My Credit Card Usage Plan for Maximum Rewards

Posted by Mr. B

April 26, 2007

I admit, I use credit cards a lot. To me, it’s much simpler than writing a check, and I tend to carry very little cash. Plus, you can earn rewards from the credit card companies. Yes, I’m one of those people who whips out a card to buy a coffee refill for 85 cents.

However, I don’t just use whichever card I grab first. I usually carry about three or four cards in my wallet, and use whichever one offers the highest reward for the particular category of my purchase. The following is my current plan of attack, which works well for me. Feel free to create your own “Variations on a Theme.” All of the cards mentioned below have no annual fee.

1) Chase Freedom Visa - earns cashback

Rewards: earn 3% cashback for all purchases at grocery stores, gas stations, and “quick service” restaurants (such as pizza, burgers, coffee houses, etc). All other purchases earn an even 1% cashback.

This is my most oft-used card. I use it for all of my grocery shopping and when I have to buy gas. I don’t eat fast food that much, but I do have an affinity for good pizza, so all pizza purchases earn 3% cashback.

One caveat is that the 3% earnings for the above categories are only valid for the first $600 spent (in those categories) each month. After that, you only earn 1% for those categories. This limit is not a big deal for me, as I’m not a big spender. If you tend to spend a lot in these categories, keep an eye on how much you spend and switch to a different rewards card when you hit the limit, such as the Citi Professional card mentioned below.

Reward earnings can be redeemed for a check after you accumulate $50, or you can redeem $200 in rewards for a $250 check. If you can wait until you reach $200 in rewards, this effectively increases the reward percentages to 3.75% / 1.25%. Not bad. Occasionally you can even find a sign-up bonus for this card as well, so keep your eyes open.

2a) Citi Professional Mastercard - earns “Thank You” points

Rewards: earn three “Thank You” points for every dollar you spend at restaurants, gas stations, certain office supply merchants and auto rentals. All other purchases earn one point per dollar spent.

My primary use for this card is at restaurants and office supply stores. I probably dine out a little more frequently than I should, but at least I’m earning three points for each dollar when I do. It’s also a good alternative to the Chase Freedom card for gas stations.

“Thank You” points are redeemable for gift cards to a multitude of places, such as Home Depot, Target, Macy’s, Circuit City, and many others. Also, you can earn 10,000 bonus points, redeemable for $100 just for signing up.

2b) Citi mtvU Visa - earns “Thank You” points (for students)

Rewards: earn five “Thank You” points for every dollar you spend at restaurants (including fast food), bookstores, music/video stores, and movie theatres. All other purchases earn one point per dollar spent.

If you are a student, a the mtvU card from Citi is a great option for racking up points quickly. I use it primarily for restaurants and bookstores, and since Amazon.com falls under the category of “bookstore,” all purchases from Amazon earn 5 points per dollar spent!

You can earn earn bonus points for paying your statement on time each month, plus extra points for earning good grades each semester. Sweet.

The nice thing about the “Thank You” network is that the points are not exclusive to the individual Citi card. Rather, you can aggregate all of the points you earn from multiple Citi cards into one account by listing the separate “sponsor” accounts. I have all four of my Citi cards linked to one “Thank You” account.

3) American Express “Blue Sky” - earns points

Rewards: earn one point for every dollar spent. Points are redeemable for travel credits (such as airline tickets, hotels, and cruises). 7,500 points equals a $100 credit, which is equivalent to just over a 1.3% cashback rate. Once you have enough points to redeem, make a travel purchase, then call AMEX (or go online) and request a credit toward that purchase. Easy enough.

I use this card for my collective “other” category, meaning anything that does not fit into the aforementioned categories. In other words, anything that would net only 1% cashback from another card is applied here. What initially attracted me to this card was an offer for 30,000 points as a sign-up bonus. Keep in mind that this was a targeted offer and is currently not available directly on their web site. They also gave me a massive credit limit!

Summary

With proper usage I can net a solid 3% cashback or more for most of my spending. For all other purchases, I can earn at least 1.3%, which is decent. Are the cards I list the “best” ones available? Probably not. You may find a card with slightly higher percentages. However, for cards with no annual fee and without tiered reward systems, these are good choices.