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Well Rewarded

Andrew Forsythe, 3:34 am ET

AS JULY BEGAN, there was happy news for Chase Freedom Visa cardholders like me: One of the categories for 5% rewards this quarter is grocery stores. We spend a lot on groceries, which means I’ll get a nice cash reward from Chase.

I’m a big believer in credit card cash rewards for two reasons. First, of course, there’s the reward money. The second reason is psychological: Credit card companies are notorious for the outrageous interest and fees they exact from anyone who doesn’t pay off every nickel every month, so I find having them pay me money to be extremely satisfying.

Different cards have different rewards schemes. To maximize your cash back, it can be worthwhile to have more than one credit card—at the cost of a bit more complexity and hassle.

I currently use three cards. The aforementioned Chase Freedom Visa normally pays a meager 1% reward, but also has the rotating quarterly category where certain types of purchases earn 5% on up to $1,500 in quarterly purchases, potentially giving me a $75 quarterly reward. I pay attention to the current category and use the Chase card for those purchases.

I have a Bank of America Cash Rewards Visa which likewise pays 1% but lets you choose an ongoing category that pays 3%. I selected online purchases. I’ve discovered that ordering groceries online and then picking them up curbside—a habit we acquired during the pandemic—qualifies as an online purchase, so I use the Bank of America card for that. Unless, of course, the Chase card’s 5% quarterly category includes groceries.

Finally, I have a Citibank Double Cash Mastercard, which pays 2% on all purchases, all the time. I use that for everything else. It can add up: In 2020, I earned more than $1,100 in cash rewards from the three cards—plus a significant shot of psychological satisfaction.

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M Plate
M Plate
2 months ago

The way we manage our credit cards can make them a nightmare or a very valuable bonus. I keep it simple, not opting for the more complex offers. I put every bill and shopping expense on my main cash back card. I do have a 2nd unused card for “emergencies”. Once, my autopay didn’t go through. I was notified at a hotel that my card was declined. A real shocker for me but at least I had my backup card.

Matt McGuinness
Matt McGuinness
3 months ago

As I approach retirement I am trying to balance simplicity of my affairs with optimization of financial solutions, and find there is a strong inverse relationship between the two. For example US Bank just sent my wife an offer to credit her $400 if she opens a new checking account, subject to some terms we could meet by juggling a few things. But we do not need a 5th checking account to keep track of, so we will likely just pass.

Likewise I have read articles in the past on Nerd Wallet and similar posts on the optimal way to collect and harvest CC rewards. Depends a lot on your spending patterns, which set of cards works best.

I use my (original issue, better grandfathered deal than the new ones) GM card to accumulate 5% earnings on the first $10,000 in purchases annually. Then I use my Citi Costco Visa for everything else, all year long. 4% on gas, 3% on restaurants & qualified travel exp’s , 2% on all purchases at Costco (in whse. or online), and 1% everywhere else). Simple. And redeemable in CASH or Costco Credit (which is the same thing for us, based on how much we use Costco!)

I keep maxing out the GM card earnings each year because it’s the simplest 5% reward I’ve found. And even though it has a HIGHLY RESTRICTIVE reward – in that it can ONLY be used to purchase NEW GM Vehicles, period!!

However, my earnings expire on a rolling 7 year cycle, giving me plenty of time to use them before they (slowly) start to bleed off, and if you DO intend to buy a new GM vehicle, these are as good as cash. You don’t even need to announce them to the dealer until you have already negotiated your best deal, including all applicable factory rebates and national promotions (and of course Costco auto program negotiated starting point, usually well below MSRP!).

I currently have > $3,000 in earnings at the moment, representing rewards on ~ $60,000 in spending on my Capital One GM card over the past 5.5 years since I last zero’d them out by buying a new Chevy. Will probably use these earnings (and another $500) up in a few years buying a new electric Cadillac, or the new Electric Silverado when it comes out in a few years.

I find the dozens of specialized travel rewards cards (to get free airfare, etc.) are among the most complicated to understand, track and comply with all the many rules, restrictions and fine print. So I just pay for all of our airfare and hotels on my Costco Visa…

Ormode
Ormode
3 months ago

Where does this money come from? Why, from the poor saps who have a $5000 balance and pay 25% interest on it. The effect is to transfer money from those who are in financial trouble to those who can easily pay their bill in full every month.

wtfwjtd
wtfwjtd
3 months ago

In the last several years, I’ve come to think of our yearly spending as a “reverse” savings account; instead of “earning” interest when our money sits in an account, it “earns” interest when it’s spent. With some thoughtful searching and arrangement, most monthly bills can be paid (without extra fees) by using credit cards; by doing this, our “reverse” interest rate on our annual spending now averages better than 5%, tax-free! Not too bad, considering the paltry return of most checking/savings accounts.

Guest
Guest
3 months ago

Thank you for your article Mr. Forsythe. I try to keep things simple by carrying only 1 credit card. I do have a 2nd one I bring on vacations (just in case) but otherwise, while I do understand the benefits of tracking various rewards and when to use different cards, it just doesn’t do it for me.

Michael1
Michael1
3 months ago

Thanks for the tips.

The Savor card from Capital One pays 3% on dining and entertainment and just started paying 3% on groceries as well.

With an Amazon card plus a Prime membership ($119/yr), you get a 5% discount on Amazon purchases. When shopping at Whole Foods, the Amazon card plus Prime membership also beats Savor’s 3% on groceries. The membership also comes with other benefits.

Have to think about that rotating catagory…

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