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Most financial advisors don’t include “maximize credit card points” on the wealth-building checklists they give to their clients. But investors who overlook the potential of card reward programs may be missing out on benefits that can contribute to the abundant lifestyle they are looking to build. As someone who has maximized the reward capabilities of 12 American Express Business Gold cards, I can assure you that the potential is there.
To be fully transparent, not everyone will be able to achieve the level of rewards I’ve experienced. It requires the right purchasing patterns as well as a particular volume of spending that typically only business owners are capable of achieving.
But if your financial activity puts you in the right category and you are willing to invest a little time to learn and execute the strategy, you can quickly accumulate tens of thousands of tax-free travel value every year from business activity you are already engaging in. You, like me, can turn your company’s biggest expenses into a first-class travel rewards engine.
Be strategic about the card you use
Perhaps you’ve waded into these waters before and determined from a surface-level review that the deck is stacked against you when it comes to truly benefiting from credit card rewards. With some cards, I’m sure that is true. But with some focused activity on a card that aligns with your spending habits, you can see a sizable return on your investment.
I use the American Express Business Gold Cards. At $375 per year, it has a relatively high fee, but its functionality creates synergy with my spending, allowing my points to accumulate quickly.
The first important feature to look for in any card is a rewards multiplier. The AmEx Business Gold provides a 4x point multiplier on dollars spent in your top two categories each month. A $150,000 annual cap means you can accumulate 600,000 Amex points in one year.
If you book through Amex Travel, your 600,000 rewards points will get you 1 cent per point in travel dollars, or $6,000. However, if you transfer those points to Amex’s travel partners, they can be redeemed for as much as 4 cents, effectively increasing your 600,000 points to $24,000 in travel value.
Do the math, and you’ll see that earning $24,000 on $150,000 in spending is a 16% return, paid out in tax-free travel. No wise investor is going to miss out on a chance to earn 16%.
Be strategic about your spending categories
As I mentioned above, the 4x multiplier the AmEx Business Gold Card provides can only be earned on your top two spending categories. For me, the top category is online advertising, which gets me to the $150,000 cap in just a few months.
Other categories that trigger the multiplier include electronic goods retailers, software and cloud system providers, gas station purchases, transit purchases such as tolls and parking, and wireless telephone service charges.
Maximizing this element of your strategy may require some effort. Bundling expenses, such as improvements to IT systems, so they all fall within one calendar year, can help you improve the volume of spending on cards. The key is identifying what qualifies under the card and making plans to focus your card spending on those categories.
Don’t limit yourself to spending on one card
Most cards have caps when it comes to the rewards you can earn. As mentioned above, the AmEx Business Gold Card’s cap is $150,000.
However, some cards allow you to push beyond the cap by having more than one card. The AmEx Business Gold, for example, allows you to add a new card for the same business every 90 days. Using the same EIN, you can add another $150,000 in spending with the 4x points multiplier every three months.
If you have the volume of business needed to spend at that level, your $24,000 in travel value can nearly reach $100,000 in a year. And nothing says you need to stop at four cards. The travel rewards I earn on my 12 cards provide more than enough travel dollars for my family to fly first-class anywhere in the world for free.
Letting your money work for you is a core principle of optimized investing and something that savvy investors are always looking to do. Maximizing your credit card rewards is one more way to do that.
And making it happen doesn’t involve leveraging a financial “hack.” Having tens of thousands of dollars to use for travel — or whatever other reward is meaningful to you — is just a matter of aligning the right card with the right spend. Business owners who don’t put the process to work are leaving tens of thousands of dollars in rewards value on the table every year. You’re already spending the money, so why not let it work harder for you?
Aaron Cirksena, Founder and CEO of MDRN Capital, is a 2011 graduate of the University of Maryland, College Park, where he studied economics. Since then, he has devoted his entire career to financial planning, distribution planning, and managing client money. He first worked with multiple $1 billion teams at Morgan Stanley and independent firms, and eventually created his own independent services firm in MDRN Capital, which is revolutionizing retirement planning by offering a comprehensive range of services, including income planning, investment management, tax planning, healthcare, and estate planning, all with a greater degree of effectiveness compared to traditional providers. As a fully digital firm, MDRN prioritizes efficiency and convenience by providing remote consultations and opening a digital account.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
