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June 12, 2008

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Great post! I saw this on CNN this morning and was hoping the info would get passed along further.

I've often found it difficult to pick the best card for my situation. There are so many options out there and it can be confusing to weed through all the choices, introductory rates, fine print, etc. I'm glad you mention the Chase Freedom card -- I recently got one and so far, I think it's great! I can get cash back, rewards at a ton of stores and double/triple rewards points at lots of retailers. This card gives you a lot of choices. The interest rate seems higher than on non-rewards credit cards, but I'm like you -- rate really isn't an issue if you pay off your balance each month. Might as well get something in return for my patronage!

I'm another one with good things to say about the Chase Freedom card. The only thing I have to remember is to check the chase shopping links first, because there are bonuses if you click the vendor link from the chase website...if it was something I was going to order anyway, then that's a no-brainer. I'm currently saving up my cash back bonus because they told me if I saved $200 in cash back bonuses, they'd give me $250. I guess we'll see if that's true. And like you, I pay the balance off every month so the interest rate doesn't really matter.

I have been using a combination of the 5-percent-back BP card, 2-percent-back Countrywide Visa, and the aforementioned Chase Freedom card. I understand that the AmEx card is better for bigger spenders, which I am not, so this strategy is, I think, the best possible for my situation. At any rate, you're exactly right, FMF; APRs should not even factor into the discussion.

Angie,

The $250 for $200 accumulated is indeed true.

Just applied for the Chase card, hopefully I'll get it. Good articles.

Anyone have any recommendations for people with low credit scores? It's very hard for me to get any decent credit card (cash back, points, etc) because of a school loan that went to a creditor 4-5 years ago.

Sam's Club Discover: tiered rate to 1% after $3000 spent...not that good, but it's where I shop most often. I agree the Chase Freedom is probably the best for my next card.

And although I don't care too much for Dave Ramsey...he does make a point about credit cards versus cash. For some reason, many people including those who call themselves frugal often spend more with a credit card than if they had cash in their wallet. I almost never go around with cash in my wallet because using it represents a lost opportunity to generate passive income. On the odd day I have cash, however, I notice that it gets spent on the items that cost a dollar or two. Somehow it's embarrasing to use your card for tiny purchases.

angie - that's true about shopping through the Chase link online. I bought our video camera @ Circuit City (after researching it and testing in-store) for the same price as the "regular" CC website and got the bonus cash back which was about $12 if I remember correctly. Made me mad after I had just bought a TV online a few months ago, but did not use the Chase link.

Also, the $250 for $200 bonus is a nice feature as well.

"give me cash!" & "WHO CARES WHAT THE APRs ARE?" I agree strongly with you on those points.

Cash rewards are the simplest and overall best usually as far as I've seen. I have yet to see a 'points' card that is a better deal than straight cash back. Airline miles cards *might* work out ok if you find the right card for an airline you know you'll be able to use the points for. But as a general rule its probably best to go with cash back cards.

The APR should not really matter on a rewards card. Paying any interest at all on a card will cost you more than any rewards rebate will earn you. If you have a balance then pay it off first. Only look at rewards cards once you have no balance and can pay off the balance every month.


Jim

I always avoided credit cards even though I would have paid off the balance every month anyway, I just figured they would always trip me up by me forgetting or them losing a payment. Now that some of them (Chase Freedom included) allow you to set up an automatic payment plan that prevents the possibility of a late payment, I must admit not using one seems like giving money away. Now I cash out my rewards each year in Nov. (It makes Christmas shopping much more enjoyable with the extra shot of income).

Maybe I'm fooling myself on into thinking I don't spend more with plastic, but spending $20 on something that is not a necessity seems to give a tightwad like me the same pause whether I use cash or credit.

"give me cash!" & "WHO CARES WHAT THE APRs ARE?"
Couldn't agree more. Let them offer a credit card with 20% cash back and APR of 99.99%. I'll take it. As long as it offers automatic payment in full.

I also don't think I spend more with plastic. I am always thinking before spending $20, even if I could cash flow 10 times as much. At the same time when I am on vacation, got some cash out of the ATM - it melts.

Thanks for the post. Credit cards can be confusing.

Amex Blue is *not* necessarily the cure-all for big spenders that the media makes it out to be. The $6,500 tier and 1.5% on non-g/g/d purchases means that Amex Blue only makes sense if you're spending huge (and I mean *HUGE*), and specifically spending huge for g/g/d. Of course that's easier to do now that $4+ gas is here to stay along with the accompanying higher grocery prices. But a lot also depends on how much non-g/g/d purchases make up your spending profile.

