Our New and Improved Credit Card Strategy

Managing Money / Thursday, August 7th, 2014

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:

  1. Be brand loyal when traveling whenever possible.
  2. Pay for our Hilton purchases with our Hilton card.
  3. Pay for our Southwest purchases with our Southwest card.
  4. 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?

7 Replies to “Our New and Improved Credit Card Strategy”

  1. We use our Chase Blue card for cashback bonuses and use the bonuses for gift giving. I do like the idea of the Hilton card, as hopefully hubby and I will be traveling more in the future. Do the Hilton points expire?

      1. Sharon, I did some digging and it looks like the points will expire after 12 months unless you’ve had some activity (earning or using points) during that time. We’ve always had activity (earning points through our credit card) so it’s never been an issue. I think this kind of policy is somewhat standard among loyalty programs, but don’t hold me to the details.

  2. I’ve never actually owned a credit card! Crazy, right? I’m not against them. I will probably get one soon. Have any tips for which credit card I could get with good rewards? FYI I don’t travel that much or buy that much stuff either…

    1. Will, that’s a big question and a lot will depend on your specific circumstances. I’d head over to a site like Bankrate to compare cards and look for something that matches your spending habits. Look for something with no annual fee and – ideally – one that pays you a bonus for opening. Then look at the cash back categories and see which card has the best rewards for the way you spend (i.e. if you don’t have a car, don’t choose a card with high gas rewards unless it rewards you well in other categories you spend in). Hope that helps!

  3. Keep in mind that if you earn 110,000 points in a calendar year with Southwest you will earn a companion pass for the remainder of that year and the following year. The 50,000 bonus points you got from signing up for that card count! My husband and I both applied for 2 cards each and received the companion pass in March of this year. It will be good til next December and our teenagers are our companions. Your companion flies free even if you book with points! I just came across your blog and will definitely be reading all your posts about $ for college! Thank you!

    1. Great point, Elizabeth, and we did exactly that this year. I have the points and my husband is flying free. I love how you and your husband did it at the same time so your kids could fly free. I’ll bet you’ll take some memorable trips during that time.

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