How do you treat cash back from credit cards?

[frugaliknowit]

I am a one person, non-big spending household who earns a few hundred per year in cash rewards.  I simply let them accrue until I buy an airline ticket, then once I am charged for the airline ticket, I apply my cash rewards as a statement credit, thus reducing my travel cost.

To me, reduced travel costs is like money in the bank because travel comes out of savings (a virtual sub "buffer" account to be precise).

[OddOne]

My cc is connected to a brokerage account. Every time I get cash back it goes into the brokerage account, which I then invest.

Yep, +1

[Cyrano]

For what it's worth, while income and expense rebate are completely equivalent ways of accounting a cashback redemption, I account it as income because accounting it as a rebate would require distributing the rebate proportionally over the expense accounts whose spending resulted in the credit card reward, if I cared to do it consistently. And as a wise man once said, ain't nobody got time for that.

In similar situations where the refund is easily allocated to a single account where the expense was (such as an income tax refund), I account it as a rebate.

Mileage may vary.

[arebelspy]

And as a wise manwoman once said, ain't nobody got time for that.

Fixed that for you.  :)

[guitar_stitch]

If earned income money is considered our Employees, cash back rewards from credit cards should be considered volunteers.  They can still work for you, but you didn't have to put out much effort to "hire" them.

I still look at it all as a workforce.

[Philociraptor]

I use them for statement credits, call them "Service fees" in Mint.  I'm up $400-$500 each year in "Service fees", even after accounting for the yearly membership fees.  They reduce the amount spent on my "Everything Else" tab each month.

[Richmond Savers]

If you want to learn about travel hacking and have someone help you, I highly recommend Brad over at http://www.richmondsavers.com/

A Mustachian couple, they write about travel hacking and give free coaching lessons:
http://www.richmondsavers.com/free-travel-rewards-coaching-program/

Literally free.  Brad will email you, chat on the phone with you for 45 minutes, etc. helping you out.  All they ask is if you do sign up for some cards, use their referral links (but they don't push any particular thing).

I don't see how that's sustainable time-wise, so I'd jump on it now if you're interested.  ;)

@arebelspy: Thank you very much for this extremely positive mention of my free travel rewards coaching program -- that was really kind of you!!

I got a kick out of the "I don't see how that's sustainable time-wise..." as you are almost certainly correct in the long-run.  For now it is working out great, but yes, in the long-run my time eventually becomes a constraint. 

But until that day comes, this is a completely free (no gimmicks) service where I'll email with people and hop on the phone to answer any questions and help you plan a cohesive travel rewards strategy moving forward.

I like to look at this coaching as 'travel rewards for regular people', as I know how complicated and daunting it can be for most people to get into this concept, so I try to make it fit into the regular framework of your life.

Of course the usual caveats apply that you have to pay your credit card bill in full and on time every single month, and you probably shouldn't do this if you're just starting your credit history or are buying a house in the very near future, but other than that, this can really be done by anyone!

If anyone is interested, I'm happy to help, so just sign up at the link above or just send me an email: brad (at) richmondsavers.com

[boarder42]

i'm on the side of counting as reduced expenses not income.  do you count coupons for a discount on products as income.  No so i look at my 6% on groceries as 6% off my grocery bill each month.  i shopped around for my CC and found the best one.  This isnt income and i dont see how it can be treated as such. 

Now signup bonus's should be treated as income.  but using a CC vs cash and getting 1+% back is just being smart and getting yourself 1 or more % off what you're buying already

Hah, I like how you can't see how cash back can be treated as income, but claim sign up bonuses should be. :D

They're the same thing, to me.  They're money you get for using a credit card in a certain way.  That, to me, doesn't reduce the amount of money you spend, but gives you a little back for doing so.  You're still spending the same amount, you just get a little income to offset it.

So if I manufactured enough spending to get 15k in cash back annually and spent 15k annually, would you say my spending is $0?  Or would you say I spent 15k and have a side-gig of churning CC spending to earn 15k extra income?

Since the only way to do this falls into my sign up bonus points category i would call this income.(unless you do have a side hustle of churning them to get the points then this is the other way to get income) 

If i purchase groceries on sale for 6% vs using my 6% cash back card would you count that savings as income?  a discount on something you buy already counts as cutting expenses in my book.  a discount that is obtained through sign up bonus is an abnormal savings not a constant one over time.  so i would put this in a side hustle income category just like churning cards through bluebird for the 5k a year in rewards points(this doesnt work easily anymore)