A common question I’m asked constantly is why do you have so many credit cards and what do you do with all those credit cards? There’s a logic behind almost every credit card I have gotten till date and I’ll dive into what the thought process is with this article.
What’s the Purpose?
One thing I’ve come to realize, and better late than never, is that every purchase I make, whether it be my groceries, a dinner with friends or a $1 Pizza slice, there is something to be earned back. While it may not be a lot, it’s still something. If my grocery bill every week as a student on a limited budget was $30/week ($1560/year) and I got back 5% of that: $78, it was a significant amount to me as a college student. Compare that to getting back nothing when using a debit card and I was sold.
If you know you have to spend on certain things in life but are unable to maximize the returns you get, you need to categorize them and see what works best for each category.
If you have existing debt and you wish to move it to another card so that by the end of that low APR period, you have the funds to pay out the debt, you might want to look at Balance Transfer Cards.
Creating categories and matching cards
My main categories are: groceries, gas, restaurants and travel. I cook more at home to eat healthier and avoid spending much on restaurants while I travel a lot because life’s too short to stay at home all the time. I knew my main categories of spend and I start seeing what cards match best in terms of their returns.
Since the Discover IT was my first card, it offered 5% cashback on groceries Q1 of every year so I put all my applicable spends there. Knowing HEB (grocery store of my choice) sold gift cards to everywhere else, I’d buy a gift card and shop on amazon, target, or ebay depending on the miscellaneous items I wished to purchase.
The Chase Freedom Card in the same quarter offered 5X back on Gas which I used to fill my car. But in Q2, the categories swapped and Discover had Gas while Chase offered groceries. Since I realized the value of points that the freedom card offers, I started buying HEB gift cards which I could use at the Gas Station to fill gas and the same practices I did with the Discover card the previous quarter.
For Travel, I wanted a card that not only gave me the highest return across the board but also had unique perks that really put my mind at peace. Hence I decided to take a leap with the Chase Sapphire Reserve Card. With its 3X back on Restaurants and Travel (literally ANYTHING remotely travel related) it became my top card. Among all its amazing benefits, the two that really benefit me are the Lounge Access and the Primary Rental Car Insurance.
So far I have mentioned three cards which really fit my bill but I wanted something that was good for miscellaneous purchases too and the Chase Freedom Unlimited Card with its standard 1.5X back on all spends was the right card for that. This card not only gave me a sweet sign-up bonus of 20,000 UR points worth over atleast $300 in travel (when transferred to the Reserve), but helped me complete my Chase Trifecta.
Deciding between Cashback and Points
While my first two cards, Discover IT and AMEX Blue Cash were both cashback cards with their own amazing benefits, I realized the true value lay in points after I had booked round-trip domestic tickets using points I gathered from one quarter worth of grocery shopping.
For reference, the cash price of the tickets was $96.60 which would’ve required almost $2000 of spend had I used the Discover card. So I immediately saw the benefit of spending money on cards that earned me points I could transfer to partners or use through the portal in a way I didn’t have to pay (or paid a few dollars relative to the actual price) for my tickets/hotel stays.
I realized Amex MR points and Chase UR points were the most valuable points and I knew I had to collect them. Hence I created a strategy to get cards that maximized the point earning potential and started using those cards.
Do note though, you don’t need a whole lot of spend to collect points – the sign-up bonuses are what are the best part about the cards. Higher the spend, better it is to spread across various cards to get those lucrative sign-up bonuses.
Some people still prefer cashback and that’s a choice they make because they either don’t travel or do not wish to spend time finding the best point redemption and that’s alright.
What’s the best strategy?
If you want to really save up to travel for free or really cheap, then you have to play the points game – which means you keep collecting points and do not redeem them for cashback. For potential future emergencies, you should look into emergency funds which I cover here (it’s a good practice to start early).
Since most credit cards have minimum spend periods of 90 days to get the sign-up bonuses you can space out your credit card applications accordingly. If you’re a thin file (low history), you should ideally space out your applications to once every 6 months to let your credit score grow more. If you’ve already gotten a well established history, you can do once in three months.
Plan to apply for a credit card with a bonus only if you know:
- You have spends near or over the Minimum Spend amount in the next 90 days
- You have the funds to pay off all balances in FULL to receive the sign-up bonus.
Failure to meet either of the criteria is a red flag and I recommend you NOT to apply for a card. Planning is key and I hope you are able to create a strategy that best fits you,
Relevant topics and articles
Across the blog, I have covered topics within Points and Miles that go deeper into ways of earning more of them without really spending much or out-of-the-way. Additionally, feel free to check shopping tips/tricks out incase you’re interested.
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