Cash Back Credit Card Reward Strategy

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Topic Author
Invest_Wisely
Posts: 86
Joined: Tue Jan 08, 2019 10:15 am

Cash Back Credit Card Reward Strategy

Post by Invest_Wisely » Wed Jan 22, 2020 12:17 pm

My wife and I are considering a implementing a cash back rewards strategy for the year ahead. We currently have two credit cards each that we only intermittently use, primarily for travel purchases. 90+% of our purchases are currently via debit card (which we're thinking of switching to credit cards for the rewards).

First a little about us:

Married
Me - 36 years old
Her - 32 years old
No debt
5 month emergency fund
**Rent but saving to own
Both employed full time
Comparable salaries
24% Marginal Tax Bracket
15% yearly employed sponsored 401k/TSP
Both maxing out Roth IRAs
No kids (but one of the way)

We are planning to purchase a home by the summer of 2021. We both have two credit cards each (with meh rewards) and excellent credit scores (above 800).

First, since we will be making a home purchase next year, is there a significant risk to our credit scores in opening up a new credit card to take advantage of rewards?

Secondly, we're looking for a simple cash back strategy (like a one-, maybe two-credit-card strategy). I like the Citi Double Cash Card, but it's not accepted at Costco where we make 30-40% of our grocery purchases. I suppose we could get the Citi Costco Visa, but I think the spending cap would really limit our rewards points vs the 2% on everything via the Citi Double Cash Card. Is it an option to apply for both?

hoffse
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Re: Cash Back Credit Card Reward Strategy

Post by hoffse » Wed Jan 22, 2020 12:30 pm

In your shoes I would wait until the home purchase is complete to open a new card.

In the meantime, you could look into BoA preferred rewards, which will give you 2.625% back on daily purchase and 3.5% back at Costco and grocery stores if you hold enough assets at either BoA or Merrill Edge.

If you hold $100k of assets during a 90-day period at those institutions, you get those higher rewards on their cards, and my understanding is that they only look at your account once a year to determine if you meet the asset threshold on a go-forward basis.

I am in the process of doing this right now. I have moved my Roth IRA to Merrill, and I just opened a bank account at BoA. In 90 days I will apply for these cards.

If you can’t meet that asset threshold, then I suggest the Fidelity Visa card. It’s 2% back on everything with no fee, and it’s a Visa so Costco will accept it.

PaunchyPirate
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Re: Cash Back Credit Card Reward Strategy

Post by PaunchyPirate » Wed Jan 22, 2020 12:35 pm

When I've opened a new card, my credit score (usually in the 800+) arena, might drop 5-10 points for a short time, but it works its way back up to where it was within a few months. I would do it now and get the rewards this year. I primarily use a 2-card approach. I use a PNC Bank card (also my local bank) for gas (4% back) and restaurants (3% back) and a Citi DoubleCashback card (2%) for everything else. I recently added a Citi AAdvantage card to get 50,000 miles to use for a flight to Europe this summer. So, yes, you can have 2 Citi Cards if you want. I will cancel the AAdvantage card before the annual fee kicks in, as it doesn't offer enough benefit to me after the initial bonus was given.

brad.clarkston
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Location: Kansas City, MO

Re: Cash Back Credit Card Reward Strategy

Post by brad.clarkston » Wed Jan 22, 2020 12:45 pm

You will get a small hit on your credit score when they run the check but it bounces back within a month so no worries.

The Citi card is a good general everyday card but I prefer using a couple of specific spend 5% cards before switching to a general 2.x% card (it's called a "pairing card" you pair it with a bigger but limited card).

I use:

1.) Gas -- Ducks Unlimited Visa for 5% Gas and Sporting Good stores (I hunt and camp allot) - no limits and supports wetland conservation.
2.) Amazon -- Amazon Prime Visa for 5% Amazon purchases - no limits.
3.) Groceries -- Blue Cash Preferred AMEX for 6% supermarkets up to $6k per year and 6% on online subscriptions or the Costco card if shopping there.

