It’s no secret that I love optimizing things. I have to make a strong effort to optimize what I optimize though. Sometimes I get caught up in optimizing things that just aren’t worth optimizing. Lately, I’ve become pretty excited about the idea of optimizing my credit card rewards. I slowly realized that I spend enough to earn something from funneling all my purchases through credit cards, but the less you spend, the less you’ll earn. I’ve been tracking my credit card spending over the last few months in a Google doc. I made a list of the major extra spend categories that you can get credit cards for and made a pie chart of my spending in those areas:
Notice how big the “Everything else” category is in the pie charts? Yeah. So the biggest win will be to optimize there.
Side note: Notice that last year my Restaurants spending was 20.7% in an average month and this year it’s only 8.2%? I’ve decreased it from about $400/month down to $150/month. That’s a pretty good drop! I’m also not spending as much on Amazon.com, which is good too.
My current system is as follows:
- 3% Amazon.com spending (Chase Amazon.com Visa)
- 2% Drugstore, restaurant, and gas station spending (Chase Amazon.com Visa)
- 1% everything else (Chase Amazon.com Visa or credit union Visa)
I could double the Everything else rewards by simply by adopting the Fidelity Investment Rewards American Express Card that gives you 2% back on all purchases. (Thanks to tj and Executioner for recommending it on my last credit card strategy post!) I would be able to redeem the rewards for $50 in cashback every 2.5 months based on my current spending for a reward of about $240/year versus the current $120/year. Not everywhere takes American Express, but many places do. Based on last year’s spending, adding the Fidelity 2% Amex would have netted me an additional $175 in cashback over my current system since that pulls in groceries, airlines, and department stores, as well.
Another option would be the Fidelity Investment Rewards Visa Signature Card, which gives you 1.5% back on your first $15,000 in spending and 2% thereafter. But, my estimate of “Everything else” spending for the year is only $12,000, so I’d likely only get the 1.5% back on everything. You can’t redeem the rewards until you’ve accumulated $50 worth either and the points are separate from the Amex one, so I’m not sure if it’s worth it to go for both. The break-even point would be if > 50% of my “Everything else” spending dollar-wise was done at places that take American Express, then combining that card with a 1% one makes more sense than using the 1.5% Visa card.
I’ve also looked at cards with bonuses for the following categories:
5% cashback at gas stations – That’s a great cashback rate, except that I spend very little at gas stations. Last year, I averaged $40/month and this year I’m at $23/month so far. Getting a 5% gas card would net me an extra $8 this year or an extra $14 last year. That’s not nearly as worthwhile as the $174 jump with improving the “Everything else” category. You also need to be careful to not overextend yourself with credit cards and you can’t redeem the cashback often enough that the points expire. So if I was to get a gas card, it would be the PenFed Platinum Cash Rewards card that automatically credits your 5% cashback each month. The problem then would just be remembering to have it on me when I happen to get gas.
5% cashback on airfare – On every airline! This card is also through PenFed and it’s an Amex, the PenFed Premium Travel Rewards American Express Card. I was kicking myself for not having this card when I spent ~$1,000 on overseas flights a couple months ago since that was a loss of $40 in cashback rewards. Oh well, I did get about $10 in cashback rewards from that at least. I may consider adding this card at some later point, but I think I’ve bought all the flights that I will for this year now.
American Express Blue Cash Preferred/Everyday: This card has some great benefits:
- Preferred: 6% cashback at grocery stores, 3% cashback at department stores and gas stations, 1% everywhere else ($75 annual fee)
- Everyday: 3% cashback at grocery stores, 2% cashback at department stores and gas stations, 1% everywhere else
- Roadside assistance
6% at grocery stores with the Preferred card looks great until you factor in the $75 annual fee. You would need to spend more than $2,500/year or an average of $208.33/month for this card to break even over the Everyday card. And the Everyday card is a $25/year increase in cashback rewards at that level over the 2% Fidelity Amex, with most likely only being able to redeem the rewards twice a year. Honestly, if I got one of these two cards, it would be mostly for carrying the Roadside assistance feature and some of the purchase protection from American Express like extended warranty and return policies. Plus, right now, they’re offering $150 in bonus reward dollars if you spend $1,000 within the first 3 months of opening the Preferred card or $100 with the Everyday card. So I will probably give in and open the Everyday card eventually, mostly for the free roadside assistance and the $100 bonus.
I had been looking for a no foreign transaction fee credit card beyond my Charles Schwab debit card, but it looks like my credit union is in the process of removing the foreign transaction fees from their credit cards, so no action is required on my part to obtain a no foreign transaction fee credit card. That’ll be pretty nice.
I’ve already opened the Fidelity Cash Management account necessary for redeeming the rewards from the Fidelity 2% Amex card, but since my plan was to wait until July to apply for another credit card, I’ll hold off for another month and a half or so. I’ll apply for the Amex Blue Cash card in early October when my current roadside assistance is about to expire.
Hope everyone is having a good weekend!