My New Credit Card Strategy

One of my goals for 2013 was to put every purchase on a credit card. Before I’d even published that post, I had a plan in place and it’s been enacted. I really should have done this sooner, but I didn’t want to while the refinance was in progress and my brain totally forgot about doing it after I closed on the condo because I’ve gotten so used to paying for everything with my debit card.

What did my plan entail? Asking.

I asked my primary credit union to increase my limit to $10,000. They said yes, basically on the spot. That card gives 1% back on everything and it will get automatically deposited into my membership accounts every month. Easy cash back, awesome.

The second step was to ask my other credit card company to increase my limit to $10,000 as well. I didn’t get the answer I wanted at first and I didn’t give up. I politely explained that 30% of that amount represents a very small amount of my monthly income and my monthly spending and asked if there was anything further they could do. I was transferred to someone with more authority who did give me a bit more of an increase from the initial offering. I’m happy with that. This card essentially gives 2% back on gas stations, drugstores, and restaurants.

For the next 6 months, I plan to ask for no new credit. In July, I will investigate refinancing again and I will also look into a third credit card. I’m considering looking for a no foreign transaction fee for that one, for use when traveling.

My tentative new credit card strategy is as follows:

  1. My dividend rewards checking account pays a pretty healthy amount of interest that would take a LOT of spending to make up for losing, so I will use my debit card for the first N in-person transactions each month. I may decide to skip this step later or figure out another way to get to the N transactions.
  2. All purchases from the following will go on credit card #2: Amazon.com, restaurants (unless I learn that they don’t match the merchant code for that), gas stations, and drugstores.
  3. Everything else will go on credit card #1. This works out great because it has the highest limit.

There. I finally feel like a grown-up, having a credit card with a limit > $1,000. It’s pretty cool logging onto the online banking and seeing how much I’ve earned in cashback for not even modifying my habits. I figure that I should be able to earn $15-30/month in cashback, with which I might be able to stay above $1,000/year in passive income for 2013.

Readers, what is your favorite credit card?

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25 thoughts on “My New Credit Card Strategy

  1. We have an Amex cash back card that we’ve had forever. I’m not good at looking for new cards regularly and this one has worked well for us.

    However I do need something like your dividend rewards checking account. Is there a balance maximum for this account?

    • I’ve heard good things about some Amex ones. I think that chasing points is too much effort if you keep your spending low.

      There is a balance maximum on the high rate. I would look around at credit unions in your area. Alliant Credit Union which I believe is available to online only customers has a checking account at 0.747%: http://www.alliantcreditunion.org/depositsinvestments/checking/ without the complicated debit card transactions that mine has, which is probably more worth it for the time.

  2. My favorite card for charging overseas is Capital One. The last time I did credit card research it was the only card with zero foreign transactional costs.

    You always want cash too when travelling and that certainly increases one’s pressure to carry high amounts for unexpected mishaps. That stopped when I obtained the Citi credit card. Citi has an awesome international presence and charges no foreign ATM withdrawals from qualified ATMs. I find out before I travel which those are on Citi’s website and unless you are going to remote parts of the world, they should be plentiful.

    • FYI, I’ve also found some through PenFed. I think I might go with one of theirs, we’ll see. I have a Charles Schwab checking account that reimburses international ATM fees (supposedly) that I plan on using on my next international trip.

  3. Chase Ink Bold. After fees I pay for my antics, I sit at about 4% back. Not cash, but gift cards. But what I really use the points for is travel. Just bought 2 roundtrip tickets to Bali in first class for $160.

    I don’t think this is passive income. If you use a coupon to save some money, do you count that as well?

    • That card also has no foreign transaction fees!

      The card I have that deposits the cashback directly into my membership accounts feels like passive income since it requires pretty much no effort on my part. No, I don’t count coupons to save money. Do you just count credit card rewards as reduced spending then? I think I might if they come in the form of gift cards.

  4. Capital One cut me off after too long a period of inactivity. I only miss it when I go overseas, though the better exchange rate from charging vs. cash usually makes up for it.