I'm borrowing and modifying this comment I posted a while back on another thread, but it's worth repeating here:

Using a single-card strategy comparing Blue with another card I've plugged (2% Countrywide) and the oft-mentioned Freedom: Assuming your non-g/g/d purchases are from $5K-$10K for the year, in round numbers my magic spreadsheet puts the break-even point for where Amex Blue starts becoming advantageous over the other cards at around $10K worth of g/g/d. Spend more than $10K on g/g/d, Amex *might* win over the others. Spend less than $10K g/g/d, Amex ALWAYS loses.

Some more scenarios for the big spenders out there:
If you're making non-g/g/d charges of $15K/year, breakeven for Amex Blue becomes $11K worth of g/g/d.
If you're making non-g/g/d charges of $20K/year, breakeven for Amex Blue becomes $13K worth of g/g/d.
If you're making non-g/g/d charges of $25K/year, breakeven for Amex Blue becomes $15K worth of g/g/d.

For me at least, that's a lot of g/g/d. Again, what I'm describing above are SINGLE-CARD strategies versus Blue. Blue becomes all the easier to beat by employing the oft-discussed multi-card strategy.

Also worth considering before you jump on the Blue bandwagon: A lot of places don't aceept Amex because of the high service fees, including places that deal with big-ticket charges. My biggest expense is daycare--$15K for the upcoming year I can't put on an Amex that will get me 1.5% after I've gone through the $6,500 tier. But I get 2% back on the whole thing through Countrywide. Landlords who accept credit cards for rent typically don't take Amex either.

I only use one card, which I really like, but I don't think it's available anymore. It says Chase Freedom on the front, but mine gives 5% back on gas purchases at any gas station (1% on everything else). My favorite feature is how the rewards are redeemed - every month the rebate from the last month is just deducted from this month's gas purchases. It's a straight line-item credit on the statement. I don't have to do anything to get the rewards.

I wonder how long it will be before they decide that's too much and convert it to the current rewards program which is not nearly as good or convenient.

If you have children who will attend college, the Amex 529 plan card through Fidelity is a very good card. It offers 1.5% cash back (deposited to the Fidelity 529 plan account) on every dollar spent. No graduated rates, no benefit for spending at certain categories. Fidelity used to offer a Mastercard with 2% cash back on everything, but have discontinued it for new customers (but we who had it are grandfathered!). I use that MC everywhere: 2% with no rules to remember (with those cards where you select three categories, I'm afraid that the credit card company won't agree on the category). The cash back bonus is deposited every quarter, automatically, to the Fidelity 529 account.

I have a Lukoil / Getty mastercard as well, which I only use at Getty. It pays 4% cash back. Well, every time you generate $20 in rebates, they send a paper coupon for $20 with your bill. You then have to remember to take this $20 coupon in your car. Then, when you buy gas, you have to walk into the store, and give them the coupon for your $20 free gas. Then when that's done, you've got to get our your credit card buy more gas with the pay at the pump feature. Why the heck couldn't they have just subtracted $20 from your bill? This is the most ridiculous way of giving the reward. Seriously.

"Why the heck couldn't they have just subtracted $20 from your bill?"

Because then you wouldn't have had to walk in the store and give them the opportunity to sell you a 20-ounce bottle of Coke--which yields more profit to the operator than your 15-gallon fillup.

I agree on the APR's comment and paying your card off every month, not keeping a running balance. I've got to say though, that I **love** the Hilton Honors points program. It's made it possible for me and my family to take quite a few vacations we might not have otherwise. They've been pretty easy to deal with also. But that might be just because it's the hospitality industry.

My discovercard sky miles program, I've been pretty disspointed with. I tried to use them last month and they only let me use them un multiples of $100 worth of points, which is not a huge deal, but irritating nonetheless. I'm going to stop using the card and still have a points balance I can't use.

This post is a little dated but still an interesting read. I also prefer the cashback rather the points. Partly because I want the cash to spend on whatever I want, but also because 25,000 points to get a $350 flight isn't a very good return. But a friend recently pointed out to me that the key is to use mileage points on international flights rather than domestic. You get much more bang for your buck (don't have the math in front of me but I think it works out to 5 or 6 cents on the dollar). Still, the cash in my hand is my preference and my favorite card is my Discover Open Road (2% on gas/restaurants + rotating categories). The ShopDiscover site has some great deals too.

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