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November 14, 2008

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I just checked my AMEX year-end statement. After spending $18k on my American Express card, I averaged 1.1% cash back for the year. Unfortunately, through a combination of factors, I wasn't able to get anywhere close to 3%.

Reasons were as follows:
1) AMEX isn't accepted at several places (and it's gotten very annoying to ask the store if they'll accept AMEX as payment)
2) Big Box stores like Wal*Mart aren't eligible to earn the AMEX top tier rate

I have both the Chase Freedom card and the Citibank Dividends card. I've had problems in the past with my Citi card not going to bat for me on unauthorized purchases (I do a lot of Internet shopping) and plan to use the Chase card exclusively this year.

Does anyone have a better idea?

Dave --

You meet one of the two main criteria to make the most of this card: you charge a lot ($18k is a good amount each year.) But you (must, I assume) not spend a good portion of that on the big three categories -- food, gas, and drugstores. That's where this card really kicks in as you earn 5% cash back on this card in those categories on the second tier of rewards.

Since you don't meet both criteria, then the Chase card is probably better for you.

This post prompted me to figure out my percentage. I have followed the total amount, but hadn't taken the time to do the math. My year ends in June, but so far YTD I have earned $965.60 on $43,698.62 - that works out to 2.21%. Even with some reimbursable work spending in there, 28% of my spending is in the 5% category.

So I think it is a pretty good card, although I agree that always having to ask if they take AMEX is annoying. Most places I frequent I now know whether they do or not.

Jonathan --

I would be interested on getting your take on a new Fidelity Credit Card.
2% cash back. - link provided.
Does not appear that there are any spending tiers or other tricks.
If I read their terms correctly, it is a straight 2%.
At first look it appears you have to make deposits to a retirement account, but then it goes on to say you can make deposits to non retirement accounts.
Can you punch any holes in this?

Using this card in combination with cards that pay higher % on everyday purchases may be the recipe to exceed the 2%.

Fidelity card reward terms.
Earn 2 points for every dollar in net retail purchases and choose to automatically sweep them as a cash deposit into your Fidelity IRA or other Fidelity account(s). Or, redeem your points for WorldPoints® rewards. The WorldPoints program is flexible enough so that you can choose the reward that is right for you§:
Airline travel on any major U. S. carrier with no blackout dates
Merchandise, gift certificates, cash, car rentals, and hotel stays
You also get access to the MyConciergeSM service - a unique personal
assistance service**
Some easy ways to earn points include: shopping, as well as charging recurring monthly expenses, utilities, mobile phone bills,
insurance bills and membership fees.

For every $2,500 in purchases you make, you earn 5,000 points, which can be automatically redeemed for a $50 current year contribution to your Fidelity IRA account.
You can also enjoy the flexibility to redeem points
into other Fidelity accounts.

Another card
Chase has a 10/10 bonus add-on option that gives you two extra bonuses. 10 bonus points for each purchase (great for small dollar purchases) and 10% bonus on the bonus points you earn each month.
So if you made 20 purchases, charging $1,000 -you would earn a base rewards of 1-3% depending on what categories your purchases were - so lets say it was only 1% that wold get you $1000 points, + 100 points due to the 10% reward bonus (1000 * 10%) + 200 points dues to the 10 points per purchase bonus (20 purchases * 10 points) this would be a total of 1,300 points or $13.00. This would be much greater for purchases in categories that earn up to 3%. Anyway if you are splitting purchases between cards to get better rewards - just use this card for small dollar purchases and categories that earn the higher rewards.

Regarding the fidelity card:

you get the money in your retirement account. So basic time value of money math tells you $2 20 years from now is worth ~.50c today

deductions: if you put a $2 deposit in your IRA, it is deductable and you will recieve money back in tax deduction (ie, you are only actually paying $1.10-$1.50 {depending on your tax bracket} in actual money to get $2 in your IRA.

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