The average American could earn more than $650 a year in credit card rewards

Are you maximizing your credit card rewards or could you get more?

Consumers who delayed opening rewards credit cards often don’t realize how much money they could earn this way. Maybe you’ve seen cards that offer a certain percentage return or a certain number of points per dollar spent, but those numbers don’t tell you much. What you want to know is how much money you will actually earn using a rewards card.

It depends on two factors: your spending habits and the credit cards you use. And if your spending resembles that of the average American, the right credit card could easily be worth $650 a year or more. Here’s how.

The annual expenses of the average American

To find out how much Americans could earn in credit card rewards, I started by looking at how much they spend. In our study on average expenseswe checked data from the US Bureau of Labor Statistics (BLS) and found that the average US household spends $61,224 per year.

There’s only one problem with this number – not every expense is something that consumers can easily pay with their credit cards. Housing is a striking example. Most of us don’t use credit cards to pay our rent or our mortgage payments.

To make this calculation fairer and more realistic, I’ve subtracted expenses that aren’t traditionally paid for with credit cards. Here are the specific annual expenses that have been removed:

• $11,747 in housing costs that were spent on renting or owning a home (additional $8,344 in housing costs were spent on expenses that could be paid by credit card, such as telephone and internet service)
• $4,197 in transportation costs that were used to purchase vehicles and finance costs (another $5,564 was spent on credit card expenses such as gas and insurance)
• $6,828 in pensions (bundled with personal insurance, which represents $468 in annual expenses and is payable by credit card)
• $1,888 in cash contributions

This represents a total of $36,564 in annual expenses payable by credit card. Now let’s see how much you could earn if you spent that much.

How to Earn Over $650 in Credit Card Rewards

If you want to keep your finances as simple as possible, you can simply get a lump sum cashback card. A lot of best cash back cards earn 1.5% back and don’t charge an annual fee. At this cash back rate, $36,560 in annual spend is worth $548.46 per year in rewards.

Your other option is to use multiple credit cards and boost your rewards even more. With this method, you would carry a card that pays a competitive flat rate, like 1.5% back on purchases. You would also carry at least one card that pays a higher rate, like 2%, 3%, or even more, in the bonus categories. You can then use your bonus category card(s) for any purchases that qualify for the bonus rate and your flat rate card for other purchases.

Let’s say you open credit card which earn 3% on groceries and restaurants. The average American spends $4,464 a year on groceries, so going from 1.5% to 3% in this category would net you an additional $66.96. In restaurants, the average annual spend is $3,459, and going from 1.5% to 3% in return would equal $51.89.

Overall, you would earn $667.31 per year this way. To be fair, using multiple credit cards comes with risks. You’ll have more bills to track and more credit to manage. But if you can manage that without going into credit card debt, you can make a lot of money.

Earn money on your usual expenses

Data proves that there are all sorts of typical expenses you might pay with a credit card to earn rewards. If you have good creditthis is an opportunity that should not be missed.