Wednesday, October 1, 2014

Getting 5.5% Cash Back On Our Day Care

I guess I've been on a bit of an American Express kick these days, but that's just because they have so much to offer a young toddler and her life-hacking parents.

Today, we'll talk about the "old" Blue Cash from American Express. This card gets you 5% cash back on your U.S. supermarket, gas station and drug store spend (after your first $6,500 of spend each calendar year). The beauty of this deal is that this credit card is still available per this FlyerTalk Thread.

My mother applied for this card in early January this year, and we cleared the first $6,500 of spend quickly while we were in Texas. Then, every dollar we spent at Trader Joe's, Fairway, Whole Foods, CVS, Duane Reade, Rite Aid and Walgreens earned us 5% cash back for the rest of 2014.

Unfortunately, one of our larger monthly spends - my daycare - doesn't qualify as a grocery store, gas station or drugstore. However, my father was able to secure the ability to pay my daycare with our credit card without a 3% surcharge. Now, here were our payment options (in order of least to most complicated/rewarding).

1. Pay Directly (2.2%).  Clearly the easiest (and least rewarding) way to pay each month would be to use one of our many Visa/MC cards directly. Perhaps we'd use our Barclays Arrival+ card to get us 2.2% rewards back. Or our Chase Freedom card earning us 1.1 UR points per dollar (worth about 2.2%).

Nothing out of the ordinary here. But here's where having the Blue Cash Amex can come in and supercharge our regular spend.

2. Use BC Amex to Buy Visa Gift Cards (4.0%). By using the BC Amex at a grocery store or drugstore, we can find any number of Visa Gift Cards, such as the OneVanilla. Each one of these cards can be loaded up to $500 with a fee of $4.95. So for spending $504.95, we'd earn $25.25 in cash back. Net of the load fee, we're clearing $20.30 of profit.

That's still about 4.0% cash back, net after fees! Almost double Payment Option #1 above. But when you combine another "trick" with the BC Amex, you can squeeze just a bit more juice.

3. Use BC Amex to load Paypal Debit (5.2%). But since my parents also have Paypal accounts supplemented with the linked Paypal for Business Debit Card, we can get yet another 1% plus save $1 on each load. The Paypal My Cash reload cards have a $3.95 fee vs. the One Vanilla $4.95 load fee.

Then once it's loaded onto our Paypal Debit Mastercard card, we can use it to pay the daycare directly and we'd earn 1% for using the debit card like a credit card (signing instead of using a PIN).

So we earn 5.0%, lose 0.8% on load fees, but get back 1% for using the Paypal Debit like a credit card. Net total is 5.2% earnings or $26.25 cash back. But wait...there's more!

4. Use Citi Visa, BC Amex and Paypal Debit Card (5.5%+). OK, this is clearly the most complicated option and many of you may will wonder if my parents are just OCD crazy. But my father can never turn down extracting as much value as he can, especially when everything can be done within walking distance, over the phone or with a few keystrokes online.

This option is basically combining #1 with #3. The reason we can do this is because Citi has a unique feature where their premium credit cards (i.e., Citi Thank You Premier) can be paid off over the phone using a bank debit card. See here for the FlyerTalk thread on it. Because of this "trick," we can basically double dip.

First, we use our Citi Thank You Premier Visa to pay our daycare directly and earn 1 Thank You Point per dollar (1.25%).

Second, we go buy a $500 Paypal My Cash reload card ($503.95 with fees) and earn $21.25 in net cash rewards (4.2%). We load up this debit card so that we can use it to pay off the Citi Visa card we used to pay the daycare.

Third, we call up the number on the back of our Citi Visa and ask for a representative so we can pay off our balance with our "bank debit card" (they don't need to know it's actually Paypal). Now, you may get phone representatives that claim you cannot pay off your balance with a debit card, but that's simply not true. Just hang up and call again.

Conclusion. So at the end of the cycle, we just end up with a balance due on our Blue Cash Amex card. And for all the steps in between, we're rewarded with 500 Citi Thank You Points worth at least $6.25, plus another $21.25 in Amex cash rewards for a total of at least $27.50 (5.5% back).

Not too bad for a monthly expense like daycare that we were going to have to pay for anyway.


  1. I am a bit confused. You are still paying 3% surcharge to your daycare, right? So your actual earnig is less

  2. Actually, we were able to negotiate and get the surcharged waived. So now, we're paying the same as the lower cash price, but can use a credit card.