    I have a citicard and a chase, and prefer the citicard. I try to remember to use the chase once a year or so, and I like having it as back-up if something goes wrong with the citicard.

  5. I have a Discover card that I love! I’ve had it for years. I get 1% back on all purchases and 5% back on a different category of transactions each quarter. I hoard the cash back in my account and then you can get a bonus when you turn it into gift cards. This fall I turned $645 in cash back bonus into $700 of Sears gift cards which paid for the majority of a washer and dryer on Black Friday.

    I carry a Citi mastercard as a back up to use when someone doesn’t take Discover.

    • That’s a pretty sweet deal on your new washer/dryer set! Maybe I should try to time mine breaking down around Black Friday. Do you find that a lot of places don’t take Discover?

  6. I agree that Capital One is good for not having foreign transaction fees, but besides that one nice feature I do not recommend Capital One.

    Hands down my favorite card is the Citi Forward. If you use for flights, hotels, or gift cards you essentially get 5% back on Restaurants and Bars, Amazon.com (classified as Bookstore), Movies, and Music/iTunes.

    • Why would you not recommend Capital One other than that?

      I’ve heard good things about the Citi Forward, but I can’t find it on their website. Maybe it was too popular and is no longer open to new customers?

  7. I (and a ridiculous percent of the people I know) have the chase freedom, which is good if you don’t mind the skipping categories thing (it’s 5% on featured categories, 1% in general). I got a $300 bonus when I signed up for that one, so it’s pretty high on my list just for that.
    I also have a citi card, not sure which. It was originally “drivers advantage” which had a complicated, but awesome, rewards program for gas and auto repairs and miles driven. When I *first* got that, it was also 5% on groceries and gas (which was by far the most stuff I charge). That’s what got me hooked on rewards cards. Now I just redeem my “thank you points” for student loan rebates (cost effective, but very unglamorous).

    • It seems like the biggest draw of the Chase Freedom card is the sign-up bonus since some of the categories are pretty obscure. I don’t remember the last time I went to a theme park (maybe 2007?) or Kohl’s and I go to maybe two movies a year, but often friends buy the tickets and I give them cash. I’ve heard good things about the card though!

      Thank you points for student loan rebates? That’s a pretty sweet deal!

      • The Chase Freedom card isn’t what it used to be. It used to be easier to get 5% on stores you actually frequent. Now its down to just Kohl’s and Best Buy. I cannot max out 5% on $1500 anymore.

        My wife now has an American Express card which pays 6% at grocery stores. That card is saving us more than Chase Freedom these days.

  8. I have an American Express BlueCash card that pays 1% on everything and 3% on grocery stores and 2% on gas stations. I have had my Chase Freedom card the longest and have probably received $1000 cash back so far. For me, those two cards are all I need.

    For traveling overseas the best card I have is a Charles Schwab debit card. Not only is it no fees at any ATM worldwide (they rebate all of your fees back automatically at the end of each month) but they are the only card I know of that charges no foreign transaction fees.

    • Those sound like a good pair of cards to have! I have a Charles Schwab debit card as well and I’m looking forward to giving it a test drive on my next international trip. Thanks for confirming that they have no foreign transaction or ATM fees! (That’s the main reason I opened it.)

    • I agree with you on the rotating category nonsense. That card looks awesome except that I don’t have a Fidelity account (Vanguard!). I also love the shade of green it is, haha :)

      • You don’t actually need to invest with Fidelity. You just open a Cash Management account (basically a money market account) to redeem the reward, then ACH from Fidelity to your credit union. I do have a ROTH with Fidelity, but other than that, I have a regular brokerage accoutn with about $1.00 worth of blockbuster and the aforementioned cash management account which i never use except to redeem rewards. If you’re worried you could always buy one of Fido’s index funds as part of your allocation :)

  9. I keep it pretty simple. I use my B of A 123 card for groceries 2% and gas 3% CB. And I use my SW Chase card for everything else to get 1% since I fly SW a lot and you get some of the best redemption rates for SW points.

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