I pair that with the Chase Freedom which is 5% back on revolving quarterly categories up to $1500 a quarter. Anything that doesn't fit generally goes on a 2% travel card.

Oddball
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Re: Cash Back Credit Card Reward Strategy

Post by Oddball » Wed Jan 22, 2020 12:45 pm

There is a massive thread about CC rewards on this site.

viewtopic.php?f=2&t=192008

If your credit scores are already good I wouldn't worry about getting a new CC or 2.

What we do (me, DW, and a baby) is the Citi Double Cash for most stuff. Chase Freedom which is 1% on everything with 5% back rotating (quarterly) options, we use this card for CostCo. Target RED card for Target, and an Amazon card for Amazon, both of these are 5% cash back or 5% off.

We got ~$900 cash back from the Citi card since we opened it in April 2019, we use a CC for basically everything.

azurik
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Location: Boston, MA

Re: Cash Back Credit Card Reward Strategy

Post by azurik » Wed Jan 22, 2020 1:06 pm

I'm surprised you've been using debit cards for so long... think of all the rewards you've missed out on (and the protection benefits) :shock:

First, I wouldn't worry about the mortgage implications - getting 1 or 2 credit cards won't impact your credit score enough to drop you to the next tiered risk group. Your credit score might even increase with your time horizon since lenders like people with various debt instruments.

Second, for general spending and simplicity, just get any 2% cash back card available. Previous posts here have mentioned the top ones. If you want to spend some time and get a permanent 5% cash back, this is what I do.

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LilyFleur
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Re: Cash Back Credit Card Reward Strategy

Post by LilyFleur » Wed Jan 22, 2020 1:22 pm

Invest_Wisely wrote:
Wed Jan 22, 2020 12:17 pm
My wife and I are considering a implementing a cash back rewards strategy for the year ahead. We currently have two credit cards each that we only intermittently use, primarily for travel purchases. 90+% of our purchases are currently via debit card (which we're thinking of switching to credit cards for the rewards).

First a little about us:

Married
Me - 36 years old
Her - 32 years old
No debt
5 month emergency fund
**Rent but saving to own
Both employed full time
Comparable salaries
24% Marginal Tax Bracket
15% yearly employed sponsored 401k/TSP
Both maxing out Roth IRAs
No kids (but one of the way)

We are planning to purchase a home by the summer of 2021. We both have two credit cards each (with meh rewards) and excellent credit scores (above 800).

First, since we will be making a home purchase next year, is there a significant risk to our credit scores in opening up a new credit card to take advantage of rewards?

Secondly, we're looking for a simple cash back strategy (like a one-, maybe two-credit-card strategy). I like the Citi Double Cash Card, but it's not accepted at Costco where we make 30-40% of our grocery purchases. I suppose we could get the Citi Costco Visa, but I think the spending cap would really limit our rewards points vs the 2% on everything via the Citi Double Cash Card. Is it an option to apply for both?
I have both. I use the Costco Visa for restaurants and travel (3%) and gas (4%) and Costco purchases (2%). I try to fill up my car when I am shopping for food/clothing at Costco.
I use the Citi Double Cash Card for all other shopping, except I use the Amazon Visa for Amazon purchases.

Jack FFR1846
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Re: Cash Back Credit Card Reward Strategy

Post by Jack FFR1846 » Wed Jan 22, 2020 1:41 pm

Do you live in an area served by Citizens Bank? They have a promotion now where their normal 1.8% back card will give you back another 3.2% (total 5%) until March 31. Then it reverts to 1.8%, which isn't all that bad. The catch is that you have to apply in a branch. They also have rewards for opening a checking account, which they will push hard.

