What’s In My Wallet? And What Should Be In Yours?

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Amazon.com credit cardAfter seeing yet another of those ubiquitous CapitalOne “What’s in your wallet?” ads, I decided to write about the one credit card that’s in my wallet (now that I’ve learned some hard lessons about the dangers of them). I route almost every minor purchase I make through a Chase amazon.com credit card for which I pay the whole balance each billing period.

The card offers a points program, 1 point for every dollar spent. Every 2,500 points, they turn into a $25 gift certificate at amazon.com. Alone, that’s not particularly great, but here’s the kicker: for every $1 you spend at amazon.com, you get 3 points instead. That makes the card have a 3% return at amazon.com.

For me personally, it nets about a 2% return in what amounts to cash, because I am a heavy user of amazon.com for all sorts of purchases. We use it almost exclusively for gift-giving purposes, for buying diapers in bulk (it is far easier and cheaper to have a deliveryman dump a monster box of diapers on the front step than having us do it), and for buying lots of bulk groceries and personal hygiene products through Amazon grocery. I would esitmate that roughly 60% of our “household spending” each month goes through amazon. Since “household spending” is by far the largest portion of our use of the card, we easily turn out a 2% return (approaching 3% near Christmastime). Of course, one of the big reasons for this is baby supplies; when our baby gets older, this may be re-evaluated.

How do I select a bonus program that’s right for me? The first thing to do is evaluate your credit card spending over the past few months and see where you use them and what you use them for. I made a list of spending ordered by what I buy and where I buy it.

The next step is to visit the websites of the top places that you use for purchases and see if they have good offers. Many of them are comparable to amazon’s offer. For a long time, my wife used a Target credit card because she lived very close to a Super Target and did virtually all of her shopping there, easily netting her a 2-3% return.

While you’re comparing these, you should also look at the offers from the major credit card companies to see if any offers match your spending profile. Good places to start include Chase, Bank of America, CitiBank, and CapitalOne. Whenever you find one that’s interesting, make sure to evaluate it carefully before signing up. If you’re not earning back at least 1.5%, there is probably an offer out there better for you. There are many different rewards credit cards that offer a variety of cash-back points for different retailers or purchases. For example, My Money Blog recommends a Fidelity Investment Rewards card that generates 1.5% cash back into a Fidelity account (of course, you need a Fidelity investing account first…).

The key thing is to do some research and see whether or not your everyday card is really as much of a benefit as it can be. For me, switching to the Chase amazon.com card has netted a lot of “free” diapers.

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9 thoughts on “What’s In My Wallet? And What Should Be In Yours?

  1. I like my Fidelity 529 College Rewards Card. It pays 2% of everything into a 529 account for my daughter.

  2. I have both Chase Amazon card and Fidelity 529 reward card, but I use Amazon card only at Amazon.com. Everything else goes to Fidelity card. I used to use Citi Dividend card a lot, but since they cut back the reward, it’s no longer in my wallet.

  3. Sams Club has a Great Deal on their Discover Card with up to 2% back. Great Card if you are a big credit card spender. the more you spend the higher the rebate. (1st $1500=.25%)2nd $1500=.50%)($3000 to $5000=1%)($5000 to $10,000=1.75%) and finally over $10,000=2%….the only catch to this that you have be a member of Sam’s by paying a $100 annual membership fee.

  4. Beware of the “I’ll pay it off every month” mentality. Though it may seem like a good idea because you are earning points/money the reality is that eventually “life” will happen. You may loose your job or have an unexpected emergency that will not allow you to pay off your credit card at the end of a the month and maybe even for many months. It is my strong belief that debt is never a good tool for gain financial freedom.
    There are some who have a solid emergency fund and still opt to use credit cards to earn points. Though their situation is a little better I still think this is the wrong direction. Another truth is that people make mistakes and could miss the end of the month payoff, what then? You are charged the interest and your goal off making money or points has back-fired. Borrowing money even for a short time shouldn’t be something we seek but run away from.
    I speak from experience not ridicule. The debt card is the only card that I will ever use again.
    That being said you can actually earn a return on your PayPal debt card with your own money. I use my PayPal account to recieved payment for my paid blogging and ebay sales. Every time I use the my PayPal card a debt purchase , I earn 1%. This would be the only way I would use a “credit card” to earn a return.
    Though I don’t agree with some of the financial advice you offer, you do have a great blog. Keep up the good work.

  5. Mona,
    This is good advice for those who aren’t good at managing their finances, but it should be no problem for someone with an emergency fund who could live the same way without the credit cards. The only difference is they temporarily pay for purchases with the CC keeping in mind that this will in effect be a subtraction from their bank account/paycheck AND they will be rewarded with cashback or the equivalent. This can be done and is done, the trick is spending with your CC, but keeping the mindset that is drawing directly from your bank account and always paying the balance every month. “Life” as you say could just as easily happen when you only purchase items with your deb(i)t card and you would be in as much trouble as you were if you were using your CC’s correctly, except when you use rewards cards you can get cashback on every expense you make (utilities, gas, groceries, restaurants, etc.). Although, not everyone can use a credit card as if they didn’t have any credit so I suggest if someone wanted to take advantage of these rewards cards they should first live as you do only on your debit card and then try to transition to rewards cards without making any additional expenses.

  6. while reading the link to this page i was wondering if my reward card would count.

    I laughed when i saw the picture, because it is the exact same one I am using. It is the only credit card I use. Yes the only ONE. I have my bills one it, any purchase that requires a credit card i pull it out.

    Being in college it has saved me a ton of money, because i use the reward to buy used books through their website. We are talking about engineering books that have price tags matching those of designer sweaters.

  7. I love being “paid back” for using my credit cards responsibly. I use those bonus’ to treat myself & my husband. Discover buys me & my Hun Bun dinner once-a-month and Amazon/Chase buys me a DVD or book every now & then. I pay them both off EVERY month.

  8. Recently my husband logged on to a joint card we have and freaked out because there was a $2000 balance on the card. The funny part about that last sentence is that it was an Amex (and not the kind that you pay over time) and I pay the balance every month no matter what it is AND I keep a spreadsheet of every expense and all the income I plan to have over the next 3-4 months AND I’d been trying to get him to sit down and look at OUR budget for months! Luckily a trip to visit his family and some conversations with them about how much money we weren’t saving really made him see the light and now WE have a joint budget. We were doing really well before but now we are on our way to making me comfortable – and since I grew up really poor and had almost EXACTLY the same life as Trent (except for the hogs), that is saying something. Thanks for making me feel like less of a freak for not thinking that designer clothes will make me happy; I learned the hard way that things don’t make me happy, they just made me poor.

  9. All sounds good, but try this. If you are disciplined and have good credit: Get a card with a high credit limit $20-$30K and offer 0% financing for 12-15 months. If it is a good reward card too, that’s just icing on top of the cake. Purchase everything on that credit card (gas, food, auto-pay utilities, etc.) For me that’s normally about $2K per month. Setup auto pay for the card’s minimum every month. Then open an ING direct money market at 3-4%. Take that money that you would normally use to pay off your credit card in full every month and put it into the ING direct money market. Then watch the interest build. Towards the end of the offer, you will be pulling down $90-$100 in interest per month. Caution: Make sure you pay off the credit card company IN FULL before the offer ends. Once it does, close the card and look for the same offer again. Rotating credit cards annually is a good idea anyway, to avoid/minimize fraud risk. One drag is that you will have to pay taxes on the boatload of interest you earned.

    –ron.
    p.s. (simple dollar guy. If you want to turn this comment into a post on your site so that it gets read more, that is fine with me.)

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