Credit cards - 2

For using credit cards,  here’s my strategy. I have a basic spending card that reflects the majority of my spending. For example, the one card that I carry with me gives me rewards on restaurants and coffee, because that’s really all I spend my card for. In my car, I have a credit card for gas and groceries. I have another card for Amazon purchases, registered on my Amazon account, and that’s it. All the other cards I have are just in my other larger wallet, just sitting there. I just leave them to slowly die off. When I travel and need to spend money overseas, I’d take the card with travel rewards and no foreign transaction fees. Let me just give you a specific example, or better, show you through my credit card journey.

 

I started out with my university credit union credit card. Since I was a broke student without any credit, I couldn’t get anything from a bank. But I had a job with the university, so the credit union gave me a credit card. The initial credit limit was 200 dollars, which was small, but was far over what I spent those days. I had that for a couple of months, and I visited a Chase branch to ask for their Chase Unlimited Freedom card. They approved, and I had those two for two years. I had plans to get more cards, but I simply did not have any money to meet the minimum spending for the welcome bonuses. Then I went to graduate school, where the school paid for my business travel. Luckily, they were in the form of reimbursements, where I would spend money for flights, hotels, food, and they’d just simply reimburse me. This was perfect. Before most business travels, I would apply for a credit card, and I’d pay for the travel, get reimbursed, and I’d be left with the welcome bonuses. I did that for American Express Gold (this is a different card now), SPG (this is also different), and Chase Sapphire Preferred. The travel expenses were around 2000 dollars, so I was able to cover the extra thousand or two for the minimum spending with my personal purchases. From those three cards, I got about $ 2000  worth of points, which I spent on (unfortunately) Starbucks gift cards, and some reward travel later on. I cancelled the Amex gold and SPG, and kept the Chase Sapphire Preferred, because it had travel insurance and rental car insurance, that came in handy for some occasions. After those, I got a Capital one Savor One card, which doesn’t have an annual fee but has 3% for restaurants, and used that for most of my purchases. After college, I got the Amazon Prime credit card that returns 5% of all Amazon purchases. I got this in time for my move, to get rewards for the furniture and appliance purchases through Amazon. I then cancelled the Chase Sapphire Preferred (it had a 95$ annual fee) and got a Citi American Airlines Platinum Reserve. Since I didn’t really rent cars, this card was a better choice because it gave me preferred boarding and a free checked bag on American Airlines flights, which was my go-to airline. My last card I got was the Costco card, which I was lured into getting (with a Costco membership) by my friend. It doesn’t have an annual fee, and it’s pretty good for Costco shopping and gas. Now I don’t really get new credit cards because I plan to buy a house, and `hard inquiries’ on my credit temporarily lowers my credit score. I would like a high credit score at the time of my buying so that I get a good rate. 

 

But all in all, throughout this journey, I have earned at least $ 4000 worth of value, just from the welcome bonuses, and much more from the cashbacks and point accumulation. Rather ominously, my credit score is pretty good (high 700s). 

 

Now that you have these points, where would you use them? Different credit cards have different usages for their points. Some cards only do cashback rewards, where something like a  100 points is treated like a dollar. Some cards, notably Chase Sapphire Preferred, have a pretty good conversion bonus if you use your points for travel. You could also purchase things with your card, but I don’t really recommend it, since the products are sometimes not that great, considering their price. Some cards like Capital One offer bonuses if you use the points to purchase gift cards. I used most of my points for cashback. Cashback is usually not the most optimal way to use your points, but I was just too lazy, and hey, cash is king. For the airline points, I used them for last-minute and small-airport travels. Usually, flights you book last-minute ( less than a month prior to departure) are unreasonably expensive. However, if you book with your points, it’s not ridiculous. Also, flights to small airports (e.g. Champaign Willard Airport) are really expensive because there’s not a lot of flights. But flights booked with points are calculated by their mileage, so that isn’t quite factored in. Rather, flights to smaller airports are cheaper if they’re booked with miles.  For example, when I wanted to surprise my then girlfriend by visiting her in Champaign, IL, the cheapest flight was $433 from Knoxville, TN to Champaign. This was both because it was a `last-minute’ booking and because Champaign was a small airport. The flight to Chicago, a major airport, was much cheaper at $231, but still really expensive. Booking with points, the flight to Champaign was cheaper, because the total distance travelled was less than the flight to Chicago (about 18,000 miles). A small, but satisfactory win.

 

In summary, with the big assumption that you use credit cards within your means, they can be a fun little thing you can do to score some extra cash, to which you can do fun things with. With enough knowledge and strategy, credit cards allow you to buy Starbucks venti cold brews, and reasonable flights to a small town. What more can a person ask for?