I don't understand why anyone uses debit cards. Less protection than credit cards and you get nothing for using it.
Bogle: Smart Beta is stupid

Topic Author
Invest_Wisely
Posts: 86
Joined: Tue Jan 08, 2019 10:15 am

Re: Cash Back Credit Card Reward Strategy

Post by Invest_Wisely » Wed Jan 22, 2020 1:48 pm

LilyFleur wrote:
Wed Jan 22, 2020 1:22 pm
I have both. I use the Costco Visa for restaurants and travel (3%) and gas (4%) and Costco purchases (2%). I try to fill up my car when I am shopping for food/clothing at Costco.
I use the Citi Double Cash Card for all other shopping, except I use the Amazon Visa for Amazon purchases.
Good to know. This might make the most sense for us in our situation. Since both are Citi cards, I didn't know if there would be restrictions to carrying both.

Topic Author
Invest_Wisely
Posts: 86
Joined: Tue Jan 08, 2019 10:15 am

Re: Cash Back Credit Card Reward Strategy

Post by Invest_Wisely » Wed Jan 22, 2020 1:49 pm

Jack FFR1846 wrote:
Wed Jan 22, 2020 1:41 pm
Do you live in an area served by Citizens Bank? They have a promotion now where their normal 1.8% back card will give you back another 3.2% (total 5%) until March 31. Then it reverts to 1.8%, which isn't all that bad. The catch is that you have to apply in a branch. They also have rewards for opening a checking account, which they will push hard.

I don't understand why anyone uses debit cards. Less protection than credit cards and you get nothing for using it.
Unfortunately there don't appear to be any Citizens Banks in my area.

Topic Author
Invest_Wisely
Posts: 86
Joined: Tue Jan 08, 2019 10:15 am

Re: Cash Back Credit Card Reward Strategy

Post by Invest_Wisely » Wed Jan 22, 2020 1:50 pm

azurik wrote:
Wed Jan 22, 2020 1:06 pm
I'm surprised you've been using debit cards for so long... think of all the rewards you've missed out on (and the protection benefits) :shock:
Trying to make up for this blunder now :D

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FrugalProfessor
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Re: Cash Back Credit Card Reward Strategy

Post by FrugalProfessor » Wed Jan 22, 2020 1:53 pm

https://www.frugalprofessor.com/best-cr ... 9-edition/

5.25% on most purchases (including Costco), 2.625% on all else (property taxes, doctors). Not too shabby.
I blog. Taxes are the lowest hanging source of alpha. I eat tax alpha for breakfast.

FizzyWomack
Posts: 7
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Re: Cash Back Credit Card Reward Strategy

Post by FizzyWomack » Wed Jan 22, 2020 1:58 pm

brad.clarkston wrote:
Wed Jan 22, 2020 12:45 pm

1.) Gas -- Ducks Unlimited Visa for 5% Gas and Sporting Good stores (I hunt and camp allot) - no limits and supports wetland conservation.
2.) Amazon -- Amazon Prime Visa for 5% Amazon purchases - no limits.
3.) Groceries -- Blue Cash Preferred AMEX for 6% supermarkets up to $6k per year and 6% on online subscriptions or the Costco card if shopping there.
This is about my setup too! I also use the Fidelity 2% card for most other things and the BoA card for dining (3%).

One thing I’ve heard about the Ducks Unlimited Card is that they are a bit picky about applicants having lots of new accounts/inquiries on their report...so maybe look into that and see if that might want to be one you apply for first if you determine you could use it. I like the card and the rewards, but the site to manage it from does leave a lot to be desired.

That Amex Preferred Card is clutch too - there is a $95 annual fee, but with a good sign-up bonus and if you use all $6,000 of grocery spend you come out way ahead :-)

pmr2017
Posts: 29
Joined: Tue Dec 31, 2019 11:34 am

Re: Cash Back Credit Card Reward Strategy

Post by pmr2017 » Wed Jan 22, 2020 2:45 pm

I would suggest looking at a Fidelity Rewards credit card give you're expecting a child. No annual fee. Unlimited 2% cashback when depositing into an eligible Fidelity account, 1% if taking the rewards in cash. We opened up a 529 for our child and switched our joint credit card to one of these. It's an easy way to make contributions while not taking away from funding other retirement accounts.

