How I play the credit card game

Credit card companies make all merchants pay a fee. This fee can be higher or lower, but if a merchant accepts one Visa, they must accept all Visas, even though the fee might be higher. Banks then charge higher fees and pass some percent to the credit card holder as a cash back bonus, travel reward, etc. This drive up prices for all the other consumers. So if you don’t play the game, there is a transfer of wealth from non-rewards card users to card users.

Strategy:

Get 5% back on all large categories.
Get “free” Hotel and Rail trips because the reward rate is pretty good for Hotels and Rail companies who don’t pay money out of pocket when I use a reward and take up a hotel room that might have been empty anyhow.

My Game:
My game is optimized to me in that
- I don’t drive much (gasoline cards not so important)
- I like to take rail vacations
- I eat out
- I shop too much on Amazon
- I drive a Chevy Malibu and will likely get another in 3 years, or a Chevy Volt. Or a Hybrid Equinox if they’d just do it already.
- My non-category spend is enough to offset a few credit card fees.

Category Spend
Capitol One Savor – 4% on restaurants. I got lucky and got the card before they started charing an annul fee.
Chase Amazon Prime – 5% on Whole Food & Amazon
American Express Cash Preferred – 6% on groceries. Has annual fee, so effective works out to closer to 3% or 4%
US Bank Cash Plus – 5% on a category of your choice, but restricted to a list. I plan to use mine for Cell Phone bills. Two phones with a data plan can easily run $1000+ a year.

Non-category Spend
It feels like the annual fee cards rack up points fast enough to offset the fee. Of course if you have $0 spend, then this is not true.
Amex Hilton Card – Annual Fee, seems to rack up points at a good clip. Ignoring bonuses, I figure I can get a
Bank of America Amtrak – Annual Fee. I rack up Amtrak points faster than I can use them.
Chase Freedom Unlimited – 1.5% back. I may let this one idle and get a Citi card instead which is 2%.
Capitol One BuyPower Card – 5% towards a new GM car.

Specific Stores
Lowes 5%, Target 5% and Ikea all got store specific money back cards- if you got credit score to burn (and having too many cards doesn’t seem to affect your score too much).

Altogether, this is $500 – $1000 a year of banks just “giving” me stuff for “free”.  But … is it?

Fee hotel cards are sort of like prepaying a hotel night.
Fee rail cards are sort of like prepaying part of a rail ticket.

And part of me knows that some of these rewards are paid by people who are in difficult financial situations and have run up huge credit card bills and are somehow paying them down. So use credit responsibly, don’t play the game if you aren’t going to use credit for what is best use for: occasionally running a balance around the time of huge expenses so as to preserve cash for emergencies. For that I tend to use balance transfers to Discover Card, which used to be charging around 4 to 5%. I figured it was simpler to pay money that to try to catch a 0% promotional and risk making a mistake leading to a 10%-14%-20%-25% interest rate.

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