More Kudos for My Credit Cards

As most of you know, I'm using the Blue Cash from American Express card and the Chase Freedom Cash Visa Card to try and max out my cash rewards this year. Sounds like I'm on the right track, because Money magazine recently named these two among the best credit cards available. We'll start with what they say about the Blue Cash from American Express card, telling us it's the best card "if you want cash back (and you spend big)":

Once you've charged $6,500 in a year, you get 5% back on grocery, drugstore and gas purchases and 1.5% on everything else vs. 1% for the average cash-back card. (Below $6,500 you earn 0.5% to 1%). Blue credits the cash to your account automatically, so you don't risk leaving rewards on the table.

On the other hand, maybe you spend small. In that case, the Chase Freedom Cash Visa Card is a better option, as Money notes:

You earn 3% back in three of 15 categories (like groceries and pet supplies) on which you spent the most each month. The reward drops to 1% once you've made $600 in eligible purchases a month. Even so, when you amass $200 in rewards, Chase throws in $50. That translates to a 1.25% rewards rate. Be sure to pay bills in full: Rates start at 15.24%.

Of course, this isn't new news to me. I did an analysis some time back saying the same things as Money notes above. But I went one step farther and showed that you could earn even more if you used the two cards together -- which is exactly what I'm doing. Thanks for noticing, Money. ;-)

Comments

[David]

My question is, what is the line for spending small or spending big? Obviously, if it takes you an entire year to get to $6500, you are a small spender and the AmEx card isn't for you. There are others who might be huge spenders and get to $6500 in a month. But where is the line? At what point are you spending enough that the AmEx card is best for you? Right now I use the Chase card in conjunction with BP and Marathon Chase cards that give me 5 percent back on gas. I'm not really sure how to analyze my spending to determine if I should get the AmEx card as well. Any thoughts?

[FMF]

Dave --

The transition is at about $1,700 per month. See this post for details:

http://www.freemoneyfinance.com/2007/09/how-you-can-ear.html

[ski daddy]

So what kind of credit score do you need to get these cards. Which of the two is harder to get? Finally, what is the best Gas Rewards card?

[MelMoitzen]

Those who've read my comments in the past know I juggle many cards to maximize rebates. I understand it's not for everyone, but I won't dwell on it here since we're talking about one- and two-card strategies.

I agree that Amex Blue really only makes sense if you spend a huge amount, but specifically only if you spend a REALLY HUGE amount on g/g/d, and you spend that REALLY HUGE amount on g/g/d only after you've otherwise gone through the $6,500 spending tier.

I've previously plugged the 2% cashback on everything Orchard/HSBC card, but now I've now switched over to the 2% on everything Countrywide card since it has no rebate limit (and the rebate goes directly into their 4% yield savings account electronically quicker than you get a check from other cards).

Of course YMMV based on your spending habits, but for people who only want to deal with one card, this is probably the one to get.

If you want a two-card strategy, Countrywide is also the one to get, and then supplement with either the 3/3.75% Chase Freedom (watch the monthly spending limits closely, bonus rebates are limited to only the first $600 in spending/month) or the Chase Professional Mastercard, which offers 3% back on gas, all sorts of restaurants--not just fast food like Freedom, hardware & home supply, office supply stores. Much higher bonus rebate limit than Freedom.

It's hard to get excited about Amex Blue with its $6,500 tier and the 1.5% maximum rebate for your big-ticket items after you've passed the $6,500 when 2% is available on all your spending at any level.

The lesson remains: If you're earning less than 2% on your overall spending (or working hard with multiple cards to wind up at just over 2%), you're using the wrong card mix.

[David]

A great gas rewards card is the BP Chase Visa. You get 5 percent back and it is in cash (not gift cards like some companies give you, which results in you missing out on getting 5 percent back on whatever gas you purchase using the gift card). Not to mention you get an extra 5 percent for the first 60 days of using the card for a whopping 10 percent back! There are no limits, as far as I know. You also get an additional percentage for other non-BP purchases but you'll need to check Chase's website for details as I've forgotten. I haven't seen a better gas card but if someone knows of one, I'm all ears.

