Wednesday, February 15, 2012

New Credit Card Strategy in effect

(If you know me and are interested in getting the American Express cards, please get a hold of me - I can refer you and you'll get a better account opening offer than is publicly available, and I'll get a small reward too)

Lately we've been finding ways to save more money without necessarily curbing the lifestyle we've grown accustomed to. One of the areas in which I knew we could improve was the rewards we were getting on our credit cards. I am now employing a 3 card strategy where we use an American Express Blue Cash Preferred Rewards card for Groceries and Gas, a Chase Freedom card for the reward bonus categories quarterly, and a American Express Delta Gold Skymiles card for most everything else where the bonus is not at a higher rate than 1%.

For a number of years, my wife and I were heavy debit card users for things like groceries, gas, and other bricks and mortar purchases. For restaurants and online purchases, we've primarily used a Capital One No Hassle Rewards card. Previously, I was almost entirely using my debit card, but after several fraudulent transactions for $750 hit my debit card, I switched to using a credit card for higher risk transactions (restaurants are where a lot of cards get skimmed, and online, well, things get out.) This curbed the fraud to the credit cards where it's easier to manage a purchase that you didn't authorize since it doesn't immediately cause cash flow issues.

We had been happy with the Capital One rewards, procuring various gift cards over the last several years that have allowed us to buy quite a few items from Amazon and the like.  The card we have has multiple options, but the gift card options pay the best, at 1% (1 point equals .01). The cash options only pay .05% (1 point equals .005%) and I haven't looked at the travel options to figure out what those are working out to, but I suspect they are probably averaging around 1% or slightly more as well.

When our American Express Skymiles Gold Delta card came up for renewal in November after having it for a full year, I debated cancelling it as to not pay the $95 annual fee. Katie and I decided to renew it simply for the fact that they give you a companion voucher where you can book a flight with a companion and you only pay $99 for the companion's ticket. Its value is typically more than $95 just for that transaction (average airfares out of Minneapolis-St Paul, a Delta hub are in the $300-$500 range for the places we regularly travel). Not only that, but the card allows you to waive one bag fee per passenger on the booked itinerary up to 9 people, so it can pay for itself after only one trip if you have multiple travelers and checked bags. Which as a young family, with two small kids, we do. 

So, we allowed the annual fee to be charged, and at the same time, I also decided to stop using debit cards completely. I did this for two reasons - at the time there were rumblings of the banks charging monthly fees to use these cards, and there was no value there for me. Also, my bank discontinued their rewards program for debit cards (it was pretty meager to begin with, but it was something). An added side benefit, which I realized in hindsight is that it actually makes cash flow management easier as long as your are disciplined in your spending. Which, for the most part, we are.

Since I moved to credit cards for everything, it made sense to see if we could do better than 1% gift cards on the CapOne card. After reading this blog post I decided to start employing the three card strategy described there, with my third card being the Amex Delta card we've already been using. It pays something a little over 1% on average which isn't the best for airline rewards, but since we're hub captive to them and the card provides other benefits with a good value, I figured it's worthwhile to continue using it. I may explorer payouts on other travel reward cards in more detail if we start traveling more.

So I have the two Amex cards and the Chase card now. The current bonus on the Chase freedom card is and Gas stations, which we are using it on. I also get $200 if I spend $500 in three months. No problem, we'll be there in a couple of weeks if we use the card. Amex card also has a bonus if you spend 1000 in 3 months, which we'll get next. The Chase Card has no annual fee, and the Amex Card has a $75.00 annual fee, and break even is if you only spend $25 a month on groceries. So that's not hard to get hundreds at 6%. For everything not in the bonus categories, we'll continue to use the SkyMiles card for now.

It seems a little complicated, but once you get used to it, it works great and it stands the potential to have $1000 or more back in my pocket every year without doing anything other than switching the credit cards I use.

I'll give periodic updates here on how well it's working for us.