The Miser’s 3 Things:

  1. Like most of my friends, I use plastic for 99 percent of my purchases
  2. Compare cash-back credit cards to see if you’ll save more by using one with “bonus categories” or one with a flat cash-back percentage
  3. I’m saving $15 a month with little effort by using a cash-back card instead of a debit card

Cash may be king for older generations, but plastic reigns supreme for millennials. Most of my friends never have a single George Washington on them.

Until a year ago, like many of my friends, I used my debit card for every single purchase. The credit card I got when I went to college had almost no rewards options.

Then, I was turned on to a different kind of plastic: cash-back credit cards. They’re not exactly life-changing, but they do have the power to put a few Washingtons back into your bank account.

Cash-back cards, explained

Every dollar you spent becomes a point value. At the end of each month, redeem your points for cash (some companies allow you to apply this to travel purchased through their website, or gift cards).

Cash-back cards are different from travel rewards cards that are specifically geared toward airline miles, hotels and rental cars. If you’re planning to do a lot of travel, get one of those. If not (like me), get a cash-back card so your savings can go to your savings account.

Most cards also offer a sign-up bonus, again in the form of cash back. If you put a certain amount on the card within the first three or six months, you get a one-time bonus.

Lastly, they work just like any other credit card: pay your balance off every month, and there’s no interest applied.

The Miser’s comparison shopping

There are a ton of cash-back cards out there, and I found all of them have varying, yet similar, rewards. Every few months, there’s a new one that appears to one-up the rest, but only slightly.

I decided to simplify my search by comparing the offerings from Chase, where I bank.

I definitely did not want a card with an annual fee, because that just seems wrong. So, I had two options: the Chase Freedom card, and the Chase Freedom Unlimited card.

Both cards offered a $150 sign-up bonus if you buy $500 with the card in the first three months. For comparison’s sake, I won’t include the sign-up bonus in my calculations because you’ll be able to reach that amount easily with either card.

Chase Freedom Unlimited card

This one has way simpler math: you get 1.5 percent cash back on every purchase.

I estimated I could buy groceries, gas, car maintenance, haircuts and gifts, plus website expenses, entertainment expenses, eating out and travel with the card (basically, everything except rent and utilities). That’s a total of $845 a month, which would net me $12.68 cash back a month and $152.16 for the year.

Chase Freedom card

This card gives you 1 percent cash back on everything you buy, and 5 percent cash back in “bonus categories” that change every three months. You have to go online and activate each of these bonus categories every quarter.

freedom categories
Photos via chase.com

Those categories for 2017: January-March, it’s gas stations, taxis, subways, local commuter buses and trains. April-June, it’s grocery stores. July-September, it’s restaurants and movie theaters. October-December, it’s Walmart and department stores.

Obviously, the math is a little trickier here.

The easy part was removing all the things I’d never spend money on: we don’t have subways or commuter trains in my city, I don’t use buses or taxis, I rarely go to movie theaters, and I don’t shop at Walmart.

Then, I returned to my budget for the following calculations.

For January-March: 1 percent back on $770 a month in expenses besides gas, plus $75 in gas at 5 percent cash back = $11.45 a month.

For April-June: 1 percent back on $595 a month in expenses besides grocery stores, plus $250 at grocery stores at 5 percent cash back = $18.45 a month.

For July-September: 1 percent back on $670 a month in expenses besides restaurants, plus $175 at restaurants at 5 percent cash back = $15.45 a month.

For October-December: 1 percent back on $845 a month in expenses besides department stores. Since I don’t regularly shop at department stores, I put $0 down for this category. That’s $8.45 cash back a month.

For the year: $161.40.

Choosing a card

You can see above that the Chase Freedom card would earn me $9.26 more per year with my current spending levels.

So, maybe it’ll surprise you that The Miser left money on the table and went with the Chase Freedom Unlimited card.

Why? First, it’s a difference of 75 cents a month. Plus, going online every quarter to activate a new bonus category wasn’t worth an additional $9.26 for me. What if I forgot to activate the grocery store category before going to the grocery store at the start of April?

Yes, I could increase my cash back with the Chase Freedom card by going to department stores in October, November and December. But it didn’t make sense to split up my shopping trip into multiple stores or, worse yet, start buying clothes or other items I didn’t need.

So, Miser, how’s it working out?

Well, even better than I thought, thank you!

In the 12 months since I got the Chase Freedom Unlimited card, I’ve earned $180 in cash-back rewards ($15 a month). That’s about $28 more than I had expected to earn for the year.

How have I done that? Well, I changed a couple of my online utility accounts from my debit card to the credit card. (Admittedly, I never did change a third account to the new card because the utility company made the process way too complicated.)

I also forgot to factor in things like medical expenses, which I was able to use my credit card to pay online.

And obviously, I got the $150 sign-up bonus on top of the $180 in cash-back.

A word of caution

If you’re struggling with credit card debt and don’t want to risk the temptation by getting another card, don’t use this savings strategy.

Cut up your existing credit cards and focus on getting out of debt.

But for many millennials who already use their debit card for 99 percent of transactions, we’re leaving money on the table by not switching to a cash-back credit card.

Using one takes a small amount of extra effort, because unlike with a debit card, you’ve got to remember to pay off the credit card. It takes about three minutes online, and I do it every Friday.

SAVINGS: $15 per month (plus a one-time $150 sign-up bonus).