Maximizing You Cash Back

Over at Free Money Finance, they have done an exhaustive review of how to maximize your cash back card spending. Wisely they have narrowed their analysis down to three cards, the Chase Freedom card, the Amex Blue, and the Schwab card.

The Chase Freedom card is one I have not really looked at much. He includes it with the caveat that the terms have changed for new applicants versus existing card holders.

Another premise of his is that he is able to get more value from the cash cards than he does from the travel cards, as he has previously explained here. I think he is right most of the time, when it comes to most airline cards. Frankly, I have discovered United and Delta miles to be hovering at a value of around 1 cent each. I have heard better things about American miles. The real value for people like me, who do travel a few times a year, is from a flexible travel card like my Starwood Amex or an Amex that earns membership rewards points. I frequently get about 4 cents per dollar spend in value, and sometimes more.

Of course, his conclusions are only really valid for him and his spending. To evaluate your spending, and to draw your own conclusions, check out Mr. Credit Card’s Cash Back Calculator.

Speaking Of Worthless United Miles..

First USA now has an offer for “up to” 40,000 United “Mileage Plus” miles with their Visa. The link is here. Things to keep in mind are the “up to” language includes a lot of spending $10,000 a year, and an anniversary bonus. Neither of which are pretty clearly spelled out in the terms and conditions.

Apparently, other people have been receiving even sweeter offers in the mail including double miles on some purchases, and the holy grail of true frequent fliers, Elite Qualifying Miles, or EQMs.

Of course, I can’t mention anything United related without referrencing my strong preferrence not to have anything to do with that airline. You can read one of my latest tirades here.

You’ve been warned.

House Of Cards

That is the title of a recent article in the New Yorker about credit card companies and their tactics. It touches on the two types of credit card users, those who pay their balance in full and those who carry a balance. It underscores my mantra if credit cards were only be used as charge cards, we would all be better off. I also think it is interesting that the author portraits people who carry a balance as incurring both the most risk and the most reward for the credit card industry itself. Ultimately, he extrapolates that the reduced credit lines we are seeing will mean less credit card debt as a society, and more people living within their means. He speculates that less credit card interest and penalties will probably mean more money spent elsewhere, as it does for me personally.

Son in the end, responsible use of credit is not just good for you, it is good for the economy. Fantastic! I think I will go out and buy some socks.

Reduced Credit Limits and Credit Scores

I have read a lot of articles recently about people, with excellent credit, having their credit limit reduced dramatically on this card or another. For most, it is no big deal, unless the limit is below your balance.

The also brings up another question: Will my lowered credit limit negatively affect my credit score? The answer is that it very well may. One of the factors in a credit score is your credit utilization ratio. This is the ratio of your credit limit divided by your present available credit. Even if you are paying your balance in full every month, you still have a balance on your card that affects your credit utilization ratio. It gets lower when you pay your bill in full, but it still includes at the very least. everything you purchased between your statement closing date and your payment due date, usually about 20 days worth.

To ensure this is not a problem, there are two steps that you can take. The first it to diversify your credit card portfolio ahead of time. People like me who pay off their balance in full tend to also be fairly frugal, self reliant people. It is often against their nature to apply for more credit cards than they need. Some people opperate under the erroneos belief that having fewer credit cards will help their credit rating.

Unfortunately, this is not true anymore, if it every was. Having more credit cards gives you more of a credit history, and having more credit lowers your utilization ratio.

The second thing you can do is to ask your remaining credit cards to raise your limit. If you have a good record, they will likely oblidge.

Finally, if your limit is arbitrarily cut to something that is too low to be practical, cancel the card. Your business is to valuable to be abused.

This entry was posted on Wednesday, March 18th, 2009 at 23:55 and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.