So Rewarding

Kristine Hayes

A FRIEND RECENTLY asked me the interest rate on my credit card. I admitted I had no idea. I pay off the balance in full every month and therefore don’t know, or care about, the interest rate.

I’m a minority in this regard. Only 35% of us pay off our credit card balance each month. We’re dismissed as “deadbeats” by profit-hungry credit card companies, perhaps with some justification: We reap the benefits of credit card rewards programs designed to lure the other 65% of the population into using their cards on a regular basis—and then foolishly carrying a balance.

There are different credit card rewards strategies. One involves having multiple cards and matching purchases to the card offering the highest reward for that specific item. For instance, you might use a credit card that offers 4% to 6% back on groceries at the supermarket, while using a different card—one with enhanced travel rewards—when purchasing a plane ticket. Another system involves carrying just one credit card, which offers a somewhat lower percentage cash back, but on a wider variety of items. Since I have a relatively low disposable income, and don’t travel much, the single card system works best for me. I do, however, try to figure out ways to maximize the rewards I get.

A recent example: I decided to replace my well-loved Kindle Fire with a newer model. Instead of purchasing the device directly through Amazon using my Costco Citi Visa card, I chose instead to purchase an Amazon gift card at my local grocery store using my credit card. This allowed me to earn 1% cash back, as well as a 30-cent-per-gallon discount off my next gasoline purchase. The grocery chain I shop at frequently runs this promotion to entice people to purchase gift cards through their stores. I then used my gift card to purchase the Kindle and used my Visa card to buy my discounted gas, generating an additional 4% cash back.

So far this year, I’ve racked up $340 in cash back. When my rewards check arrives next February, I’ll cash it in at my local Costco. I could, instead, use the check as credit toward items I purchase at Costco. But I’d rather continue to charge those purchases on my card, thereby earning additional cash back.

Taking advantage of credit card rewards programs pays off handsomely for those of us with the discipline never to carry a monthly balance. What if you don’t pay off your balance in full? The rewards you collect will likely be tiny compared to the interest you end up paying.

Kristine Hayes is a departmental manager at a small, liberal arts college in Portland, Ore. Her previous articles include Driving Down Costs and Getting Sued.

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