The Average American Could Earn Over $650 per Year in Credit Card Rewards

Are you maximizing your credit card rewards, or could you be getting more back?

Consumers who have held off on opening rewards credit cards often don't realize just how much money they could earn this way. Maybe you've seen cards offering a certain percentage back or a number of points per dollar spent, but those figures only tell you so much. What you want to know is how much money you'll really make using a rewards card.

That depends on two factors: your spending habits and the credit cards you use. And if your spending is anything like the average American's, then the right credit card could easily be worth $650 per year or more. Here's how.

The average American's annual spending

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 spending, we checked data from the U.S. Bureau of Labor Statistics (BLS) and found that the average American household spent $61,224 per year.

There's just one problem with that number -- not every expense is something consumers can conveniently pay with their credit cards. Housing is a prominent example. Most of us don't use credit cards to make our rent or mortgage payments.

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

• $11,747 of housing costs that went towards renting or owning a home (another $8,344 in housing costs went towards expenses that could be paid by credit card, such as phone and internet service)
• $4,197 in transportation costs that went towards vehicle purchases and finance fees (another $5,564 went towards expenses payable by credit card, such as gas and insurance)
• $6,828 in pensions (grouped together with personal insurance, which accounted for $468 in annual spending and is payable by credit card)
• $1,888 in cash contributions

That leads to a total of $36,564 in annual expenses that are payable by credit card. Now let's look at 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 could just get a flat-rate cash back card. Many of the top cash back cards earn 1.5% back and don't charge an annual fee. At that cash back rate, $36,560 in annual spending would be worth $548.46 per year in rewards.

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

Let's say you open credit cards that earn 3% back on groceries and at restaurants. The average American spends $4,464 per year on groceries, so going from 1.5% to 3% back in that category would earn you an additional $66.96. At restaurants, the average yearly spending is $3,459, and going from 1.5% to 3% back would be worth $51.89.

Overall, you'd earn $667.31 per year this way. To be fair, using multiple credit cards has its risks. You'll have more bills to keep track of and more credit to manage. But if you can handle that without going into credit card debt, you can make a lot of money back.

Making money off your usual spending

The data proves that there are all kinds of typical expenses you could pay with a credit card to earn rewards. If you have good credit, it's an opportunity that you shouldn't pass up.