# One simple way to make $12000 in 30 minutes

**Do not read this story if:**

- You are not currently using a credit card to make your purchases
- If your credit card gives you 2% cashback

**Now, here’s the gist —** in less than 5 minutes, I’ll show you how spending 30 minutes now to upgrade to a credit card that gives you 2% cash back equates to ~$12000 in earnings over time.

### The Math

#### Assumptions

- Your current credit card’s cash back rate = 1%
- Annual credit card spending = $12000
- Time over which your savings compound (y)= 30 years
- Assumed annual rate of return (r)= 7% (
*Inflation adjusted S&P 500 return over last 30 years = 7.9% —**source**)*

Ok, with these basic assumptions, let’s dive in to calculate what your savings over time can be, if you upgrade to a credit card that pays you an extra 1% cash back (2% in total):

- Extra amount earned every year (d) = 1% of $12000 = $120
- At the end of Year 1 — you have $120 in your account.
- This will grow to 120*(1.082³⁰) = $1276.44 after 30 years
- At the end of year 2 — you have earned another $120.
- This will grow to 120*(1.0832²⁹) = $1218.24 at the end of 29 years (since we have one year less on our timeline after year 2) …. and so on.
- So we have this formula

Total earnings = d*r^y + d*r^(y-1) + d*r^(y-2) + ….. + d*r^(y-29) + d*r^(y-30)

If you plug the numbers we assumed into this formula and an interest rate of 7.9% (historical average), you will see that you earn~**$14,400**

I am assuming a more conservative 7% CAGR, which earns us **$12,100.**

### How much extra time will it take?

This should take no more than 20 to 30 minutes. Seriously. Pretty much everything is done online and you’ll receive a decision almost instantaneously. Less time than it would take to drive to a Starbucks, wait in line and get a coffee.

### Ok, how do I do this?

Currently, there are two credit cards that offer 2% cash back that I am aware of:

#### Fidelity Rewards Visa Signature Card

- Open a brokerage account with Fidelity at www.fidelity.com. I personally started a Roth IRA account. This way, the savings go into a retirement account and withdrawals will be tax-free.
- Apply for the Credit Card here.
- You get 2% cash back when you make a purchase.

**Pro: S**avings go into a tax advantaged retirement account.

#### Citi Double Cash Card

- Apply for your Credit Card here.
- You get 1% cash back when you make a purchase and another 1% cash back when you pay your bill.

**Pro: **Requires just one step to get started.

**Recommendation:** My recommendation is Fidelity — the extra step should take no more than 15 minutes (that’s part of the 30 minutes that I mentioned in the headline) and your savings:

- are directed into a long-term retirement account, which you cannot withdraw from easily
- If you opt for a Roth-IRA, your withdrawal will be be tax-free.

*Note: I do not get referral/affiliate commission with either of these recommendations.*

### Risks

#### Overspending

Clearly, if you spend more when using a Credit Card, this is not a good deal. Hence, if you are not using Credit Cards currently, you probably should not start using them now.

#### Below average returns

The markets may have returns below the historical average of 7.9%. This means that your earnings will be lower.

### Conclusion

If you are currently using a credit card with 1% cash back or equivalent in flyer miles, spending 30 minutes to upgrade to a 2% cash back card may be worth your while.

*Disclaimer**: This is not a solicitation. You should do your own research in the context of your financial situation before applying for a credit card. Past market performance is not necessarily indicative of future returns.*