If you shop at Target a lot, look at getting a Red Card. 5% back and free shipping on 95% of items on target.com.

fujiters
Posts: 385
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Re: Cash Back Credit Card Reward Strategy

Post by fujiters » Wed Jan 22, 2020 3:03 pm

FrugalProfessor wrote:
Wed Jan 22, 2020 1:53 pm
https://www.frugalprofessor.com/best-cr ... 9-edition/

5.25% on most purchases (including Costco), 2.625% on all else (property taxes, doctors). Not too shabby.
+1
I set this up a couple months ago thanks to your recommendation. 2.625% minimum *cash* back can't be beat outside always putting spend towards a new sign up bonus.
“The purpose of the margin of safety is to render the forecast unnecessary.” -Benjamin Graham

Topic Author
Invest_Wisely
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Joined: Tue Jan 08, 2019 10:15 am

Re: Cash Back Credit Card Reward Strategy

Post by Invest_Wisely » Wed Jan 22, 2020 3:40 pm

Curious why folks recommend the Fidelity 2% card over the Citi Double Cash Card? Fidelity seems like extra work with the restriction that you must run the cash back through a Fidelity brokerage account. I'm aiming for the most bang for my buck (efficiency) with the least amount of extra time/effort.

snailderby
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Re: Cash Back Credit Card Reward Strategy

Post by snailderby » Wed Jan 22, 2020 3:55 pm

1. For your first card, there are several 2% no-annual-fee cashback cards on the market:

PayPal Cashback (Mastercard)
Citibank Double Cash (Mastercard)
Alliant Visa Platinum Rewards (Visa)
Fidelity Rewards (Visa)

The Visa cards have the advantage of being usable at Costco. There's also the Bank of America Travel Rewards card (Visa), which earns 1.5%-2.625% on all purchases, depending on your Preferred Rewards status with Bank of America. The downside is you get those maximum rates only if you redeem all of your points for travel purchases. The BoA Premium Rewards card doesn't have that restriction, and it has a higher rewards rate for travel and dining, but at the cost of a $95 annual fee. (If you're willing to pay an annual fee, another straight-rewards rate card to consider is the Alliant Cashback Visa Signature, which offers 2.5% cashback on everything, up to $250 per billing cycle, but with a $99 annual fee.)

2. There are many potential options for a second card, but for starters, I'd take a look at:
  • BoA Cash Rewards card (3%-5.25% on gas, online shopping, dining, travel, drug stores, or home improvement and 2%-3.5% on grocery stores and wholesale clubs)
  • Wells Fargo Propel (3% on dining, gas, travel, and streaming)
  • Bank of the West Cash Back World (3% on dining, gas, and groceries -- only available in certain states)
  • American Express Blue Cash Preferred (6% on supermarkets and streaming and 3% on transit and gas -- $95 annual fee)
  • Citi Costco Anywhere Visa (4% on gas and 3% on dining and travel)
Last edited by snailderby on Thu Jan 23, 2020 8:37 am, edited 1 time in total.

retireIn2020
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Re: Cash Back Credit Card Reward Strategy

Post by retireIn2020 » Wed Jan 22, 2020 9:43 pm

I have a Sam's club Mastercard
5% back on Gas anywhere
3% back on Dining
1% everything else

Just opened Fidelity CC, already have checking account (with bill pay) along with 401k, IRA, HSA with them
2% on everything, unlimited

BeneIRA
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Re: Cash Back Credit Card Reward Strategy

Post by BeneIRA » Wed Jan 22, 2020 10:18 pm

Invest_Wisely wrote:
Wed Jan 22, 2020 12:17 pm
My wife and I are considering a implementing a cash back rewards strategy for the year ahead. We currently have two credit cards each that we only intermittently use, primarily for travel purchases. 90+% of our purchases are currently via debit card (which we're thinking of switching to credit cards for the rewards).

