My Personal Finance Journey

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Doubling Up Credit Card Rewards

Contributed by mm | September 13, 2004 9:36 PM PST

If you follow my gold credit card portfolio to get your share of $1,000 cashback rewards every year, you might notice the biggest bottleneck to squeeze even more cashback dollars is the caps put in the top two cards. Specifically, Citi® Dividend Platinum Select® Card has an annual cashback cap of $300, effectively limiting the 5% cashback priviledge to the first $6,000 grocery and gas station spend every year, and MBNA Cashback Card has a monthly cap of $25 for 10% cashback opportunities for grocery and dining charges.

How to break such barriers? If you have a family, you might want to get a second card of each type by applying in your spouse's name. That's what I did last month -- now I have two Citi Dividend cards and two MBNA Cashback cards.null

The next challenge is how to allocate the charges. Based on my recent spending patterns, my family charge around $750 in groceries, $300 in dining out and $130 in gas refilling. (Around $250 monthly spend on groceries is on Walmart or Target, which does not fall into the eligible 5% or 10% cashback category.) Besides, we also have around $500 credit card charges in other categories.

If you run some calculation based on these numbers, you may realize I have no way to max out the reward caps from the four cards. The best choice I have, is to max out the $25/card monthly cap on two MBNA Cashback card by charging $300 dining out and $200 groceries, and leave another $300 groceries and $130 gas filling to Citi Dividend. Assuming any other credit card charges give me 1% cash back, I should be able to earn $500 * 10% + ($300 + $130) * 5% + ($250 + $500) * 1% = $79/month.

I must recognize that the incremental benefit from such cashback arbitrage is diminishing, and it isn't worth more time to squeeze the last reward dollar, but if you have a larger family to support, or have a larger spending base than mine, a second card should help your bottom line much more. Good luck!

This Post Has Received 1 Comment. Share Your Opinions Too.


ASAP Credit Card Commented on September 23, 2005

Reward credit cards are GREAT if you can pay them off quickly! But watch out for those higher interest rates and annual fees. If you plan on carrying balances for a long-time, those rewards might not be worth it!

Here's a tip: only use your reward credit card for short-term purchases. This would include just the items you know you can pay off in a short period of time. For longer term purchases, use your "main" credit card with the lower rate!

http://www.asapcreditcard.com


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