Personal Finance 

Does It Pay To Optimize Your Reward Credit Cards?

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Reward Credit Card Cheat SheetHow many reward credit cards do you have? If the answer is more than two, chances are you’re introducing more hassle than it’s worth. If you get into arguments with your significant other over which card they should be using, you may be introducing more strife than it’s worth. When it comes to optimizing your reward credit card usage, you may be making life harder than it needs to be.

Our Credit Card Rewards System

We use two credit cards:

  • Citi Forward Card – 5 points for every $1 at restaurants and entertainment; 1 point everywhere else.
  • TrueEarnings® Card from Costco and American Express – 3% on gas, 2% at restaurants or travel, 1% everywhere else.

We use the Citi Forward card at restaurants and movie theaters and the American Express TrueEarnings Costco card everywhere else. Those are the rules, it’s that simple. We actually have a Capital One Platinum card that we use when we travel because they don’t charge a foreign transaction fee. It offers 2% at grocery stores but I don’t keep it in my wallet.

Why don’t I keep the Capital One card in my wallet? Convenience. I surrender the 1% at grocery stores and I don’t need to remember to pay the bill each month, I don’t carry the weight of having to remember to use it at grocery stores (which isn’t a big deal), and it’s one less card in my pocket.

What Rewards Are We Missing?

In aggregate, how much do you spend on your credit cards each month? We spend probably around $1500-2000 a month (except at local small shops, we charge everything to a credit card). If we had a credit card that gave us 5% on all of our purchases, we’d earn, in rewards, $75-$100 in rewards each month. If we only had a credit card with 1% cashback, then we’d earn $15-$20 a month. The spread between the two is approximately $60-$80 a month.

Few cards offer 5% and it’s usually on a few categories. Discover More rotates their categories but there’s typically a limit, which varies from category to category. Through September 2012, the 5% is on gas stations, theme parks, and movies with a limit of $1,500 across the three months (July-Sept). So we’re talking $25 in max rewards a month, compared to $5, and that’s if you were to spend $500 a month in those three categories.

Take a look at your budget and calculate how much in rewards you’re actually earning over a simpler system and see if it’s worth it for you. I did it a few years ago and realized that we were talking less than $10 a month. Even today, I have to spend $1,000 a month on groceries to reach a $10 difference in rewards between the 2% Capital One card and my 1% American Express – we never spend that much on groceries.

Revamp Your System

Once you have the data, you can revamp your system. I recommend picking two, at most three, cards to keep around and it should be so simple that it’s second nature. You shouldn’t have to keep an extra card in your wallet or purse that reminds you. It’s important that you maximize rewards while maximizing your enjoyment of life!

If you do the math and notice that you are earning significantly more, then by all means stick with it. For us, it didn’t make financial sense.

(Photo: I don’t know where it’s from but it was shared here)

{ 15 comments, please add your thoughts now! }

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15 Responses to “Does It Pay To Optimize Your Reward Credit Cards?”

  1. Shorebreak says:

    I utilize the Pentagon Federal Credit Union (PenFed)Visa Platinum Cash Rewards Card for my gasoline purchases. It earns 5% cash back on gas purchases paid at the pump, 0.25% cash back on all other purchases, no annual fee and no foreign transaction fees.

  2. Jim M says:

    Couldn’t agree more Jim – the hassle of managing credit cards often outweighs the benefits if there are too many cards to handle.

  3. cubiclegeoff says:

    I try to keep it simple, but sometimes I have to do more. usually it’s debit card for small purchases and AmEx for everything else (with its 6% groceries, 3% on gas and department stores and 1% elsewhere). The few times when Chase has a decent 5% program, we use that. And right now my airline card is doing 1.2 miles per $1 spent, so we’re using that for the random stuff.

  4. Botchster says:

    I used to have a Chase card that paid 5% on gas, groceries and pharmacys. It was great for me. They have terminated the card and now have a rotating reward like Discover, which doesn’t work for me due to CRS.

    • Shirley says:

      I use three rewards cards and find it easy to know/remember which cards are having a bonus during what dates. I use a spreadsheet for transactions for each card, check them online weekly, and put the dates and categories being featured there too.

  5. Russell says:

    Many credit cards have a way to automatically pay off the full statement balance each month. This helps you avoid forgetting a payment, especially if you have several cards to juggle.

    A word of warning, though: when setting up automatic payments, the default choice is usually the minimum payment, rather than the whole balance, so watch your choices carefully

  6. elloo says:

    Chase Freedom Card. 1% on most, rotating categories quarterly for 5%.

  7. Honestly, I worry less about the rewards and more about the sign up bonuses. You can get a $500 sign up bonus pretty easily where as with a 2% cash back reward you have to spend $25k to get $500 back!

  8. I have a lot of credit cards – most of them with Hawaiian Airline miles because I use those miles all the time to book flights or to upgrade. I also have Discover’s Escape which gives me 2 miles per dollar spent, American Express, and just got a Marriott Rewards VISA for hotel points.

    This many cards complicated my accounting and I must make sure that I pay the cards off in full before the due date. I also enter the transactions in QuickBooks so I have the numbers for our CPA at tax time ready and accurate.

    I would not recommend this many cards to others. It makes for a lot of juggling and annual fees – but for me, it is worth it for the mileage points which I use all the time.

    I like the idea and simplicity of having only 2 cards and maybe later I will go that route. For now, since I am actively going for mortgage loans, I need the high FICO scores that credit cards with a long good history give me, so I will keep them.

    Mahalo for a great article


  9. Beej says:

    Rather than offer ‘rewards’, credit cards should scrap annual fees, foreign transaction fees and late fees (the interest they charge on your overdue balance is itself a ‘late fee’). The $$ we’d save w/o these (and the time saved not having to compute which card offers the better ‘rewards’, along with the attendant anxiety re whether or not we’ve made the right choice) would (more than) make up for any ‘rewards’ the companies like to think they’re so generously proffering. It would be way simpler for us consumers, and more straightforward on the part of the companies.

    Oh. . .I try to use my debit card whenever feasible, so that the purchase is paid for on the spot. No big shock at the end of the month; no risk of interest/late fees either. (Of course this is not always possible!!) (alas)

    • cubiclegeoff says:

      Those fees mean nothing to me as I never pay them (with the exception of one annual fee which is well worth it). So the rewards are much more important to me.

  10. Mike says:

    My parents don’t have to worry about managing their credit cards since I’m doing it for them.

    When it gets too busy, I’ll probably get them to sign up to a 1.5% – 2% credit card so that they don’t have to worry about optimizing.

  11. Seth says:

    I don’t think it’s too much to keep up with if you don’t have too many. I use 3, and only one of them has the rotating categories. If I go to a restaurant, I know I use my Citi Forward card. If I buy gas, I use my credit union card. Both of those get 5% back on those purchases.

  12. Darin says:

    I’m sorry, but I fail to see the issue here. I have five different rewards cards that I use to maximize my savings. It’s really not that complicated. But even if I were somehow confused about which card to use where, and I accidentally used one the “wrong one”, it’s not the end of the world. I’d be no worse off than if I didn’t have enough cards to maximize my savings. If couples are getting into arguments over losing a few bucks due to non-optimal rewards card usage, they probably have bigger issues that aren’t going to get solved just by getting rid of a couple credit cards.

    The only valid downside I see is a slightly thicker wallet.

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