Tuesday, March 13, 2012

My Personal Credit Card Strategy, Or, How To Save at Least 5% On Life

A little bit of strategery (thank you, W.) can save you a lot of money in the long run.

It seems like far more people than normal have been asking me about my credit card strategy recently, so I figured I'd write it all down so that, when asked about this in the future by someone, I can reply in a properly haughty blogger voice, "Oh, you can go read that on my blog."

But seriously, for some reason people have been asking me about these things a lot lately, so here's my advice, for the world to see (though, honestly, this advice really only applies to people in the USA, and you probably need good credit to get most of these cards). I will be the first to admit that the two biggest drawbacks of my credit card strategy are 1) my rewards are spread out among multiple cards, so even though I'm maximizing my total award amount, I sometimes have to wait a while to build up enough rewards on a particular card to redeem them, and 2) this strategy requires slightly more effort and planning than just putting everything on one card. I can live with those two shortcomings, but I certainly understand if you can't.

Also, this strategy assumes that you carry no credit card balances, ever, i.e. that you pay off your credit cards in full every month. If you don't and get charged interest, no rewards anywhere will make up for what you'll pay in interest.

Anyway, with no further ado, here's how, with a little bit of effort, you too can save at least 5% on almost all of your expenses:

My primary card: American Express Blue Cash Preferred.

This is an awesome card. AMEX's customer service is legendary, and rightfully so. But more importantly, for the purposes of this post, this card gives you unlimited 6% cash back on groceries, 3% cash back on gas and at department stores, and 1% cash back on everything else. My wife and I eat almost all of our meals at home and spend a lot on groceries, so it's well worth it to us for that alone. The downside is that there is a $75 annual fee, but you get additional cards on the same account for free. If you spend more than $25/week on groceries (and who doesn't?) you'll more than make back the annual fee in a year. And they're currently offering a $150 sign-up bonus, which is more than I got when I originally signed up for the card. Seriously - what are you waiting for? If you ever eat at home, get this card. And email me for a referral link, please ;)

Because of AMEX's awesome customer service, I also put all of my random charges (i.e. that don't go on one of the below cards) on this card.

My Travel Card: PenFed Premium Travel Rewards American Express.

I'm actually rather new to this card - my previous main travel card was a Capital One card that, unfortunately, is no longer available. I end up flying a good deal, so I wanted a card that maximizes the rewards I get on airfare, without locking me in to one carrier - and this card gives you 5 points for every dollar spent on airfare with any airline (essentially, 5% cash back). It also offers premium-level travel insurance (including baggage and delay insurance) at no extra cost. It even has no foreign transaction fee, although as an AMEX, it's not terribly useful once you actually are abroad. All of this for no annual fee!

What's the catch? You have to be a member of the Pentagon Federal Credit Union. But, lots of people are eligible for free membership - have you ever donated blood? Congratulations, you're eligible. You just have to stick $5 in a regular share account with PenFed before you can get your hands on this card.

My Rotating Cards: Chase Freedom, Citi Dividend Platinum Select, and Discover It.

All of these cards are basically the same - they offer 5% cash back (limited, unfortunately, to $1,500 in eligible spending per quarter) on purchase categories that change every quarter. They're also a little irritating in that you have to sign up every quarter for the 5% cash back, but oh well - having all three gives you 5% cash back on a bunch of different categories every quarter, which is handy. Sometimes, the categories are quite awesome (e.g. charitable donations, restaurants, or Amazon.com) and sometimes they're less awesome (e.g. theme parks or toy stores), so at the beginning of a quarter, I pick which 1-2 cards I'll actually bother to carry with me that quarter. Oh, and importantly - none of them have an annual fee.

Other cards you may want:

If you travel abroad, even just occasionally: any Capital One card with no annual fee. Capital One used to have a great travel card, but they've reworked their card lineup, and none of them are terribly interesting anymore. But, if you go abroad, even just occasionally, you'll want a Capital One card (whichever Visa or Mastercard looks good to you with no annual fee) because Capital One is the only major credit card issuer that doesn't charge any foreign transaction fees! Other cards can charge 3%+ in foreign transaction fees, which can add up fast when you're on vacation.

If you drive a ton: a card that gives you 5% cash back on gas. PenFed has two cards like this - one that gives rewards in the form of points and the other as cash back. I don't drive terribly much, so I just stick with my AMEX's 3% cash back or the 5% cash back from my rotating cards, but if you drive enough, you may want to always be able to get 5% back on gas. If so, take your pick of these PenFed cards - neither has an annual fee - though the membership requirements for these cards are the same as with my airline travel card described above.

If you stay in hotels frequently: a hotel rewards card. When I travel, I almost always stay with friends or family, so I don't have much use for a hotel rewards card - but if you're a semi-frequent hotel-goer, it may be a good idea to get one. I'd probably go with the AMEX Starwood Preferred Card, but you can pick your own favorite hotel chain, if you want. The downside with almost all of these is that they almost always have an annual fee, so you'd need to use them a decent amount to make it worth having one.

At least one card from each major credit card type. Yes, this means you will have at least 4 credit cards, maybe more. However, each of the major credit card types (AMEX, Visa, MasterCard, and Discover) have been pushing brand-specific promotions more and more often, and some of them have been pretty nice. Here are a few deals I've taken advantage of in the past few months:
  • 15% cash back at Groupon from Discover
  • $25 free to spend at a small business from AMEX
  • $10 off $50 at Amazon from MasterCard
Though it's a little irritating to juggle so many cards, you can only take advantage of brand-specific promotions if you have the right card. So, you might want to be sure to have one of each lying around somewhere.

Well, you now know all my credit card secrets - I hope you find the above information useful, and I hope it helps save you some serious cash over the long-term. (Now, if only I could figure out a way to get 5% cash back on my rent ...)

Oh, and if you're in the market for an AMEX or Discover and want to support the blog, please shoot an email to the address in the upper right part of the blog and I'll send you a referral link - thanks!

Post-publishing Ninja Edit: After publishing this post, someone pointed me to a nice card I didn't mention above - the Citi Forward card. It gives you 5% cash back on restaurants and Amazon.com (along with a few other entertainment categories). I may add this card to my lineup, if I can convince my wife to let me get yet another card - and it seemed nice enough to let you all know about it too.


  1. If you run into trouble abroad, AMEX is *great* to deal with. My purse was "picked" in Brussels and they got me money and a new card the next day. I was eternally grateful and have used them for travel ever since.

  2. Sounds pretty good. I differ a little in that I don't want lots of credit cards. I carry the AmEx Blue and Citi Mastercard and this covers everything I need. Both are cash back rewards (I have the no annual fee versions of each) and with these I can apply the money to whatever life offers.

  3. Brent: indeed, AMEX is great. On my most recent trip to Europe, it wasn't accepted very many places, however, which is why I think a Capital One Visa or MasterCard is essential for overseas travel.

    twin: I certainly understand that the above might be a little to complicated for some people, but it works well for me, and it saves me at least 5% on almost everything. In the long run, that's a substantial chunk of change!

    -The Angry Bureaucrat