HOW DO YOU KNOW IF YOU HAVE TOO MANY CREDIT CARDS?
How many are too many? Is there a set rule or a prescribed limit? Apparently not from what I have read. But what I have found is that when I have to spend hours almost daily to monitor them, it is too many for me.
HOW DID I END UP WITH SO MANY CREDIT CARDS?
When I discovered that cash reward credit cards could be a reliable way to reduce my monthly expenses, I started applying for them as often as I could. Of course, the idea was to get the largest promotional welcome bonus, the highest % of cash rewards as well as a substantial amount of available credit. Therefore for about the last three years, gathering cash reward credit cards has become a major pastime. Well, guess what? Now I have too many cards.
THE JOURNEY TO TOO MUCH
It has been a tremendously educational experience collecting all the cards I have. Primarily, it has helped and still helps to reduce my expenses. In addition, I have written many blog posts and several Ebooks about this. Doubtless, there will be more. But the most significant comment I can make at this time is that right now I have too many. As I mentioned in a previous blog post, I have reached critical mass.
For most of this time, my primary concern has been focusing on the 5 or 6 FICO® credit score factors that go into building a good credit score. Certain cards have taken priority for charging purchases. Then it recently occurred to me that if I did not start using all of my cards, some could be closed for inactivity. That could affect my credit score negatively by lowering my available credit, changing the average length of time I have had cards and flagging too many closures. Low and behold, that is exactly what happened this week. One of my co-branded cards was closed without notice for inactivity.
HOW MANY CARDS DO I NEED?
I need enough cards to satisfy the FICO® score factors. Fortunately, I found a formula that I could use to determine how many cards to own, which ones to keep and those to phase out since I had surpassed critical mass. These are the factors I now consider in which cards to use:
a. the oldest aged accounts
b. those with the best credit line and lowest credit utilization ratio
c. the ones with optimal returns in my top spending categories
d. those that give me the maximum value for use with my favorite merchants, stores, airlines or hotels
HOW MANY CARDS DO I WANT?
My sense is that I would like to have no more than ten at the most. For example, my ‘straight flush’ analogy illustrates most of them. Beyond that, I think that one or two travel cards are essential. Other than that, an additional card or two in the ‘straight flush’ formula would be OK too.
I am at a new beginning. I have climbed the credit card mountain in excellent standing. Now it is time to descend the other side with equal care. Therefore future writings on this topic will involve reducing my load doing my best to maintain my great credit card standing while keeping also 6 FICO® score factors in balance.
There are numerous credit card categories and signup incentives available. For example, some credit cards offer hefty signup bonuses. Others have top cash rewards. Then there are travel points. Finally, there is balance pay down cards. You just have to know what you need, go over the details, see what you qualify for, and apply for the best card in that category. Because there is so much to cover, this blog post will focus only on one time sign up cash incentives and ongoing cash rewards.
Credit Card Sign Up Incentives and Ongoing Cash Reward
There are basically two ways that credit card companies entice new customers seeking cash rewards as their priority. First, there is a single signup cash back bonus. This is accomplished by offering a set amount of money to be charged on a new credit card within a given amount of time. In addition or instead, there can be ongoing cash rewards.
Bank of America® VISA or MC Cash Rewards Card
This particular card is a very good deal all around. It offers a number of excellent credit card signup incentives. In fact, it is ideal for someone seeking a credit card with cash rewards:
• $150 cash reward bonus
• cash back on every purchase, every time
• no annual fee†
• your choice of a 3% cash back category, 2% and 1% categories
Comparing Credit Card Offers
Let’s compare the Bank of America VISA Cash Rewards Card with some of my other favorites. In fact, I have several other favorites. Determining which are the best cards or even single card depends on a person’s credit card charging needs or spending profile, as I like to call it. For example, I always aim to get the maximum cash back on every purchase I make. Therefore, when I signup for a card, I like to make sure it fits into my spending profile. For example, these are my major credit card charging categories: • GROCERIES
• DINING (EATING OUT)
• HOME AND PERSONAL PURCHASES
GROCERIES: The Amex Blue Cash Everyday® Card
Here is how my system works. For example, the American Express Blue Everyday card offers 3% cash back so that is my card of choice for groceries. It has a similar profile to the Bank of America® card with a few differences.
• $150 or $200 cash reward bonus
• cash back on every purchase, every time
• no annual fee†
• 3% cash back on groceries
Numerous credit card accounts provide charts like the this one to provide of breakdown of categories of expenses or vendors within a particular category.
DINING OR EATING OUT: Capital One® SAVOR Card
This card offers 4% for dining out. It even includes McDonald’s, Burger King, Dunkin Donuts, etc..
The chart below compares values of dining out cards. The Savor Card is close to the highest and charges less than others with higher or similar % bonuses.
UTILITIES: The New Credit Card Sign Up Sweet Spot
This is how I break in a new credit card to receive their one time sign up bonus. If I use it to charge my monthly utility bills such as cable, cell phone, and contents insurance, I charge about $275 a month on it. That easily covers a requirement of $500. in charges in two months. A requirement of $1000 in charges in three months can also be covered with a few extra charges are added in. I have fulfilled the requirements of a number of very useful cards with this method. In addition, I also get monthly cash rewards this way because I use the new card for charges and pay it the following month from my checking account. This technique is a real winner if I can remember which month I am supposed to do what task.
GAS: Get 3% With the New ‘Choose Your Category’ from Bank of America®
Because Bank of America® Cash Rewards Cards now offers the option of choosing 3% on their new ‘Choose Your Category’ plan, we use it to pay for gas. That is the best cash back rate I have found to date for gas.
