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An End-of-Year Credit Card Tune Up

As we head into the cold December days (or, in New York, mid-60 degree days) I thought that now was as good a time as any for a little credit card tune-up. I almost titled this post Thirteen Ways of Looking at a Bluebird (a joke that will make sense to the exactly zero percent of people who live at the intersection of being fond both of early 20th century American poetry and credit cards)…

Anyway, where the hell was I? Oh yes, the end-of-year credit card tune up. If you’re anything like me (and wow, do I hope you’re not for so many reasons) you find yourself right about now with a pile of credit cards wondering how you got to this point. That doesn’t matter, you’re here. But for those newer to the game (or who feel like it’s starting to spiral a wee-bit out of control) it’s good to have a plan – an outline for how to get your head around all of the card options out there. Plus, you’ll want to make sure you’re keeping some cards open for years — your credit score will benefit from having credit lines open for years. I find it helpful to think about credit cards in these 3 categories:

CARDS FOR SPECIFIC CATEGORIES OF SPEND
Cards in this category come down to your answer to this question: How many credit cards do you want to have to juggle on a day-to-day basis? You may decide that zero is the correct answer — you just can’t deal with remembering to use one card for this and some other card for that. That’s fine – there’s no wrong answer here. For me, these are the best options for category-based spend (for categories that just about everyone spends money on), and it doesn’t require much card juggling, as some of these you’ll set up on auto-pay and not even bother to stick in your wallet:

Restaurants/Travel
I use the Chase Sapphire Preferred because of the 2X Ultimate Rewards points in these categories (newbies: these transfer to United, British Airways, Southwest, Marriott and a bunch more). When I actually did the math, this was more of a borderline decision than I had originally thought. That $95 annual fee after the first year meant I had to put $4750 on the card (which earns 9500 points) to break even. I ended up getting a card for me and adding my wife as an authorized user for the first year, then canceling and getting a card for my wife and adding me as an authorized user. Between the two of us we hit that level of spend. But I’m not 100% sold that I’m going to keep it.

Groceries
The Amex Blue Cash Preferred (link) earns you 6% cash back on your first $6,000 spent at groceries stores (and 3% cash back on gas, but that’s not the best offer out there – see below). Even with the $75 annual fee, almost everyone benefits from having this card. A family with even 1 child likely will max out the $360 cash back ($285 net, after annual fee). I smile every time I use this card, and I don’t get any affiliate payout for it — how can you possibly argue with 6% cash back on groceries?

Gas
The PenFed Visa Platinum Cash Rewards card (link) gives 5% cash back on gas, with no annual fee (you need to be a member of a qualifying organization to join the Pentagon Federal Credit Union, which you can do by joining Voices for America’s Troops for $15). I don’t have this card, as I spend next-to-nothing on gas. But if you don’t live in Manhattan, why wouldn’t you want 20 cents per gallon given back to you? And since you’re just using this for gas, just leave it in your car – you don’t even have to carry it around with you.

Internet/Cable/Cellphone
I bring this up because the Chase Ink Plus (link) and Chase Ink Bold (link) offer 5 Ultimate Rewards points per dollar spent on Internet, Cable and Cellphone. Even with the $95 annual fee after the first year, these cards pay for themselves — I spend roughly $300/month on various Internet/Cable/Cellphone bills. That’s $3600/year or 18,000 points (roughly $180) earned by just using this card for auto-pay on those bills. I won’t even get into the whole buying gift cards at Office Depot, which is a whole other reason to get the cards. But even if you get the card, pay those bills on autopilot and move on, you’ll end up ahead – and you can just put the card away and not bother carrying it if you don’t want to. Then enjoy the benefits on your credit score of having long-term open credit on your report.

EVERYDAY SPEND CARD
You basically have two options for a card for your everyday spend (by everyday spend I mean anything that is not in the above categories…): get a card that gives points or a card that gives cash back. There’s no right answer here. I think the best cash back option (oddly enough) is the Priceline Visa (link) (I know, weird right?) which offers 2% cash back on everything with no annual fee. Remember – if you get a points-earning card you are basically buying points at 2 cents a piece (since you are forgoing 2% cash back). That can certainly still be a good option, but let’s face facts — those points aren’t free.

