What I'm Doing Now with My Credit Cards

Since the credit card companies are making all sorts of negative changes to credit card rewards programs and, in particular, my two favorite cards appear to be casualties in this effort (Chase Freedom and American Express Blue Cash), I'm going to have to make a few changes. Here is what I'm currently doing/thinking regarding credit cards (BTW, I'm still holding to the principle that I want to carry one main credit card -- not five or ten to maximize rewards):

1. I think it's all over for the Chase Freedom card. If they are going to both rotate the categories that get the bonus amounts (I only spend anything of consequence in three or four of their 15 categories anyway) AND eliminate the bonus $50 when you redeem $200 in rewards, they're history in my book. Lucky for me, I'm close to $200 and should hit that level this month or in June for sure, just in time to redeem by $200, get the $50 bonus, and then stop using the card. As you might expect, I'm charging all I can on the card this month to try and hit the $200. The change away from this card will be a hassle because I have several auto-pay bills set up on it, but that's the way the cookie crumbles sometimes.

For those of you in the same boat, here's a way you can rack up charges without them costing you anything:

• Buy US gold dollars under the free shipping program. $500 (or more) gets you $500 (or more) in cash plus counts as rewards for your card.

• Buy gift cards for grocery stores. Let's face it, we all eat. So what about buying a $500 gift card from your favorite gorcery store? It will count as a food purchase so you'll earn 3%, plus you can spend the $500 in later months as you do your regular grocery shopping. For that matter, you could buy your entire year's food purchases in gift cards now to get you the rewards you need.

• Buy other gift cards at grocery stores. Our grocery store sells gift cards for Logan's restaurants, Home Depot, and a variety of other places I shop. By buying gift cards at the grocery store for things I'd already buy, I get the 3% grocery store reward level. Granted, I then have to manage a bunch of gift cards, but we're in a tough spot here -- racing against time.

2. I've applied for a Schwab card. A straight 2% back these days looks like a fortune. They were already close to the top in my recent rankings of the best cash back credit cards, and now they're the leader by far.

3. If Schwab should pull back on their rewards (which they've said they aren't going to do), I'll probably go back to the American Express Blue Cash card. They were tops in my ranking and while they've cut back a bit, it isn't that much.

4. If the whole thing implodes and credit card rewards go bye-bye, it won't be the end of the world. Sure, a few hundred dollars a year in free money is nice, but if it all goes away, I'll live.

How about you? Are you doing anything different with your credit cards given the changes companies are making?

Comments

[Cherry Blossom]

USAA offered 5% back for gas and groceries for the first year on their Amex. Everthing else goes on my Schwab card (including rent).

[BenG]

Rumor has it there is going to be a $30 annual fee on the Chase Freedom card, starting July 2010... If you think 1% cashback is lame, how about a bonus annual fee kicker?

[David]

My PenFed Visa just arrived last night. This card is now my exclusive gas card, since it offers 5% cash back on all gas purchases. Right now I'm still using Chase Southwest Visa as my everyday card, due to its Rapid Rewards (aka frequent flyer) program, but it has a $50 annual fee. I'm applying for Schwab for my other everyday card, and may give up the Chase Southwest Visa. Having 2 cards in my wallet (gas and everything else) is pretty simple to manage.

[Angie]

Switching to Driver's Edge for Groceries to get the promotional 6% + $ for miles. Still have my 10% on gas. Still using my Amex Sky for planned spending until the 0% on purchases runs up in September. Should just be able to reach the reward level then.

Chose a few months ago to stick to cash only budget for all other purposes. The 1% cash back usually doesn't outweight how much I'm tempted to go over budget!

[MonkeyMonk]

I'm also disappointed about the changes announced for the Chase Freedom card, though I'm curious why I haven't received the letter that a lot of people have reported getting. I'm mostly bummed that I would have hit the $200 rebate level in August or September so I'm going to lose out on my $50 bonus. I'll probably wait until I get to $200, get the rebate, and then look into getting a new Visa/MC. If Chase really is considering adding an annual fee that would be a total deal-killer for me.

[CommRE]

I use the AmEx Blue Cash and I haven't seen anything indicating the changes mentioned. Maybe they are waiting until my year rolls over in June. I've got just over $1,300 in cash coming to me.

[Josh Stein]

After the end of May, we'll be using the Schwab card that we just got approved for. Many of the places we shop around here don't take AmEx anyways, so this easily outpaces what we were getting rewards-wise.

[CF]

Still sticking with AmEx Blue Cash for most purchases, use Amazon Visa for Amazon purchases (3% with frequent bonuses and promotions), and have a Citi Cash back card for places that don't take Amex. Considering changing to Schwab for the non-Amex purchases - only thing I wish is that they gave decent interest on cash in their accounts (0.2% right now).

[FFF]

here is a ABC news story, outlining the credit card regulation changes before congress. they discuss the negative effects on those who pay timely (ie those who take advantage of rewards programs). interesting.

http://tr.im/lLpl

all government regulation comes with unintended consequences.

