In this guest post from JoeTaxpayer.com, Joe is sharing how he maximizes the rewards of a specific credit card he uses in a creative way.
A few months back I came across a credit card offer that was above and beyond any deal I had seen before. First, a disclaimer. I believe that credit and specifically credit cards, can be used in a responsible manner. This belief is not universal, in fact there are those who feel the opposite, suggesting “there is no responsible use of credit cards.” If you are in that camp, we should agree to disagree, this article is not for you. To me, responsible use is treating the card as cash, i.e. buying only what you would buy anyway, but more important, paying it in full each month, never paying interest. I’d even suggest that for every charge, you actually already have the money available, else you are really just living on money that you haven’t been paid yet, and that can be dangerous.
Be aware however, that there is an impact to your credit score, as I discussed some time ago, the age and number of cards you have each affect your score. Last, there are those who say that “rich people didn’t make their money on credit card rewards.” Well, of course not, but rich people are also not known for leaving money on the table.
I have a card that gives 2% cash back to a 529 (college savings) account. My daughter is now 13 and that account funded only from this card has just past $12,500 in value. It should be $20,000 by the time she starts college. How long does it take you to net $20,000? For people in the US, it’s over 6 months of work. Even for a 1%er, it’s a week or two. Why would I ignore it? On to the deal.
This card has a reasonable 1% cash back for as long as you hold it, but the amazing part of this deal is the 10% for the first 90 days. Right in the features, it states the 10% is good only on gas, groceries, and drug store purchases. This is a nice offer but the categories are a fraction of the places people spend their money. No restaurants, department stores, Apple Store, etc.
Here’s where I needed to get creative. My local chain drug stores have a gift card rack which offers, among other things, a pre-paid Amex, Visa or Mastercard. We are Costco members, and Costco only takes Amex, so this was a way to make those purchases part of this 10% deal. The catch is that these cards do have a purchase fee, $5.95 for the Amex, $4.95 for the Visa or Mastercard, but they can be loaded with up to $500. My net cost on the $500 Amex is $455 after taking the fee and rebate into consideration.
The total rebates from this deal depend on how many of these cards you are willing to stack up. It takes a bit of tracking and some stores are not easily able to split a payment over two cards, so when the gift card balance goes sub-$50, I use it to fill the gas tank or at the supermarket where the cashiers can easily finish it off for me. Before my 90 days are over, I plan to have about a year’s worth of Costco expenses at the ready with these Amex gift cards and about 6 months of regular card use on the Visa cards.
In the end, this should be good for over $3000 in cash back. This may be more effort than many are wiling to put in, I admit, but considering the tight budgets we are all on, and how we put time into couponing, and searching for sales, this 10% looks easy in comparison.