Speaking of credit card rewards optimization, I was thinking about how the algorithm might work for me. I’m curious if others have a similar system. Man, I have a lot of cards…
Tier 1 – Special Rotating or Temporary Promotions (5%+ back)
First up, you’d want to check for cards that offer an exceptional bonus cash back. Chase Freedom and Citi Dividend both offer 5% cash back on rotating categories on up to $1,500 in spending each quarter. That’s a possible $75 extra each quarter for each card. Other cards may offer a temporary bonus as well.
- Chase Freedom® – $100 Bonus - 5% category are Gas Stations and Kohl’s® from 7/1/14 – 9/30/14.
- Citi® Dividend Platinum Select® Visa® Card - Earn 5% cash back every quarter in must-have categories. Right now, on eligible purchases within the Hilton Portfolio, car rental agencies, movie theaters and theme parks from 7/1/14 – 9/30/14. Enrollment each quarter is quick and easy.
Since I don’t buy that much gas, I would only charge restaurants on the Chase Freedom (but not gas) and airline purchases on the Citi Dividend.
Tier – Permanent Category Bonuses (3%+ back)
Some credit cards offer a year-round bonus on things like restaurants, travel, gas, groceries, and more.
Tier 3 – Everything Else (2%+ back)
Here’s your backup catch-all card. Don’t settle for 1% back here, you can do better.
- Fidelity Investment Rewards American Express® Card – 2% cash back on everything, which transfers to any Fidelity account (non-401k).
- Starwood Preferred Guest® Credit Card from American Express – Up to 5 Starpoints for every eligible dollar spent at SPG Hotels & Resorts, 1 Starpoint for every eligible dollar spent everywhere else.
If you like airline miles or hotel points, here’s where your personal spending habits may also factor in. I value Starwood points at 2 cents or more per point due to their ability to convert to miles and primarily their value in hotel stays (including Sheraton, Westin, W Hotels) so I actually switch between a 2% cash back card and the Starwood depending on my point balance as I like to keep enough to pay for upcoming hotel stays. My Fidelity cash ends up in a 529 so that’s not as much fun.
American Express cards also offer extended warranty protection that I like for larger purchases as their customer service is always the easiest to deal with when you actually need to file a claim. However, American Express cards aren’t accepted in certain cases (like my auto insurance), so you should have a Visa/Mastercard as a final backup.
All in all, it’s not as crazy as it seems. If the Chase/Citi 5% categories aren’t daily-use categories but things like airfare then I don’t keep them in the wallet (0-3 cards). Out of Tier 2, I only keep the Blue Cash AmEx with me (1 card). Out of Tier 3, I actually have a similar-but-grandfathered Fidelity 2% Mastercard and the Starwood AmEx (2 cards). So the total is really about an average of around 4. I’m thinking of switching to an All-Ett “world’s thinnest wallet” which should cut the thickness in half.
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