I’m going to step up and be an adult and admit something. Pssst, come a little closer….I don’t want to shout. OK, that’s too close. Yes, right there.
Shhhh…I’ve been giving a piece of advice that, now that I think more about it, is, how do I put this….wrong. I’ve been giving a wrong piece of advice.
But I have good news – I’m going to correct myself. Here goes:
I’ve been saying for a while that for many people their best bet is to get a 2% cash back card as their everyday card, and to stop using it only to hit minimum spends on new cards where you’re going for a bonus (or if there are cards with a category bonus – say, the Sapphire Preferred on dining and travel – where you get at least 2% back in points on certain categories). For those who don’t use points for business class international travel, most people are best off getting the 2% cash back card as their everyday card. (The other way of looking at this is that all points you earn through spend cost 2 cents, which is what you’re forgoing by not getting the Amex Fidelity card that offers 2% cash back).
However, that advice is wrong. Or at very least, it doesn’t maximize your outcome.
If you have a 2% cash back card for everyday spend, your best bet is to buy Vanilla Reloads to satisfy your minimum spends on cards you’ve churned. Why? Let’s look at it this way:
If you have a card (like the Amex SPG) where you need to spend $5,000 to earn a bonus, you can purchase 10 Vanilla Reloads for a total of $39.50, then go deposit the money into your Bluebird account and pay off the $5,000 credit card bill with those funds.
If you do what I was previously suggesting – just putting $5,000 worth of regular spend on that Amex SPG to hit the minimum spend – you are forgoing $100 in cash back on that $5,000 spend. You’ve just cost yourself and extra $60.50 by listening to me.
It’s worth doing the math for whatever everyday card you use. I use the United Club card as my everyday card, where I earn 1.5 points for regular spend. If I shift $5,000 in spend from that to a card where I’m trying to hit a bonus, I’m forgoing 7,500 United miles. If I go the Vanilla Reload route, I’m basically paying $39.50 for 7,500 United miles. That’s not a bad cost per mile (roughly $5.64/1,000 miles).
So I take back my earlier advice and admit that perhaps I was just a little bit, ummmm, wrong.