Making Your Credit Cards Work For You: What credit cards do you use?

Having the right combination of credit cards can be a huge financial plus +++ for everyone. I was once asked by a date what credit cards I carried and used. Initially, I was amused yet a bit puzzled by this question as it was the first time anyone ever asked me anything remotely related to my personal credit card collection.

At the time, I had the following cards:

Card	Annual Fee/Annual Percentage Rate (APR)	Benefits/Perks	Notes
United Airlines VISA Signature Card by Chase	$0/18.24%	-1 mile/$2 spent -Access to VISA Signature perks (e.g. I got freebies and free gift wrapping at Westfield Shopping Malls during the holiday season, free movie passes for advanced movie screenings)	Several years ago, I had the United Airlines Signature VISA Card with an annual fee of $65/year. I had contacted the credit card company indicating that I wanted to cancel the card. They offered me a card that did not charge an annual fee, but instead of a 1 mile/$1 spent, it was 1 mile/$2 spent. Obtained in college.
Discover More Card	$0/11.99%	-1% cash back on all purchases (after meeting the initial threshold of spending $3000 within the calendar year). -5% cash back on select purchases such as travel, department stores, home improvement, groceries, and gas throughout the year (types of purchases vary depending on time of year). Currently, it is 5% for gas purchases. -5%-20% purchases online through the Discover Card Website. -In lieu of cash back, one can cash out their cash back bonuses for gift cards. Sometimes this is an even 1-1 exchange, but it can be as much as doubling one’s initial reward (e.g. $20 bonus can get you $40 in value for the gift card). -Can get “cash advances/cash backs” for free at participating retail stores such as Safeway and Walmart (usually a limit of around $60 bucks) without getting charged a cash advance fee. -Periodic promotions on it such as the holiday promotion at select malls where spending/charging $200 on the card will garner $20 cash reward bonus up to $1000 spent.	Obtained in high school. Low credit limit.
Banana Republic Card	$0/21.90%	-5 points per every dollar spent (in reality it takes $250 spent at the store to obtain $10 reward card). -Annual birthday gift $15 gift reward/year	Obtained in high school. Card users would be upgraded to LUXE status once they hit a threshold of $800 in a calendar year. I don’t shop there THAT much, but it offers benefits such as Free Shipping Online, free alterations on pants, and access to exclusive events.
Macy’s Gold Star Reward VISA Card	$0/23.99%	-Gold status obtained when one spends $500 within a calendar year. Statuses are lost if threshold is not met the following year. -1.5% of all purchases at Macy’s go towards Macy’s gift certificate rewards. Everything else charged on the card is at the 1% rate and goes towards the certificate rewards as well. -Routine perks, special discounts, tons of coupons mailed. -Can be combined with the annual “gift giving” donation of $25 dollars which entitles the card user to receive 10% of all purchases back in the form of Macy’s gift card redeemable within a set period of time after the holiday season. -Returns without receipts. -Annual birthday gift (more like a $10 off coupon after one spends a minimum amount).	Opened in high school. Varying Rewards levels ranging from the red card to the black card depending on how much a person spends at the store annually.
Victoria’s Secret VIP Card	$0/22.80%	-VIP card obtained once the $250 threshold is hit (just once). -$10 gift certificate/reward for every $250 spent. -Exclusive coupons and early access to semiannual sale and select events. -Annual birthday gift $10 gift reward/year -Since Bath & Body Works are owned by Limited Inc. as well, items purchased from Bath & Body Works can also be charged on this card.	Obtained in high school.

 

I had told my date this information (minus all the details) and he made a comment that has stuck to me to this day. “I always make my cards work for me”. I thought about this when I got home that night and realized that I had “grown up” yet my cards did not grow up with me. The majority of my credit cards were obtained when I was in high school with only 1 obtained during my undergraduate/college years. They did not necessarily meet my needs and I wasn’t making my cards work hard enough for me.

A few things I noticed:

• High annual percentage rates
  
• Most did not offer me cash back except for the Discover Card.
  
• Majority were retail cards.
  
• All cards I held had no annual fee tacked onto them.
  

I’ve always considered myself very financially responsible. I hardly looked at the APR rate because I never thought it mattered since I always paid my bills on time and in full. I never left a balance and thought that I managed my finances well. However, in order to make my cards work for me and not against me (such as encouraging me to spend more on items such as clothes), the frugal girl in me had to reconsider my “mix” of cards.

First, I decided that there’s no point to “kill” my already established credit card history with super established credit cards. Years of excellent credit history are on it and these boost my FICO score. Second, I realized that I wanted to get a better percentage of my annual spending back from a credit card. Sure, it was great that Discover More Card offered me 5% back for various purchases throughout the year, but the rest of the time I was getting 1% cash back and that was only after the $3000 threshold annually. Third, I thought that my APR rates were too high. I am a fan of Suze Orman and I remember reading her book and it advising me (the reader) to negotiate with the credit card company to lower your score even if I was responsible and paid my bills on time. She had said you never know what will happen in an emergency.