HEALTHCARE AND BEAUTY: The CareCredit® Rewards Master Card
The CareCredit® Rewards Master Card pays 2% on health related and other charges that the above and below cards do not cover for more than 1% or 1.5%
“Whether you use your healthcare credit card to cover your deductible, or to pay for treatments and procedures not covered by insurance*, CareCredit helps make the health, wellness and beauty treatments and procedures you want possible today.
*Subject to credit approval.” Quoted from CareCredit® Card’s application material.
CAPITAL ONE® QUICKSILVER CARD: For Everything Else
1.5% cash rewards available at all times
HOME and PERSONAL PURCHASES
Store cards have certain advantages and disadvantages. They often offer 3-5% as their regular cash reward or as special promotions. For example, Target always offers 5%. But remember to carry your PIN number to use this card in their stores.
MORE HOME and PERSONAL PURCHASES
TJ Maxx which includes Home Goods, Marshalls and Sierra have special promos that can triple their usual ratio of points for each dollar spent. On the other hand, Home Depot has a $25 signup bonus which is deducted from the first purchase only. There is no cash reward bonus for their card.
A WINNING HAND
As a result of careful planning, almost every charged purchase can earn a cash reward of between 1.5 % TO 5%. One exception is HOME DEPOT. They don’t offer cash rewards. So, from maximum to minimum, this is what a winning hand of credit card cash rewards might look like.
HOME, OFFICE AND PERSONAL: 5% Staples, Target*
DINING AND EAT OUT: includes McDonald’s, Burger King, Dunkin Donuts, etc. 4% Capital One® SAVOR Card
GROCERIES: 3% American Express® Blue Everyday Cash Rewards
GAS: Choose 3% on the new BoA ‘choose your category’ plan
HEALTH-RELATED, PET AND SOME BEAUTY: 2% CareCredit® Rewards MC 2%
EVERYTHING ELSE: 1.5% Capital One® Quicksilver card *Special offers triple points at certain times of the year
Keeping Track of A Winning Hand
Jim Wang of Wallet Hacks has the best trick I’ve heard of to remember which card offers what. Write it directly on the card. For example, on the Capital One® Savor Card write, ‘DINING 4%’. Just one word to describe the category and the % reward. It works very well when you have three, four, or even five cards in your wallet.
SOURCES & RESOURCES
Wallet Hacks Target Staples
TJx Credit Cards
Capital One® Savor Card
Capital One® Quicksilver Card
American Express® Blue Cash Everyday Card
Bank of America® Cash Reward Cards
CareCredit® Rewards Card
Compound cash rewards are an important part of Mastering The System of Extreme Credit Card Benefits. To begin with, the largest perks I have gotten are from the credit card sign up promotional bonuses. They start at $100 each with specific qualifications. Once they are met, not only can a customer receive this bonus in a variety of forms but it is also possible to get the regular cash rewards along with it. Here is the reason.
Increments of $20, $25 or even $50 are the minimum distribution levels applied to most credit card cash rewards. Those are the amounts when regular cash rewards are involved. But when someone receives their promotional bonus, the regular cash reward levels are automatically met. As a result, the initial bonus will include both the sign up promotional bonus and the regular cash rewards bonus.
Sign up Promotional Details
Credit cards require that the purchasing threshold be paid in 90 days to 3 months. I like to complete the process in much less time than that because I often count on receiving these funds to help pay my bills. One way I accumulate purchases while keeping within my budget is to pay all my bills for the month on the new card. Occasionally bills must be paid directly by my bank account. More times than not, I can charge the payment to the credit card I have signed up for to receive a promotional bonus. Between my cable, cell phone, contents insurance, gas, food, prescriptions and even medical bills, I can meet the needed spending threshold within a month. In other words, a card that requires $500 in charges to pay oui a sign up bonus of $100-$150 will net me about 20-30%. Not bad for a month’s work.
Read The Fine Print
One time I signed up for a card without knowing that it did not pay the bonus when the spending threshold was met. When I called the bank to claim my promotional bonus, I was told I had to wait. Their terms are different from any other bank I have gotten a sign up promotional bonus from. Usually I get it immediately. With this bank, I had to wait for the full 90 days. I was not happy about that because it sure put a squeeze on my budget for the month. That was money I had expected to help pay my bills. Fortunately, I would get it next month so it was not a substantial delay. But it was an inconvenience. So be sure to read the fine print or inquire when signing up for a credit card promotion when the bonus is paid out.
Go For The Gusto, Active and Passive Techniques
In my experience, compounding cash rewards is not for the meek. Some of the perks I have gotten have required being rather brazen.
For example, one card had a promotional bonus of $150. I met the terms and got my bonus. Almost immediately after that, a new promotional bonus appeared online for $200. As soon as I saw it, I called the credit card company and asked for the additional $50. They gave it to me! You never know what you can get unless you ask. I like to make a habit of asking as often as possible. Being part of The Former Middle Class living rather frugally is an incentive to explore every possibility to get additional perks.
Occasionally someone comes up with a passive, brilliant technique. For example, using something called ‘card linked offers’, Jim Wang of Wallet Hacks has come up with an impressive, passive (nothing to do after it is set up) triple whammie for cashback dining. Read Triple Your Cashback Dining Out at Restaurants for all the details.
Whenever you can, compound your sign up promotional bonuses and cash rewards. With the knowledge of the proper tools and how they can work together, this is possible. Behind every benefit there can be another bonus and even another cash reward. See how many you can collect. In future posts, I will be discussing compounding travel points card benefits and online coupon compounding.