DC: Capital of cash back

Your credit card company owes you one, perhaps in the form of a drink at the end of the working week, a round of golf or a spa treatment.

You may not immediately associate credit card companies with such generosity, but it’s true — your next outing could be their treat! And there may be many more throughout the year, if you use a rewards credit card wisely.

Credit card rewards programs are often described in terms of points or miles — somewhat vague criteria that don’t leave customers with a solid image of the program’s benefits. To put the potential of rewards programs in clear dollar terms, CardRatings.com calculated the potential rewards of cash-back credit card programs based on the eligible expenditures of households in 18 major cities (the amounts of those expenditures come from the Bureau of Labor Statistics’ Consumer Expenditure Survey).

To make the potential value of rewards programs even more specific, CardRatings.com then calculated a number of scenarios for what you could buy with those rewards. Some of the highlights, plus tips for making the most of rewards programs, are listed below.

About that drink…

Cash rewards rates vary by credit card and according to the type of expenditure, but for this study, CardRatings.com used the following assumptions, which are fairly typical of cash-back rewards:

• 3 percent cash back on groceries and dining out
• 3 percent on personal care products and services
• 1 percent on everything else

Based on that, potential rewards in those 18 major cities vary from $275.02 to $472.45. So depending on where you live, you could possibly start every Friday’s happy hour with a drink on the credit card company. Or have them treat your family to a baseball game, or perhaps send you and a date to a couple Broadway shows.

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• Washington, D.C. Folks in Washington know a thing or two about spending money, and the average household there spends more than in any other major U.S. metropolitan area, at $77,943. With roughly 37 percent of that spending eligible for cash-back credit card rewards, people in the capital could get $472.45 back from their credit card companies. Since politics is a high-stress occupation, a Washington power couple could spend that on relaxing spa treatments twice a year.
• San Francisco. At $73,601, the average household spending in San Francisco is second nationally. Of that, 35 percent is spent on purchases that could be eligible for cash-back rewards, which would yield $426.76 from the typical cash-back program. Given their proximity to Silicon Valley, San Franciscans are very tech savvy, so that reward could be used to buy a new tablet, with a variety of Samsung, Apple and Amazon devices available in that price range.
• Boston. The average household spending on eligible items would yield an estimated $420 worth of cash-back rewards in Boston. Fenway Park can be tough to get into, but that $420 should be enough to get a family of four tickets on StubHub, with enough left over for some Fenway Franks.
• Baltimore. Average household spending in Baltimore would yield $398.53 from the typical rewards program. In a city famous for its crab cakes, that would allow you to buy an order of Maryland’s finest about 20 times a year.
• Houston. Typical spending habits in Houston would yield $394.88 in cash-back rewards. It gets pretty hot and humid in Houston, so how about a tall, cool one? Those rewards should be enough for you to start your happy hour with a drink on the credit card company every Friday throughout the year.
• Seattle. Seattle’s household spending habits would yield an average of $393.36 in cash-back rewards. In a city that’s become known for its coffee, that should be enough to buy you a couple of lattes a week all year round.
• Minneapolis/St. Paul. It gets cold up in Minnesota, but your credit card company could help you bundle up. With spending habits that could yield $387.94 from the typical rewards program, folks in the Twin Cities could take a trip to Minnesota’s Mall of America to buy warm sweaters for the whole family.
• Dallas-Fort Worth. Dallas-area household spending could produce $383.72 in cash-back rewards. What could you do with that money? How about those Cowboys? NFL tickets are pricy, but those rewards could buy you a couple seats, with something left over for snacks and refreshments.
• Los Angeles. The spending habits of Angelenos could yield 379.06 in annual rewards. Someone in the movie capital of the world could stay up on the latest releases by seeing about 30 movies, with some popcorn change to spare, thanks to cash-back rewards.
• Phoenix. Arizona is known as a haven for retirees, but retirees these days are staying more active than ever. With a potential for $376.17 in cash back based on typical household spending habits, a Phoenix resident could use those rewards to fund a gym membership throughout the year.
• San Diego. The potential rewards in San Diego are $360.63 — enough to buy a family of four passes that will get them into Sea World for the rest of the year.
• Chicago. Typical cash-back rewards would yield $359.29 to Chicago households — enough to buy the family one of the city’s famous deep-dish pizzas once a month.
• New York. With potential rewards of $358.89, New York residents could afford to spring for a couple tickets to a Broadway show twice a year.
• Philadelphia. With $346.39 in potential cash-back rewards, the typical household in Philadelphia could indulge in cheesesteaks for four about eight times a year.
• Detroit. Potential cash-back rewards for Detroit households come to $346.28 per year, enough for Motor City residents to keep their engines running with nearly 100 gallons of gas.
• Atlanta. Cash-back rewards for a typical Atlanta household could yield $321.78. Given Georgia’s great golfing tradition, that money could be put towards about eight rounds at Atlanta’s Bobby Jones course.
• Cleveland. Winters are harsh around the Great Lakes, so area residents enjoy the outdoors when they can. With an estimated $305.63 in potential rewards for the typical Cleveland household, a family of four could barbeque steaks once a week all summer long.
• Miami. At $275.02, the estimated cash-back rewards were the lowest of any of these 18 cities due to relatively low household incomes. Still, that would be enough to get a family of four a decent set of tickets to see LeBron James and the Miami Heat.

Cracking the cash-back code

Wondering how to responsibly get the most out of your credit cards? Here’s how:

1. Know your usage habits. What is the best rewards card? That depends on how you use it, so the first step is to take a look at your past credit card usage — figure out what you tend to spend money on, and how good you are at paying your bills on time.
2. Recognize that cash is king. You can get cards that pay rewards in the form of a variety of products or services, but those typically do not have any higher value than cash rewards. So why not choose a cash-back card so you can have total flexibility in regard to how you use the rewards?
3. Look for high rewards where you spend the most. Different programs offer different levels of rewards for different types of purchases, so choose a card with the highest rewards rates in your heaviest spending categories.
4. Watch out for low ceilings. The percentage cash back is only one criterion that determines how much of a reward you will get — many cards also put ceilings on how much spending is eligible for rewards. Avoid cards where those ceilings are lower than your typical spending.
5. Pay your balance in full every month. Cash-back rewards are typically 1 to 3 percent, while credit card interest rates average about 13 percent. So, if you do not pay off your bills in full, you could soon find yourself losing more than you gain. If you tend to carry a sizable balance, you would be better off with a non-rewards card, because they typically offer lower interest rates than rewards cards.
6. Get into a redemption routine. One reason credit card companies like to offer rewards programs is they know some customers simply neglect to redeem the rewards. In those cases, the program is a cost-free marketing gimmick for the credit card company. Remember, the whole idea is for those companies to be treating you to some freebies, not the other way around. So, when you sign up for a rewards program, make sure you set up a regular schedule for redeeming those rewards.

Rewards programs should not prompt you to spend more than you normally would just to earn higher rewards — that would be counterproductive. Chances are, you already spend enough anyway, so why not make sure you get the rewards you have coming to you for that spending?