[MelMoitzen]

I would strongly caution against loading up on gift cards at the grocery store with the intent of using them yourself in the future just to earn 3% as a grocery purchase. Buying them as a gift for someone else in the immediate future is one thing, but holding on to them for yourself carries some risks.

1) Risk of loss--they are essentially cash.
2) Risk of the company going under before you can use them.
3) No "chargeback" provision if you are in a dispute, vs. using a credit card directly with the merchant.

If you carry a 2% card--and you should--you need to ask yourself if it's really worth these risks to wring an extra 1% out of the transaction?

It came as no shock last week when I got the notice that Chase is FINALLY killing my 5% G/G/D card (effective 6/30) and it's only a matter of time before they kill my Professional card (3% on restaurants, gas, home improvement, office supply).

When that happens, I will be down to just a few cards:

1) 2% card for everything not covered below (currently with Orchard/HSBC, I'm moving on to Schwab).
2) Costco Amex: 3% on gas, restaurants. 1% at Costco (the only card they take).
3) Discover: 5% on rotating categories.
4) Assorted cards from stores we frequent offering rewards in the 5% range.

[Mama Bird]

We are still going to keep our American Airlines mastercard. There haven't been any changes to that that I'm aware of. And since we rack up miles both by purchasing and by flying, we earn more in airline tickets than we would with any cash back program, despite the annual fee.

[rwh]

Another article about changes in the credit card industry:
http://www.nytimes.com/2009/05/19/business/19credit.html?hp

"And to make up for lost income, the card companies are going after those people with sterling credit.

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups."

[FMF]

Mel --

I'm only charging the amounts on gift cards to places I KNOW I'll use them (we spend $300 a month at Meijer, so why not buy a couple $100 gift cards?) and I'm only doing so to run up the Chase rewards in the short term to get to $200 (so I can get their bonus $50 before they eliminate it.) Once I get the Schwab card, it's back to normal.

[Apex]

FMF,

Have you received a letter personal outlining these changes to your card. I just requested one of my 250 dollar checks and received it yesterday. In the letter that I received it outlined the terms of the freedom card. The terms were all the same as I have always gotten. 3% on top 3 of 15 categories. It was written as to suggest this was the current and expected policy on my card. I had also received the letter offering me the upgrade to the Chase Saphire card which would certainly be a bad exchange.

I will be very curious to see what will happen for me come July but if I had not heard about these supposed changes here I would know nothing about them. Chase has communicated nothing to me and seems to be treating me like my old terms will continue. I guess I will find out. One reason I think it may not be universal is that they have already changed the freedom card by giving different terms for new card holders so it would not be unprecedented for them to have different terms for different freedom card holders.

But given that you have already given up on it I was curious if you had received the same notice as others or if you are just assuming that the change is universal.

[FMF]

Apex --

I have not, but my bill is due next week and I expect to. Then again, as I stated in another post, I called them and they said they didn't know anything about it. We'll see how it goes -- maybe they are giving different customers different options. I'm hedging my bets though -- working hard to get to $200 soon and getting a Schwab card.

[tom]

@RWH,

That's what I've been saying all along. This credit card bill being pushed through Congress is ultimately going to hurt those that are fiscally responsible:

"“Those that manage their credit well will in some degree subsidize those that have credit problems.”"

It's ridiculous. It's another "bailout" for irresponsiblity. I've been preaching this for a while, but finally people (and the media) are starting to catch on.

[Health Insurance Guru]

Just about everything being pushed through Congress these days is hurting those that were/are responsible. Too much free wheeling that last two decades and now we have to bail everyone out. What a mess!

[BrookS]

After speaking with Chase customer service, I am fairly certain that the changes only apply to Chase Freedom card holders that don't have Chase checking accounts. If you have a Chase checking account, there will be no changes to your Chase Freedom reward point structure.

[BrookS]

FMF, did you hear something different from Chase (I think you are also a Chase checking account holder)??

[FMF]

Brook --

Yes, I'm a Chase checking customer.

As I noted above, I'll get my statement in the next week or so. I'll let everyone know then what I get (if anything.)

[Andy]

I'm not doing anything different until I receive notice from Chase. For all I know, even if they switch to revolving categories, the deal could be just as good in my situation (like what if the 3% category isn't limited to $12/month anymore). That said, after finishing up my current project of refinancing my mortgage, I already planned to apply for a 2% card for all purchases that aren't already 2%.

[MC]

I'll stick with my old Wells Fargo Visa Signature CC. 1% cash-back on everything, still no limit, and only 7.5% annual interest (just in case---I usually pay it off every month). Plus I've had it forever so it looks great on the ol' credit report. Made a bundle on the cash-back last year--we did some major remodeling to our house and charged everything on the card (appliances, cabinets, contractors, etc etc) and then paid it off immediately from savings. Nice! Switching cards all the time is not worth the trouble.

