I am changing the credit cards I use. Before, I would try to find the card that had the best cash back. But that soon can become just chasing after the wind. Everytime you open a new credit line or close one, you can get a ding in your credit score. Plus all the hassle of setting up automatic payments, etc. So I am simplifying.
What I am doing now is focusing on using just two cards. The first pays 5% back when using it for groceries, gas, or at the drug store – up to $300 a year. So that is all I use it for. The second card doesn’t give you any cash back. At a rate of 1%, once you get a reward amount of over $25, it is applied directly to your mortgage principle. I use this card for everything other than gas and groceries, or once I have maxed out the other card.
At first glance, 1% is pretty pitiful. But then I realized I am also saving interest. So if can get even just $100 a year toward my mortgage (which is easily doable), not only will that save me $3000 in principal mortgage payments, but I will also have saved about another $600 in interest!
I like the idea of automatic payments toward the mortgage. Let’s face it, for me, I just tend to fritter the credit card rewards away. Not that that is all necessarily bad. But now I know that the reward is going to pay off debt.
So at least now when I send my oldest child to the orthodontist, I am also helping to pay down the mortgate!
Any of you have a credit card strategy you would like to share?
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A reader asked which card I am using that gives 5% back: it is the Chase Rewards Card. Unfortunately, I do not think they are accepting new sign-ups. I also read somewhere (I really need to write things down!) that they may discontinue the program in the near future. If they do, I will see who has the best offers out there!
I signed up for Chase Rewards when I renewed a CD last fall. I get 3% back on certain purchases, up to a $600 per month limit. But there is another feature in the account that causes the rewards to go much higher. If you make purchases with linked Rewards Plus merchants, you can get an additional 3% or more (some offering as high as 25%), depending on the merchant. This is not limited to geeky gaming sites, but includes most major store chains, hotels and even some of the airlines.