First a little about us:

Married
Me - 36 years old
Her - 32 years old
No debt
5 month emergency fund
**Rent but saving to own
Both employed full time
Comparable salaries
24% Marginal Tax Bracket
15% yearly employed sponsored 401k/TSP
Both maxing out Roth IRAs
No kids (but one of the way)

We are planning to purchase a home by the summer of 2021. We both have two credit cards each (with meh rewards) and excellent credit scores (above 800).

First, since we will be making a home purchase next year, is there a significant risk to our credit scores in opening up a new credit card to take advantage of rewards?

Secondly, we're looking for a simple cash back strategy (like a one-, maybe two-credit-card strategy). I like the Citi Double Cash Card, but it's not accepted at Costco where we make 30-40% of our grocery purchases. I suppose we could get the Citi Costco Visa, but I think the spending cap would really limit our rewards points vs the 2% on everything via the Citi Double Cash Card. Is it an option to apply for both?
Sounds like for you the Citi Costco might actually be your one size fits all card and combining it with a Citi Double Cash card would probably make sense. Keep in mind, you can use the Mastercard on Costco's website to buy Costco Cash Cards, which they will mail to you, so you don't technically need a Visa to shop at Costco.

I was going to suggest the Blue Cash Preferred, but if you buy such a large portion of groceries at Costco, then I doubt you spent much at traditional grocery stores. Separately, what are your two credit cards you currently have? You can probably product change to something more valuable.

I am with you. Double Cash > Fidelity 2% card.

investor997
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Re: Cash Back Credit Card Reward Strategy

Post by investor997 » Wed Jan 22, 2020 11:58 pm

Simple strategy:

If you have >$100K of assets (taxable, Roth IRA, tIRA, whatever), move them to BoA/Merrill, enroll in Preferred Rewards and sign up for both the BoA Cash Rewards and BoA Premium Rewards VISA cards. 2.62% on everything, 3.5% on dining/travel and 5.25% on the category of your choice.

Otherwise consider Fidelity VISA. I'd say Citi DoubleCash but Citi stripped most of the benefits away from their cards last year.

TJHOFF
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Re: Cash Back Credit Card Reward Strategy

Post by TJHOFF » Thu Jan 23, 2020 7:05 am

Invest_Wisely wrote:
Wed Jan 22, 2020 3:40 pm
Curious why folks recommend the Fidelity 2% card over the Citi Double Cash Card? Fidelity seems like extra work with the restriction that you must run the cash back through a Fidelity brokerage account. I'm aiming for the most bang for my buck (efficiency) with the least amount of extra time/effort.
Citi turned me down, Fidelity didn't.
I already have several accounts at Fidelity, none at Citi.
Love The One You're With

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LilyFleur
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Re: Cash Back Credit Card Reward Strategy

Post by LilyFleur » Thu Jan 23, 2020 12:55 pm

Invest_Wisely wrote:
Wed Jan 22, 2020 1:48 pm
LilyFleur wrote:
Wed Jan 22, 2020 1:22 pm
I have both. I use the Costco Visa for restaurants and travel (3%) and gas (4%) and Costco purchases (2%). I try to fill up my car when I am shopping for food/clothing at Costco.
I use the Citi Double Cash Card for all other shopping, except I use the Amazon Visa for Amazon purchases.
Good to know. This might make the most sense for us in our situation. Since both are Citi cards, I didn't know if there would be restrictions to carrying both.
I personally have not experienced any restrictions. I raised my Citi Double Cash spending limit shortly after they gave it to me. I have a five-figure income, and I pay my bills on time. My FICO score hovers around 815.

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