[jason]

@Apex @FMF - I also just got a $250 reward check yesterday! The letter did state the old terms. But if you look on the bottom right of the letter, right above where you rip the check off, there is what looks to be a date, I forget mine but I believe it was 06/07, suggesting that is the date they printed the notice or last revised it, a few years back. Doesn't mean that you won't be seeing reward cut back. I also have not received the letter stating lower rewards, but I know they're coming, I'm not so special that I would be exempt.

ALSO - @Mel @FMF - I too would strongly suggest NOT loading up on gift cards in a few of the categories such as groceries. It is a good idea, and you can still do it, BUT, I believe there is a monthly limit as to how much you can earn at the 3% rate in those categories. I think it was $25 a month @ 3%, after that you get 1%. Check the terms, I don't think you could buy $6666.66 in grocery gift cards and get $200 + 50 back in one month. $6666.66 X .03 = $200

[FMF]

Jason --

I'm $23 in rewards away from $200. :-)

[Michael @ The Life Insurance Insider]

Seems like a lot of work and risk to earn an extra 1 or 2% on your purchases. It seems like most people could earn more by putting this effort back into their day jobs.

[MelMoitzen]

Michael,

If you're charging $40K a year (and many of us are), 1% or 2% becomes $400 or $800 for doing absolutely nothing but selecting the one right card to use. In my book, that's smart, easy money.

It's the more convoluted schemes where you're expending a lot of effort to wring out an extra 1/2% using multiple cards where the returns might not be worth the effort. I stand guilty as charged here--but it is something I can easily manage on my own and I recognize it's not for everyone.

MC,

Your pointing out the interest rate on the card is particularly revealing. If you're currently paying (or ever plan to pay) any interest on the card, the amount of the rebate becomes virtually meaningless.

Not to mention that a 1% rebate card is nothing special in today's credit card marketplace--nor will it be after the current wave of rebate cuts are done.

[MelMoitzen]

MC,

In re-reading my post, I should clarify that my comment about the interest was more generic in nature, not specifically directed to you. Anyone who stands even a slight chance of ever paying interest on a card shouldn't consider the rebates available and should look for a low-rate card instead.

Also worth noting: the interest rate on the card may be 7.5% now while you don't carry a balance. You never know what's going to happen once you do.

[MC]

I guess I prefer having one card that works for everything I might need, rather than switching around cards trying to game the system and (knowing me!) probably forgetting something sometime and getting screwed. This way even if I don't pay it all off each month it's not a huge disaster, the "unlimited" charge limit makes my credit score look awesome, I still get cash back, and I don't have to remember all the fancy rules and etc.

And I did have to carry a huge balance (15K) for about a year several years ago (during my divorce when I couldn't access my other accounts because they were all joint with my ex-spouse). Didn't affect the interest rate then, but maybe it would now.

[jbhk]

I have a Chase checking account and I also didn't receive anything from Chase. My bill was due last week and I'm expecting a statement to be arrived this week. Will keep you all posted.

[Old Limey]

Michael: I no longer have a day job - thank goodness! After a 36 year career without a single day of unemployment and with 2 pensions and 2 social security checks arriving on time every month I can certainly spare the little amount of time it takes to save 2+% on everything I spend, including utility bills. I also have had the time to do a really great job managing my investments for the last 16 years, something that I had to leave to others while I was very busy working.

[wolf]

Still no letter here yet. I do not have a Chase checking account. My statement cuts today, so I'll see tomorrow if there is a notice on the statemen.

[Param]

OK, here's my theory. Too many people have started reading FMF and realized that Card companies are making a ton off us by way of interest & fees. So we all wised up and started using cards to purchase on credit & pay in full at the end of the month - thereby becoming dead-beat customers... Now the banks realize that they are not making any money off us, so they first reduce the cash back, then eliminate it, then add annual fees, etc. until their shareholders are happy & their customers are unhappy. Capitalism wins in a weird way!

[FMF]

Param --

Ha! I only wish that was the case!!! ;-)

[rwh]

I'm with Param. If Schwab stops giving me 2% back each month I'm going to blame it on FMF.

[wolf]

I checked my statement this morning and the terms still read the same. I'm curious to see if it will change next month. In the meantime, I'll charge just enough this month on the Freedom card to get us to the $200 level.

[jbhk]

Received my statement today and the terms was still the same.

[Eric]

Is there any way to subscribe to the comments? I want to continue to read people's comments on this topic. Thanks FMF!

[FMF]

Eric --

I think Typepad has that as a new option. I'll check into it.

[FMF]

Eric --

I just turned them on. Don't know if it will only impact new posts or will come up on this one, but you should be seeing comment feeds in the future.

Thanks for suggesting it!

[Eric]

Oh no problem FMF. I just remember seeing it on other blogs so I thought I should ask. Glad to help!

And I do see the comment feed on this post so I guess the feature is retroactive too. :)