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!).
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.