card that earns 1% cash back, you’ll get an extra $10,000 per year just by switching to a card that earns 2% cash back.
If you have any questions, please feel free to ask in the comments below.
