Making the most out of credit card rewards.

As of July 25, 2011, the United States is nearly at the debt limit of $14.3 trillion.  This problem isn’t isolated to just the country.  Millions of Americans, following the government’s lead, are spending more than they earn.  Increasingly, these people are finding themselves in massive debt.  Where some of these people differ from the government is that they are making progress with drastic steps to reduce and eventually eliminate the amounts they owe.  Unfortunately, one of these steps is to completely abandon the use of credit cards.  This is a costly mistake.

Once you abandon your credit card, you are abandoning rewards points.  My primary card is the Chase Amazon Visa Signature card.  I chose it years ago because it gave me $30 off on my purchase of a TI-89 calculator through Amazon, but the rewards are so good that I’ve been using it ever since.  Every 10,000 points I earn gets me a $100 Amazon gift card.  With some creativity, I've been earning these gift cards at an alarming rate.

"Unless they accept $5 Jiffy Lube coupons as payment, it looks like I'm be putting this one on my credit card again. Don't worry, I'll get the bill and you can just pay me afterwards."

A simple trick I've been using to rack up the points requires nothing but an appetite and some friends.  All you have to do is go out for a meal and split the bill.  For this to work, everyone but you will need to be paying in cash.  You will be paying with your credit card.  Instead of only putting your portion of the bill on your credit card, cover the whole thing and pocket everyone else’s contributions.  For example, if you're responsible for half of a $20 bill, put it all on your credit card and take the other $10 from your friends in cash.

You’re not done yet.  At this point it's easy to fall into a trap.  If you spend this cash, you’re giving up those rewards points that you just earned from your friends.  Instead, go to the bank and deposit that money.  You should be paying for as much as you can with your credit card.  There is an exception to this, which you should note.

I discovered this final trick while searching for the cheapest gasoline.  With gas prices reaching record highs, some gas stations have started a practice of discounting the price if you pay in cash.  Like most people, my first thought was that I’ll probably be getting a better deal through my credit card rewards than my savings with cash.  This isn’t always the case however.  A typical cash discount will be $3.40 per gallon, versus $3.50 per gallon with my credit card.  This $0.10 difference represents a savings of 2.8%.  Even with double gas points on my credit card, I’m only saving 2%.  This means that if I pay with credit, I’m only getting back $0.07 for every $3.50 per gallon.  To counter this, I found a credit card that specifically has a higher rate of return on gas purchases.    

In order to know I’m still getting the best deal, I’ll keep my TI-89 calculator in my glove compartment so I can calculate the percentage savings on the go.  Don’t make the same mistake I did, however.  Using a calculator while driving is just as dangerous as texting while driving, and will get you a $100 ticket in New Jersey.    Not only is this ticket embarrassing, it falls under the “other” category on most credit cards so it will only give you a 1% reward.  Instead, pull over before doing your algebra.  It’s hard to save for retirement when you’re serving time for vehicular manslaughter.  

"...The Texas Instruments model 89 graphing calculator was ejected from the vehicle at the time of the accident, striking a second bystander in the head, killing him on impact.  There were no other casualties reported."