What’s In My Wallet

If you have been around for a while, you know that I love credit cards. I already wrote about how you can effectively use credit cards to your advantage. In fact, it is no secret that I earned $400 in cash in one year just from using my credit cards (without changing my spending habits). I have been reconsidering how my wife and I spend our money to both reduce spending and optimize our purchases. My most recent change has been to our credit cards. Even though I have been quite successful with reward credit cards in the past, I decide it was time to re-evaluate and see if I can do even better.

Where I was Losing Money

When I analyzed our spending, I discovered that there was one major area that I overlooked: our Costco expenses. If you don’t buy in bulk, you absolutely need to consider whether it can save you money. My wife and I go to Costco about once a month, with our bill averaging $100. This means we spend approximately $1,200 at Costco each year.

If you do have a Costco membership, you should know by now that Costco doesn’t accept most major credit cards like Visa, Mastercard, Discover, etc. In fact, they only accept cash, debit, or American Express. Before a couple weeks ago, my wife and I didn’t have an American Express card. We were using our debit card every time we went to Costco. For some odd reason, I never thought about how much money we were losing by not using a credit card.

My New Plan for Reward Credit Cards

After realizing that I was missing some major opportunities to use credit cards to get cash back, I took another look at how we use our credit cards. I took a look at our expenses and how we were currently spending our money. Then, I reviewed the major rewards credit cards and adjusted my plan. Because I won’t need to qualify for a loan any time soon and my credit is in good shape, I can afford to apply for another credit card to fit it to my spending habits.

For Costco and Gas Expenses

The adjustment to my plan for using my credit cards to get cash back starts with the TrueEarnings® Card from Costco and American Express. I will now be using this card for my expenses at Costco. This will give me an additional 1% back on all of my expenses. I already am spending the money to buy things in bulk (and I always pay off my balance every month), so why not get an extra 1% back? Another great feature for this card is that I also get 3% back on gas purchases (up to $3,000 per year). My wife and I already spend about $100-$150 on gas per month ($1200-$1800 yearly), so that equates to an estimated cash back value of $36-$54 per year (just on gas!).

Everything Else

My plan for using our reward credit cards will continue to use our other credit cards that have rotating 5% cash back offers. The credit card that, as far as I know, started the rotating cash back system, is one of my favorites: Discover® More Card. In order to optimize my use of the credit card, I use this on select purchases, according to whichever 5% category is “in season”.

I have found that the best way to optimize your credit cards for rewards is to use 2-3 credit cards. If you use them according to which card is going to give you the most rewards, you are saving money without any extra work. This strategy only works if you can afford to pay off the card each month and keep track of two cards. Also, be sure to not let them alter your spending habits. Otherwise, they lead you to the mentality that you need to spend more to save more. This sort of mentality doesn’t work. If you can master these urges, you should sign up for a rewards credit card to start saving.

18 Responses to What’s In My Wallet

  1. Jonathan says:

    I have been using one credit card to get cash back for about 7 years now I think. Some months I use it all the time, other months half the time, other months I just use my debit card. I have found that the added hassle of balancing my checkbook with purchases sitting on the credit card don’t really justify the money I’m saving, but if you have a system, more power to you. :)

  2. I think it’s funny you used the Capitol One slogan for your title but don’t have any Capitol One cards! Was that intentional?

    A few months ago we added a Chase Freedom card (basically the same as your Discover card) to our gas card, which is 5% for gas (one brand), 2% travel and dining, and 1% everything else. We also shop at Costco and spend $100-150/month and it kind of irks me that we’re not earning rewards there or anything more than 1% at our grocery stores (except during the Freedom’s 5% 3 months). We considered getting the Amex Costco card but the Freedom card won out that time, and we’re still thinking we might apply for the Amex in the near future.

    The problem is my husband doesn’t always remember when he’s supposed to use the Freedom card over our gas card and I’m afraid if we add a third card we’ll just be in for more mix-ups. Really, that’s not a problem though, and I just need to chill out about maximizing our rewards! It’s not worth the marital strife. :)

    • Corey says:

      haha – I guess it is the capital one slogan… or a slight variation of it. Yes, my wife is very much about saving the dollars (so we can travel) so we were able to set which card we can use when.

  3. Kyle says:

    I completely agree – if you can pay off your credit cards every month, the rewards are great! I recently got an American Express card for the exact same reasons – buying bulk at Costco and getting gas. I hate that you only get the rewards once a year and there doesn’t seem to be a way to see how much you have but I look forward to that day I get it.

  4. Brad Moore says:

    Corey…you may already know of this one. But we had a trip planned to Tampa a while back and really didn’t have the money for it (w/ out going to emergency account!)..so we applied for a Chase Freedom Visa card.

    The letter said they would give you $300 once you spent $500. So I put a big medical bill on it, received my $300, and have never used it again! You heard of that one?

    • Corey says:

      $300 cash back. Wow, sounds like a steal. I would be weary of opening a card and closing it. It does affect your credit rating.

  5. We have an Aeroplan visa which we use for everything. We then use the miles to pay for our flights on vacation. It works out really well.

    • Corey says:

      Nice. I personally prefer cold hard cash rewards because I don’t have to deal with the blackout dates and strict requirements, but sounds like you are taking advantage of the credit cards.

  6. Evan says:

    Is your wife on board with the rotating cards? I think I would have an uphill battle explaining which card to use where to The Wife lol.

    I use just my one gold amex as I would rather accrue a large amount of points in just one place with only one bill to pay off.

    • Corey says:

      haha. Actually yes! She loves saving money. Maybe not as much as me, but she knows that if we get more cash back, it means it is easier for us to take a nice vacation each year. :) That’s one of our major areas of splurging.

  7. If a merchant accepts my rewards Visa or American Express card, I’ll choose one of them in almost every circumstance. I preserve cash for those instances where credit cards aren’t accepted. For years, my go to credit card was the Hilton Honors American Express. It’s served me well in the way of free hotel stays. Lately, I’ve taken a liking to the Amazon.com Visa card. I use my Target card to save 5% on the items I buy from there. For some reason, I find my Target card the most exciting to use. There’s something about those instant savings.

  8. Interesting to see the different offerings between the US and Canada

  9. I had no idea Costco doesn’t accept the “mainstream” credit cards! I don’t typically shop there (can you tell?). But I do love our reward credit card. I have had it since 2006 and have received over $1200 in gift cards (while paying it off each month before interest kicks in).

  10. Don says:

    Gotta love reward credit cards :)

    I’ve never heard of TrueEarnings before, sounds like a very smart way to go on those Costco purchases!

  11. Buck Inspire says:

    I signed up for Costco’s card this year to take advantage of our grocery and gas spending at Costco. I also use Discover for cash back as well. Great minds think alike!

  12. [...] at 20s Finance did a what’s in my wallet post, including his strategy on rewards credit cards. I’ll get to that point one [...]

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