[FMF]

Mel --

Looks like you need a $10k minimum balance for the Countrywide card's account to earn interest, correct?

[fgc]

If you're really disciplined with your spending, the AMEX card can do wonders and when people look at that 6k number to maximize their rewards, they complain. If you do what I do, just throw every bill on it each month and the number is SO easy to reach!

[Ruth]

There is one error in the Money article - the Chase Freedom card does not have a minimum rate of 15.24%. My son's rate is 11.24% on his card, and he got this last June as his first and only credit card. His credit limit is not high; only $3500, but more than sufficient to earn him some nice cash rewards over time. Of course the APR does not have any effect when you pay off your card every month like you should :)

Ruth

I'm really curious about how people on blogs about frugality spend so much money per month.

ski daddy - After reading about the Chase Freedom Visa we wanted to switch our Chase MC to the visa and they just gave us a Chase Freedom Mastercard. They said that the MC was for people with higher credit scores, so I would assume that Chase Visa would be available to anyone with at least a reasonable score.

[MelMoitzen]

"I'm really curious about how people on blogs about frugality spend so much money per month."

This isn't necessarily a blog about frugality. I love my children's day- and after-care providers and wouldn't swap them out for less-expensive ones for the world. With that in mind, for as long as I'm stuck spending $18K/year (my major monthly credit card expense) for quality child care, why not do it in the most cost-effective way possible rather than running it through my checking account?

It's very easy to rack up huge charges just on what you've normally been spending with cash or checks. So many businesses (like daycares and landlords) accept credit cards these days that didn't even five years ago.

In short, I'm one of the most frugal people I know, and exercise that religiously when evaluating any transaction. But when you add it all those transactions up, I wind up spending what some might consider a boatload of money every month. Other frugal people may not have that visibility into their own spending if it comes out in drips from their checking account versus one huge credit card bill.

Spending a boatload of money and being frugal are not necessarily mutually exclusive.

FMF,

4% for $10K, 3% for under. https://bank.countrywide.com/CWBRates.aspx?tab=sl

[David]

Thanks for the heads up on the Countrywide savings account, Mel. I'm going to open one and probably get that credit card as well. Do you think that rate will stay at or near 4%? The rates on my other savings accounts have been dropping like rocks.

[Josh Stein]

I am one of those people that spend a boatload on gas and groceries, and I have decided to go for the AmEx card. I had signed up for one of those 529-savings cards for my child that's due here in a week, but (A) the rewards rates aren't all that great unless you buy from specific providers, and (B) I applied for the card but they won't talk to me because for whatever reason my wife's name is on it.

So, I'll just use the rebate every year and put it all into the 529 plan, plus whatever contributions we've got that will go in there. I suppose that also gives me the Ohio income deduction, too!

[MelMoitzen]

David,

Countrywide seems to be mimicking the trend in what other financial services companies seem to be doing after taking a beating by the press over its financial condition: Reassure the public, the analysts and your customers that nothing's wrong, set your rates high on one particular savings product for a while to put you at the top of the lists and attract new funds. E*Trade did the same thing, I moved my money there, and now for the most part their savings products are now in line with the other cyberbanks.

I suspect in six months Countrywide will be among the highest available, but not off the charts like it is now compared to the others. (Who knew that 4% would be "off the charts"?)

So long as the savings are insured, I'm not losing any sleep. And I have a backup at 2% if their rebate program somehow changes, as well.

[MelMoitzen]

Josh,

How much is a "boatload" on gas/groceries? A lot also depends on your non-g/g/d charges, as well.

Using a single-card strategy comparing Blue with two other cards I mentioned (Countrywide & 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 wins. Spend less on g/g/d, Amex loses.

Some more scenarios:
Non-g/g/d charges of $15K/year, breakeven for Amex Blue becomes $11K worth of g/g/d.
Non-g/g/d charges of $20K/year, breakeven for Amex Blue becomes $13K worth of g/g/d.
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 (although it's getting easier to get there with rising g/g prices). Again, what I'm describing above are single-card strategies versus Blue. Blue becomes all the easier to beat by employing a multi-card strategy.