For my everyday card, I have the United Club card (link) — it’s $395 annually (though readers have told me you can go to a Chase branch to apply and you’ll get the first year free). I like it because I’m a United flyer and it offers me 1.5 miles per dollar spent on everything and includes a United Club membership (at a price less than just purchasing a membership). That card isn’t for everyone (if you don’t fly United and you won’t use the Club, it makes no sense at all). Many folks use the Sapphire as their daily card. I used the Amex Starwood card for years. Either is a fine choice. I think if you want United points, get the Sapphire; if you want anyone else’s points, get the Starwood (because of the flexibilty). But if you’re not putting a ton of spend on your cards, you may find that you’re best off taking the cash back. Do the math before making this decision. For example, if you only spend $10,000/year, that $200 cash back will likely be more valuable to you than 1 night at a Category 4 Starwood Hotel (even if that hotel would cost $200 — there are plenty of cheaper options for getting a night in a hotel). It’s worth doing the math before deciding whether to go cashback vs. points for everyday use.

CARDS YOU GET FOR THE BONUSES
Throughout the year you’ll grab cards because of a bonus and never use them again. I don’t need to re-hash them here, but let me recommend that everyone at some point get the US Airways Mastercard (link). It’s 40,000 miles after first purchase with no annual fee the first year. There’s literally no reason not to get it. You are welcome to use my free credit card planning service if you find this overwhelming, or just want some ideas of how to group cards for your next couple of churns.

As I said, I find it helpful to think of cards in those 3 categories as I plan what my credit card applications will look like over the year. These provide a nice balance of cards that will give you benefits for purchasing things you already purchase, as well as helping you to build up credit by keeping cards open over the course of years. And, obviously, grabbing those 50,000 mile bonuses as they come up.

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  1. AY YAY YAY! Do you *really* go through this set of questions every time you spend? Or do you have some sort of Artificial Intelligence engine guiding you?

    Seriously, I always thought someone show write an app to help people who are getting ready to pay for something–to help them decide what card to pull out of their wallet!

    • @bluecat…

      I’ve boiled it down to this: I use one card for groceries and one for restaurants. Everything else on United Club card. Well, except for gas and you can just keep that in your car. It’s not too bad, I promise.

      Also – someone HAS come up with that app, but it’s not quite ready yet. It’s called Wallaby, and the idea is that you have one physical credit card and it has the intelligence built in to assign it to whichever card gives you the most points. Read about it here:
      http://www.walla.by/

      • There is also an iPhone app called Glyph (blue G on white background) that will tell you the best card to use based on your GPS location.

  2. Thanks for the clear and informative post. Although I must point out that there’s nary a word about what you had for dinner/dessert and how hot it was on your latest first/biz trip to Bora Bora. And not to completely belittle you but how could you not mention what color your provided pajamas were and the precise degree of angles your seat was capable. How are we to know whether you were able to comfortably lie flat or were forced to endure the indignity of a slightly-raised pajama-clad torso? I guess I’m asking, what exactly is the point of this blog? Clear and useful information will only take you so far. I’ll give you the benefit of the doubt though and am sure you’ll address the dinner/pajama in your next post. (Please god, NO!)
    I’ve finally had to start delete a lot of these travel blogs. I just can’t waste any more time hoping to glean a nugget of useful info amidst the generally useless pretentious, self-congratulatory pablum. Thanks for one of the few refuges remaining from such.
    (Although I think I speak for many in our disappointment with your glaring lack of haiku offerings. You might want to address that.)

    • @Chris – I apologize profusely for my shortcomings. I promise you will hear a LOT more about my in-flight pajamas :)

      On a plus note, I have a flight coming up next week. Expect a haiku…

  3. what about chase exclusives freedom card as an everyday card?

    • @Robert: I think it’s fine, especially if you have the Sapphire or Ink cards since the Freedom points can go into your Ultimate Rewards account.

      However, depending on how you use those points you still may be better off with the Priceline 2% cash back card or the Starwood card, as it gets you (effectively) 1.25 points per dollar.

      Yes, you can get the $75 bonus each quarter with the bonus categories, but that always seemed like a lot of tracking for just $75 benefit – YMMV.

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