15 Feb 2024 Credit Cards as Small Wins

There are a lot of ways that small decisions can add up in your financial life to make a difference over the long haul. One of those small wins is optimizing the credit card that you use for day-to-day spending. A caveat at the beginning is that the following recommendations are with the thought that you always pay your statement in full and are not paying any interest. It makes sense to set up auto pay on each card that you have. Paying interest (or buying things just for credit card rewards) defeats the whole purpose of this small win.

Credit card rewards also fall into the Pareto principle in my opinion – the idea that 80% of consequences come from 20% of the causes. While spending more time on something like this will bring you more benefit, that benefit will decrease the more time you put in.

The following will generally progress from easiest, most straight forward to a little more complex. There is a section for cash back, travel, and lastly additional benefits. There are many quality cards that I did not have the space to mention – the important piece is finding the ones that work for you and reaping the benefits. Everyone’s spending is unique, so there is no one size fits all solution.

Cash Back Rewards

For most people, a simple cashback card with no annual fee is the most efficient option. While there are many options, two good ones are the Citi Double Cash and the Wells Fargo Autograph. The Citi card offers a flat 2% on every purchase. It is truly the “set it and forget it” option. The Wells Fargo card offers 3x points (redeemable 1:1 for cash) on restaurants, travel, gas, and phone plans. It is a great option if most of your spending is in those categories, but it does only offer 1x points on all other purchases.

One simple cashback card that comes with an annual fee ($95) is the American Express Blue Cash Preferred. It offers 6% back on groceries (up to $6,000 in spend) and streaming, 3% on gas and transit, and 1% on all other purchases. If you know you spend the max amount on groceries in a year, it can make sense to utilize this card.

The last cash back options of note are cards that offer 5% cash back on certain categories (typically up to $1,500 / quarter) – the Chase Freedom Flex and Discover It. They both have no annual fees. Currently the rotating categories are restaurants / drug stores (Discover) and grocery stores (Chase). While it is straightforward cash back, it isn’t as simple as the previously mentioned options because you have to keep track of the category and activate it during the period. Two additional store specific options in the 5% category – the Chase Amazon (includes Whole Foods) and Target RedCard. If you spend a lot of money at either of those places, it may make sense to pick one up.

Bonus Mention: If you are a business owner, the Capital One Spark Cash Plus is a solid option at unlimited 2% cash back (annual fee of $150 – there is a no fee 1.5% version). These cards have compelling spending bonuses when you first sign up.

Travel Rewards

When many people think of credit card rewards, they often have travel cards in mind. Often these cards offer higher sign-up bonuses and typically have annual fees. The hard part can sometimes be utilizing the benefits that you are paying for. There are many options in this category, but the two that stand out are the Chase Sapphire Preferred and the Capital One Venture. Both of these cards have higher annual fee options (the Chase Sapphire Reserve and Capital One Venture X) that require personal analysis to determine if they are worth the increase in rewards.

The Chase Sapphire Preferred (annual fee: $95) offers 3x points on restaurants, 2x on travel, and 1x on everything else. The real value of the points comes from being able to use the Chase portal to book travel, where you receive 25% more value when redeemed, and also being able to transfer to travel partners like Southwest, Hyatt, Marriott, and more. The Chase Sapphire Reserve bumps the points for travel to 3x and includes 50% more value through the portal but comes with a hefty $550 annual fee (offset by a $300 travel credit). As mentioned above, this card will only make sense at certain spend levels.

The Capital One Venture (annual fee: $95) offers a flat 2x points on all purchases. Similar to Chase, you can use the points to book through their portal (but no bonus) or by transferring to travel partners like Air France, British Airways, and others. Similar to the stepped-up Chase option, there is a Venture X card that earns the same 2x points but has a $395 annual fee (offset by a $300 travel credit).

Bonus Mention: If you have an airline or hotel brand that you find yourself using often, it can make sense to utilize their credit card. They can offer compelling points for the brand of your choice, but the only downside is that the points they provide are not as flexible as the other options.

Additional Benefits

One benefit to credit cards that many people overlook is the additional perks that they offer. They can often be hard to find or are not advertised as well. The following is a quick bullet point list of some of my favorites:

• Travel Insurance – Mostly associated with travel cards, there are many travel insurance related perks to be aware of. Travel accident insurance, baggage loss, baggage delay, trip cancellation / interruption, and emergency evacuation are the main ones. Some cards also provide rental car insurance. If any of these are of interest to you, I recommend researching what applies for your particular card. Typically the only requirement is that you pay for your travel with the card you are utilizing the insurance for.

• No Foreign Transaction Fees – If you are traveling abroad, be sure to take a card with you that has no foreign transaction fees. A lot of cards offer this these days, but be sure to check for your specific card prior to traveling.

• American Express, Chase, and Citi Merchant Offers – This is an easy “win” if you don’t mind spending a few minutes scrolling through lists. Cards from each of these companies will have places on their website or app that list merchant offers. If you know you will be spending money at a certain place (i.e. don’t add an offer to buy something you didn’t already want), then you might as well activate an offer that will give you $ or a % back at certain retailers. There are hundreds of options on each one.

• Cell Phone Protection – A number of cards (including the previously mentioned Chase Freedom Flex and Wells Fargo Autograph) offer cell phone insurance coverage. As long as you pay your phone bill with the card, you will get money back if your phone is lost or damaged. They typically have a small deductible.

• Chase Instacart Credit – If you have a Chase card and utilize Instacart, then you can get a few months free of Instacart+ and also receive monthly or quarterly statement credits ($10-15) for each Chase card. Learn more here.

• Bank of America Museum Benefit – This is one of the more unique benefits, but if you have a Bank of America card then they have a perk called Museums on Us. For the first weekend of each month, you can show your card at participating museums and get in free. In Raleigh, you can go to Marbles Kids Museum with this! Find the full list here.

There is obviously a lot of information here and a lot left uncovered. I could likely continue writing briefs for a long time just on this topic. I hope you are able to pick out something that can help you! As I mentioned, this is one of those smalls wins that can add up over time.

The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.