credit card points

Credit Card Rewards

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A while back, I wrote about how, if you really wanted to put the effort in, you could be maximizing credit card rewards. If you don’t want to put the effort in that I’ll get to in a second, then you could at least have one reward-earning card that you use for all your purchases and pay off each month.

Important reminders:

We don’t use cash. Everything goes on a credit card unless it’s prohibited or there’s a service charge that outweighs our rewards.

We pay off the balance of every credit card every month. We have never paid interest on a credit card balance.

Let’s dive in.

REWARDS

Credit card companies are offering rewards for using their card for purchases. Some even give a reward for making payments on it too. The rewards can be in a point system, cash back, or incentives for specific companies (e.g., Delta, Disney). We prefer more generic reward options, but some people like to use a specific reward card. The best reward credit card for you is one that matches your spending habits.

An example of a specific reward credit card would be a a Disney card. As you earn money, it goes towards their trip to Disney. Psychologically, they feel that their expensive annual trip to Disney is “paid for.” While this may work for some people, our thought process is that if I earn $1,500, then I have the flexibility to put it towards a Disney trip or can buy something else.

The simplest way to collect rewards is to have an all-category-cash-back credit card (e.g., 1% cash back on all purchases). However, to make the most, you could be using multiple credit cards so you can earn extra rewards in different categories. Then you need to know which card to use when, and also keep track of your statement periods so that you pay it off in full each month. A category type credit card can give rewards in multiple categories (e.g., 4% on gas, 3% of restaurants, 1% on all other purchases), can rotate reward categories (e.g., first quarter is 5% on gas, second quarter is 5% on groceries), or can be geared towards one specific category all the time (e.g., 5% on gas). There are typically earning caps in these categories.

CHOOSING A REWARD CREDIT CARD

Each credit card company has a variety of cards that offer different rewards. You can decide what fits your spending pattern the best. If you don’t want to identify the categories that you spend, then the Citi Double Cash is a great “catch all” with no annual fee and no reward earning cap. You earn 1% cash back on each dollar spent, and then an additional 1% on each dollar paid towards your credit card balance. We deposit our earnings into a checking account instead of a statement credit, because we learned that we don’t earn cash back on the statement credit made.

Some credit cards have an annual fee. We typically shy away from anything that has an annual fee because we don’t like paying money to spend money, but we did have a couple of exceptions. For instance, one card had a $450 annual fee. You earn 3% points (one point is the equivalent of a penny if cashed out) on all travel and dining purchases and 1% points on everything else, but if you redeem the points earned through their travel portal, you get a 50% bonus. One of the rewards was reimbursement of $300 worth of travel costs. The card reimbursed the cost of TSA Precheck too, which as $75, and had a DoorDash credit of $30. Then the last $45 of the fee was offset by the rewards granted through point usage. But the annual fee increased to $550, and we no longer thought it was worth keeping and that the cost would be fully offset by the rewards.

We also look for a sign on bonus. If we’re going to have our credit checked, we want to capitalize on it. Sign on bonuses are typically additional cash back or points once you hit a certain spending threshold. For example, the card may say “once you spend $3,000 in the first 3 months, you’ll earn a statement credit of $300.”

In addition to a sign on bonus, we would also prefer opening a card that offers a 0% introductory rate. I’ve shared before that we most often look for a new credit card because we have a large expense coming. When faced with paying for in-vitro-fertilization out of pocket, we opened a new credit card that had 15 months worth of 0% interest. This way, when we paid the tens-of-thousands owed, we gave ourselves an interest free loan. That particular credit card was only used for that expense because the reward categories were worse than other cards we had. However, we didn’t close that card because it helps our credit by having more of credit line open.

OUR REWARD USE

Besides the Citi Double Cash, we’re partial to the Chase options out there. We use different cards for different categories, and then use the Citi for anything that doesn’t fit into a category.

Between 5 credit cards, we brought in $4,232 worth of rewards last year. That’s money in our pockets that we did nothing except spend other money to get. In the past, it’s usually about $1,500 per year that we bring in with credit card rewards. The amount in 2021 was higher due to sign-on bonuses that were earned in a previous year, and then the credit card changed their reward redemption options, allowing us to pay ourselves back for restaurant purchases. We had previously been using the rewards to purchase travel needs through their portal, but we were able to dwindle down our rewards with this reimbursement change.

What could you do with a “free” and “extra” $1,500?

If you’re smart with credit cards, they can be a powerful tool to create financial flexibilities.