In regards to my first goal, I decided to keep all my existing credit cards. On cards that I no longer find as valuable such as my United Airlines VISA Signature Card, I decided to maintain its activity by using it sporadically. It was a good idea to keep the card “active” since I did not want my card closed for inactivity.

In regards to my second goal, I decided to shop around online for an additional card that offered me beyond 1% cash back annually. Since I did not pay an annual fee on any of my existing credit cards, it was important to me that I find a card that had a $0 annual fee. I compared cards online on Credit Card Menu http://www.creditcardmenu.com/ and Bank Rate http://www.bankrate.com/credit-cards.aspx. They were useful in narrowing down what I wanted. In the end, I decided to add the (Charles) Schwab Bank First VISA Credit Card to my mix because it gave me 2% on all purchases. The 2% cash back went directly into my brokerage account with Schwab which can then be instantly transferred to my Schwab Investor Checking Account. The card has no minimum spending threshold (unlike Discover’s), no cash back limits, and no annual fees. In addition, I was able to qualify for the VISA Signature version of the card which gave me the same benefits that I had with my United Airlines VISA Card. The annual percentage rate was 13.24% which was much lower than my other retail cards and United Airlines VISA Card. It was almost as excellent in terms of APR as the Discover More Card.

In regards to my third goal, I decided to “test” this out by calling two of my credit cards: Victoria’s Secret and Discover More. I had been longtime customers of both cards. Victoria’s Secret would not lower the APR for me, but Discover More lowered it to 10.99% for me which was a 2% drop from my previous rate of 12.99% and their lowest APR rate given to customers. It took only a few minutes and the representative on the phone was happy to knock down my rate because I had been a “good” customer. I was pretty happy knowing that I was able to knock the rate. I have now made it my habit to ask for rate reductions annually even if I pay the bills on time and do not accrue finance charges.

Overall, I was pretty happy with adding this card to my mix. I see the “return” every month added into my brokerage account. Since it is away from my usual checking account, I never “touch” this money and it goes into my savings and investments. In addition, I have set goals on how I will use my existing card mix.

How I Have Used the Cards to Save More Money

• Retail Cards: I will only use them specifically in conjunction with coupons/promotions that require the card. This means that no more random charging on purchases outside of the store and NOT using it when it does not garner me any additional benefit. I have come to realize that I don’t need any additional gift certificates to spend more at the store. I can get a better % back by using my cash back cards.
  
• United Airlines VISA Card by Chase: I no longer use this as my main card as I find the accumulation of miles slow and not worth it. Cash back trumps mileage accrued especially when additional service charges are being tacked on now by the airlines by mileage redemption. It no longer serves a purpose of mine, but it is an emergency card and I use it once in awhile to keep it active.
  
• Discover More Card: In the past, I used it whenever I wanted “cash back” without thinking about how to maximize my gain from the card. Nowadays, I register online for every periodic promotion they offer (aka the 5% cash back rewards). I make sure I use this card primarily for the 5% cash reward items up to the set maximum limit. Beyond that, I retreat back to my Schwab VISA Signature Card. I have never taken the “cash back” from this card. Instead, I use them to redeem gift cards to maximize my rewards from using the card. For instance, recently, I traded my cash bonuses for a $25 Starbucks Card and a $25 Borders card since I can’t give up my weekly mochas and I love to read. By using the cash back reward for redeeming gift cards to places I shop at, I inadvertently reduced the amount of money I spend on entertainment and on a larger scale living expenses. Instead of going to award websites such as Fat Wallet, I first look at Discover’s Website to see if the retailer is listed as one of their shopping partners. If so, using my Discover More Card garners a higher return than me getting some points, having a large waiting period to cash the points out (and thresholds), and eventually exchanging said points for cash.
  
• Schwab Investor First Signature VISA Card: This is now my primary card. I use it for everything unless otherwise specified for a promotion at a retail store or if it happens to be a purchase that I can get 5% back from Discover More.
  

Figure out what you want out of your credit cards. If your needs do not match up to what you want, then maybe it’s time to reassess your existing credit card mix. Remember that what works for me may not work for you. Perhaps, you love to travel and stay at posh hotels. Maybe a hotel chain credit card/travel card would work for you. Talk to your friends and see what type of cards they carry. Ask if they have any recommendations for specific credit cards. Even if you pay your bills on time, it doesn’t hurt to try to reduce your APR. I saw it as a fun challenge to “negotiate” a lower APR. Plus, you never know if emergencies will ever strike. Make your cards work for you and not against you! I can’t stress this enough. I have been able to live a fuller life by maximizing the output of my cards and reducing what I normally spend on entertainment, food, gas, etc.

And if you are wondering, my date didn’t work out.