For many years our main credit card has been the Hilton Honors Visa card, and because of that we’ve earned a lot of Hilton points over time.
Those free hotel rooms were nice, but they weren’t the best way for us to reward ourselves for our spending.
So in the spirit of this blog, where I try to make the most of our family finances, I took another look at how we were using our credit cards.
Cash Back Credit Card
Last year at exactly this time, we switched to a Costco American Express card that pays cash back for purchases. Here are the reward tiers:
- 3% cash back on gas (up to $4k a year in gas purchases)
- 2% cash back on travel and at US restaurants
- 1% cash back on everything else (including gas purchases above $4k)
For the last year the American Express has been the card we’ve used for our everyday spending and it’s worked well for us.
For one thing, we can use the American Express for our Costco purchases. If you shop at wholesale clubs you know that they usually don’t take credit cards.
We’re enthusiastic Costco shoppers and in the past we had to pay for all our Costco purchases (including things like gas and tires) with a check or debit card and there were no rewards associated with those forms of payments. I really like getting some kind of reward for the way we pay for things so this card solved that.
But we don’t just use the AmEx for Costco purchases; we use it for everything we can and we pay the balance in full each month. That strategy has resulted in some healthy cash back amounts: In February we got a check for $581 and we currently have a balance of $411 for this year’s cash back.
$1000 per year is not bad for a source of found money that requires exactly no effort on our part.
Side note: We made a similar change in credit card usage for Tom’s business. We quit using an airline rewards card as our primary card and applied for a Chase Ink cash back card instead.
We don’t do nearly as much spending on business credit cards, but that simple change has paid off to the tune of over $800 in cash back in less than two years. We funneled those amounts into a business savings account.
Hotel Rewards Card
As I said at the top, our Hilton Honors Visa used to be our primary credit card, but just because we replaced it with the American Express doesn’t mean we’ve kicked the Hilton card to the curb. Here’s why:
- We’ve had this card since 2004 and to close it would shorten the age of our credit history, which could negatively affect our credit scores, so we knew at the very least we wanted to keep it open.
- While American Express is accepted at most places, it’s not accepted everywhere. When that situation comes up, we use the Hilton Visa as a backup.
- Our kids are authorized users on this account and have their own cards to keep on hand for emergencies and to pay for things that Tom and I foot the bill for, like books at college. We made the decision to do this for Lindsey when she traveled abroad and it was such a great convenience that we later got a card for Grant too. Just this week Grant used his card to pay for a dentist appointment. (These cards are only for convenience though; they don’t build the kids’ credit histories since the actual account is in our names.)
- Finally, we use the Hilton card to pay for stays at hotels that are part of the Hilton brand (Hilton, Hampton Inn, Hilton Garden Inn, Embassy Suites, Doubletree, etc.). We’re still a part of the Hilton rewards program and we try to stay at those hotels when we can to build up points. We earn 6 Hilton Honors points for every $1 spent on a Hilton hotel stay when we use our Hilton Visa card to pay for it. That’s in addition to the base amount of points we earn for each stay, which we get regardless of how we pay.
Airline Rewards Card
We recently opened a Southwest Airlines Rapid Rewards Premier card when they ran an offer for 50,000 airline points; the usual offer is 25,000 points.
We fly Southwest often and next year we have three trips scheduled: one to Miami, one to Tampa, and one to Chicago. Those are all places that Southwest flies so the timing on the bonus points was good.
Once we’re through meeting the spending requirements to earn the 50,000 miles ($2000 in 3 months) I’ll use this card the same way I use the Hilton card: to pay for Southwest purchases. In addition to the base points you get for flying Southwest, you earn two additional reward points per $1 spent when you pay with a Southwest credit card.
So, in short, this is our plan:
- Be brand loyal when traveling whenever possible.
- Pay for our Hilton purchases with our Hilton card.
- Pay for our Southwest purchases with our Southwest card.
- Use our American Express for all other personal spending and the Chase Ink for all other business spending and take the cash back rewards.
Do you have a credit card strategy that works for you?