How to maximize Reward Credit Cards

By now you've realized I'm a major cheapskate, I love a great deal. And I'm a major CC user who to quote nervous from Your Money on MSN, "they'll have to pry my CC out of my cold hands." I thought his quote highly amusing. I'm going to write this today and tomorrow follow up with Dave Ramsey's Baby Steps for getting out of debt, because I believe in it. We are not your typical CC user, neither DH or I have ever paid a penny of interest or paid a late fee on any accounts since we were 14. So we've had CC for more than half our lives and haven't misused it ever. When I was young my mom said to use the CC like a check book, every expense had to be tracked against what I had in checking to see if I could really afford it.

But for now I'll explain our current credit card strategy and how much we've earned in rewards this year. If I took the time I know we've saved thousands of dollars over the years in cash back rewards, how do I know? Because when you are two grad students living in San Diego, who can afford to buy a condo with a gross salary of $40k, you are a thrifty penny pincher.

First we typically use our Citibank Simplicity card for everything. It gives us 5% cash back on all gas station and drug stores purchases, and 1% back on everything else. The maximum cash back reward is $300/calendar year. Another bonus is no late fees, never had one, but I thought it was a nice benefit. We autopay everything so nothing is ever late or not paid in full. We got it back in April, but have earned so far $91 this year. Not bad just for using the card. It would have been more, but our other credit cards upped their rewards so we've been using them more. Plus we had an Alaska Airlines card until July. I do not like airline miles typically, but this deal was too good to pass up, I'll explain later.

Second card we use is the American Express True Earnings Card. We picked this card mainly because it works at Costco, where we are die-hard members. Now with the true earnings card you get 3% cash back at eating out anywhere, 2% cash back from any travel related expenses, and 1% cash back on everything else. Great deal, so we've started to use it for eating out and as always costco shopping. I am also planning on buying DH's ticket home for christmas on it, I already bought mine on it for 2% back extra online. This year we've earned $44 in rewards.

Finally we started this summer using Discover card for stuff. 4x a year they have this get more back program where you get 5% back on specific categories. This summer it was school supplies until Sept 30th, and this current quarter it's shopping and eating out. You also get 1% back on everything else on the card. So I paid for DH's tuition and my stupid school stuff on it and wow! Since June our cashback bonus this year is $142. So that pretty much sums up our regular use cards.

Do we have store cards? Yes, three actually that we somewhat use. Gap because every $250 spent you get $10 gift certificate and special coupons in the mail. I shop for me occasionally, it adds up over the years. Home Depot is a huge one we use, I get a 10% off in the mail, then put it on the card for 0% APR 1 year. We did it about 3 times buying stuff like cabinets for our condo in SD, paint, curtains, etc. Sometimes we've forgotten the card and paid on another one so no biggie, but it's a nice bonus. Another great thing is I've negotiated an extra 10% back when I was unhappy with our cabinet order taking so long and saying I was a loyal customer ie CC. Finally we also occasionally use the Best Buy CC. We used it initially in SD to buy a washer and dryer and get 10% when we opened the card. It saved us about $70 at the time, and then when we moved we had to buy another washer/dryer so we just went there. The great thing is we got 24 months 0%, plus tax free day, plus I negotiated free delivery as BB card holders explaining again we're loyal customers. All in all I typically don't like using store cards unless it's somewhere we're going again and these places we've always gone back to.

Finally I want to discuss airline cards. They can be great if you travel a lot and use the same airline. My mom and DH's best friend both have airline cards and adore them. But we don't travel enough, or with enough loyalty to make it worth it. This past year however Aug 2005-2006 we did have an Alaska Airlines card. Because when we got our mortgage they offered us a deal to get 100k free miles if we opened the card and paid for 1 year annual fee. That 100k miles is 3 free round trip tickets, so we figured why not pay $75 for the annual fee. We then decided we would max out usage on the card for the year we paid for and then cancel it. We did exactly that and now on Alaska Airlines have about 120k miles in DH's account. It's not a bad airline for us because DH is from Canada so using it isn't as big a deal as for other people.

That about sums up my experiences with reward and store credit cards. Guess you can see why they'll have to pry it out of my cold hands...but seriously CC are not for everyone, nor should they be used to live a lifestyle you cannot afford in cash. They are just a tool for cheapskates like me who need to squeeze a penny out of everything. I like looking at my itemized statement, I can easily reconcile it with our budget, and I enjoy seeing how much I've made back. Maybe CC don't make you rich, but in my experience people who use CC responsibly are the type of people who max out their retirement accounts, save for a rainy, and in general very conscious about how they spend money. So it doesn't make you rich, but maybe it's a sign of how diligent you are about your money.

Any opposing views, or people in agreement should feel free to comment.