The David (as I fondly call the entertainer Dave Ramsey) is known for his hyperbole. And his “my way or the highway” view on all things financial. One of his more memorable quotes is “No one ever says they got rich off of credit card points.” It seems to me that if I say so, and offer some supporting evidence, then he’s wrong. If he ever repeats himself, you can reply and tell him you know a guy that did. Let’s start here.
Above is a snapshot of my 529 account funded solely with the 2% cash back from my credit card. We use a credit card that offers 2% cash back on all purchases, and have had the card for nearly 16 years. It’s invested in an S&P index, so the number above includes the growth of the market. We have 2 years till my daughter goes off to college. Or 6 until her senior year. I’m hoping this account can grow to $40K and cover a full semester’s cost. That will make another topic for an article here.
In 2012, I wrote a guest post How I Made $4,000+ on a Cash Back Credit Card Offer. The exact number was $4550. That was a one time opportunity, for me, a way to take advantage of the institution we all hate, the bank that pays you .01% on you money, but charges you 5% on your mortgage, and a fee for every little thing. You can read all about it at the linked article.
Last, I’ve also had an Amex card that averaged over $500/yr in rebates for Costco and gas purchases, so another $10K on top of this. This all totals just over $50K, give or take.
There’s a site Global Rich List that puts wealth and income into perspective. I put in $40,000 and found
If instead of wealth, we look at income, how about I look at the $2000/yr I can withdraw from the $50,000, and add $2000/yr, the amount I’ve been getting back in rewards, so $4000/yr.
I offer this a bit tongue in cheek, as I know that $50,000 isn’t really rich, nor is $4000/yr living the dream. But $50,000 is still a chunk of change. If you look at how much we’ve saved for retirement in the US –
That $50,000 is more than 48% of those nearing retirement have saved. Did I really get rich on credit card points? We can debate that. But first, ask the 31% of 55 year olds who have less than $10,000 saved if an extra $50,000 would make them feel rich, and then decide.
Rock it man! Smart guy to accept that guest post back in the day 😉
Congratulations, Joe! In order to get that $25K in your 2% cash-back account you had to have spent almost $1.3 million. Someone with a $100K a year income might manage that in 15 to 20 years, so it takes so long-term planning and discipline, but I don’t think it’s a practical plan for most of us workin’ folks.
Thanks for the info, though, every little bit helps.
-stephen
Myrtle Beach SC
Don’t forget, the account is invested, the deposits total just under $14,000. My daughter is almost 17, so the average annual deposit was $825, or $41,250 in spending. As they say, “your milage will vary.” I offer this as an example that with good budgeting, using the card as a tool, not as credit to pay interest on, the savings can add up. Given the sorry state of saving in the US, even if you cut my numbers in half, $20 run through the card and $12-$13K saved for college, you’ll be ahead of the averages.
Thanks for the visit and comment.
LOL. Thanks, always good to hear from you.
In regard to Stephen’s comment…
How about someone who owns a business? I use an Amex card with a $500k limit and run up about 1.5 million a year. I use the card for all of our wholesale purchases. Last year we made over $3500 in cash rewards and took a free trip to Jamaica which would have cost us over $8k. We only used half the rewards. It’s important to note that none of this is taxed under our current laws. I had a Ramsey fan working for me who since changed their tone a bit. lol
I’m not passing up thousands of dollars in free money, I don’t care what some radio show host or the other people in my church who worship him have to say.
Nicely done, Jim.
Excellent article! Like Jim, I own a business and charge everything possible to my card. For those who are disciplined, I think it’s shortsighted to NOT use a rewards card. Some may gasp in shock, but I pay my tithe on my credit card.
That’s a great post dude. Yeah I thought a lot about the old Dave Ramsey goal of having a credit card score of zero. But it sure would be nice to use a cc for 30-40 years and invest the rewards as you have and then live a couple great years traveling on the back of “the man” or institution as I think you referred to it as. Well I just started a finance blog like a week ago not even and so I’ve been cruising around the web checking all these blogs out and I must say this has def been one of my favorite posts of the day. smart, simple, light, and fun. Thanks for posting bro.
Thanks for the comment and welcome to the blogging community. When I guest posted the story about the $5000 I got back on that one crazy deal, there were many negative comments. The reality is that there are irresponsible people who simply can’t use a card wisely. No different that those who can’t drink one bottle of beer, safely handle a gun, or use a knife in the kitchen. In the end, the 529 account will pay for at least a semester of my daughter’s college. That account is at $29,400 right now, all from the reward deposits.
I totaled $40K in credit card rebates as of the time of this post. Please re-read the full article. I wrote “I offer this a bit tongue in cheek, as I know that $40,000 isn’t really rich, nor is $3600/yr living the dream.” And I go on to show that 40% of adults over 55 don’t have at least this much in savings. Nancy, I agree 100% that in the US, this is not ‘rich’, not by any measure. I reflected on the percent of the world that has less than this in savings (83%) and would maintain that this money can go a long way to change many people’s lives. In the end, we agree that Dave’s audience is simply in a difference place. My issue, if any, is when people come to me and cite his advice as gospel. Those who are irresponsible should absolutely follow his advice. Those who are disciplined shouldn’t be scared away from responsible card use. (Last with the good market this year, the college account is up to $29,600 from the $25,887 I showed above. That’s not the full college account, only the account funded from the 2% card.) Thank you for reading, and commenting.
I get what you’re saying. But one thing to remember is that most of the people who benefit from Dave Ramsey’s advice have already demonstrated that they aren’t disciplined enough to pay off a credit card balance each month. To get the kind of rewards you get, the user has to have a reasonably good credit score. Also, I don’t know many people who actually think $25,000 is “rich.” I agree that I’d rather keep money in my pocket than hand it over to someone else, and I’m not going to cost the credit card issuer money in charge-offs, so I do the same thing. But that doesn’t invalidate Dave’s advice to undisciplined users.