Chase Rewards Portal

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GENERAL THOUGHTS

We have several Chase credit cards, both that are active and ones that we used in the past. As we shared in the past, we open new credit cards when we have one or several large purchases to make, so we’re typically looking for a 0% introductory rate for at least 12 months, a sign-on bonus, and no annual fee. We also do a little bit of travel hacking, so even if the card doesn’t hit these typical ‘requirements’ of ours, we’ll open a card if it comes with a sizable sign-on bonus.

Chase offers several cards that have specific rewards categories (e.g., airlines, Disney). However, our general thought process is that if you earn “cash,” you have more flexibilities than being tied to one specific category. Weigh your lifestyle; if you’re the family that does Disney every year no matter what, then maybe a Disney bonus is worth it for your finances.

CHASE CREDIT CARDS

I highlight several of the Chase cards and their main bonuses in a previous post. We currently are using:
– Chase Sapphire Reserve: Has an annual fee, comes with a statement bonus after spending a certain amount after opening, $300 in statement credits as an annual reimbursement for travel, earn 3X points on grocery store purchases per month, dining, and travel booked after the statement credit is earned, and several other bonuses.
– Chase Freedom (now called the Freedom Flex): No annual fee, rotating 5% cash back reward categories each quarter (e.g., gas, internet, grocery).
– Chase Freedom Unlimited: The offerings on this card are slightly different than when we opened them, so I’ll focus on what’s currently available. Sign-on bonus of $200 cash back when you spend $500 in the first 3 months from account opening, no annual fee, 5% on purchases made through Chase Ultimate Rewards, 3% on dining and drugstore purchases, and 1.5% on all purchases.

We’ve also been able to utilize their business card options. However, since several reward categories overlap with others that we have, these are no longer active. We met the requirement for the sign-on bonus, then slowly paid down the balance on the card (while always making more than the minimum payment) over the 0% introductory period, ensuring we had a $0 balance before the interest rate’s introductory period expired. We typically leave a credit card open, but don’t use it, when we’re no longer benefiting from the card’s rewards (e.g., when the reward overlaps with another credit card we use frequently), but we did close the Ink Business Preferred because of the annual fee.
– Chase Ink Business Unlimited: Earn 1.5% cash back for business purchases, offers a sign-on bonus and introductory 0% interest, and has no annual fee.
– Chase Ink Business Preferred: Earn 1% points for all purchases and 3X points for shipping, advertising, internet and phone, and travel. This card has an annual fee of $95.

THE REWARDS PORTAL

We utilize several Chase cards for differing types of bonuses. Chase allows you to transfer points earned from different Chase cards into one account. This is a big bonus for us because we have the Chase Sapphire Reserve card, which offers 50% more value on the points earned when they’re redeemed for travel through Chase Ultimate Rewards than if you took them out based on their straight cash value (e.g., 50,000 points are worth $750 toward travel). That means we’re earning more cash back on those categories and then more when we use those points for travel costs.

Here’s an example: Currently we get 5% cash back on internet with the Chase Freedom card. We pay our internet bill of $45 each month for this quarter. We earn $2.25 cash back or 225 points that gets transferred to the Sapphire Reserve travel portal, where it’s now worth $3.375 for booking travel costs.

We have used the portal several times to book our hotels, car rentals, and flights. Most recently, we searched for a hotel stay. We were able to search for the lodge, review the different types of rooms, and book using our points. Here’s the breakdown of our purchase within the portal.

Chase is also offering 50% more value (100 points equals $1.50 in redemption value) when you redeem points for grocery store, dining, and home improvement store purchases, as well as donations to select charitable organizations. We utilized our points to give ourselves statement credits for several restaurant purchases from the past 90 days that were made on our Sapphire Reserve card.

SUMMARY

We’ve strategically opened new Chase cards over the last 10 years. I wouldn’t recommend opening 3 new cards at once, but, like us, open them as you have a need to cover large purchases. A large purchase looming allows you to meet a fairly high spending threshold to earn the sign-on bonus (e.g., spend $4,000 in the first 3 months to earn a bonus), and opening a new card should give you a 0% introductory interest rate so you can give yourself a free loan for a year or sometimes longer.

Chase offers an array of cards, which have different reward offerings. A positive to Chase’s portfolio is that you can merge your rewards earned on different cards into one portal. This has been especially beneficial because we have the Sapphire Reserve, where your “points are worth 50% more when you redeem for airfare, hotels, car rentals and cruise lines through Chase Ultimate Rewards®.”

DISCLAIMER: Chase has no affiliation with this post; we just love what they have to offer. Be sure to read all fine print on the cards discussed here, and don’t assume we’ve covered all the details that are required to earn the bonuses. All Chase card names and their rewards portal name are registered trademarks of JPMorgan Chase & Co.