Making Your Bank and Credit Card Accounts Work for You
Some preach adamantly against credit cards. Some people go for simplicity by sticking with cash and debit cards. Others, like me, go great lengths to make the most out of their money and spending, by having a variety of reward accounts. Currently, I have four pieces of plastic in my wallet: a debit card, a rewards Discover card, a rewards Capital One card, and a regular Mastercard. Why so many? Let me explain my system.
Every three months, my Discover card gives 5% cash back in various predetermined spending categories. This quarter, the categories are gas stations, museums, and movie theaters. So whichever categories get 5% cash back, I use my Discover card for those purchases. I bank at a local credit union, where I have a rewards checking account.
Fori my checking accoung, if I meet certain requirements–have a direct deposit and use my debit card at least ten times spending at least $200.00 per month –I will received 3% interest on my checking account on a balance up to $20,000, which is much higher than current 5-year CD rates (If I don’t meet the requirements, my interest rate drops to 0.25%). I keep all of my cash in checking account, and earmark how much money is part of my savings on an excel spreadsheet. So, for my first ten (unless it’s one of the cash back categories) purchases of the month (which usually totals to about $200), I use my debit card.
After I hit ten debit card purchases totaling $200, I use my Capital One Venture rewards card, which awards 1.25 points per dollar spent. Each point is worth $0.01, which can be used for travel or cash back (for cash back, each point is worth $0.005, so I will be using the points for travel). I also use this card for large expenses such as dentist appointments, electronics, etc.
I generally don’t use my Mastercard that’s issued by my credit union. I got it when I when I opened a checking and savings account as a freshman in college. I used it in the past to build a credit history until I could qualify for cards with more perks. I still charge on it every once in awhile since I don’t want an inactive account. Even though I technically don’t use this credit card, I want to leave it open since it is my oldest account, which is an important factor in how FICO scores are calculated. The other accounts are fairly new.
Keep in mind that spending more money to get rewards defeats the purpose of getting cash back. I always stick with a budget and never carry a balance. So how much money did I “earn” with these accounts? I’ll just look at the last quarter of 2011.
Credit Union Checking Account Interest
- Oct: $48.82
- Nov: $45.51
- Dec: $3.89 [I failed to reach $200 with my debit card purchases]
Discover Card Cash Back
- Oct: $15.73
- Nov: $7.77
- Dec: $16.36
Capital One Points (Dollar values listed, each point is worth $0.01)
- Oct: $7.11
- Nov: $2.65
- Dec*: $230.08
*I received a 10,000 bonus for spending over $1000 in the first three months after opening a new account.
Three Month Total: $377.92
Do you use multiple credit cards to get the most out of their rewards?