As part of my series, VA/VE Cost Saving Projects, this post crunches the numbers to see what combination of Credit Cards is optimal for our family. Note that earning credit card rewards is only a consideration if you don't have credit card debt and are able to pay off your credit card in full each month.
Maximizing Credit Card Rewards
I conducted a credit card rewards analysis to find what combination of credit cards works best for my family. I categorized my spending into 4 types of expenses based on what most credit card rewards are based on: 1) Gas/Groceries 2) Dining out 3) Re-occurring expenses 4) All other purchases. I used certain assumption for how much in dollars, certain points were worth and I also factored in annual fees. Although I did include Travel cards in my own spreadsheet, I opted to choose only cash-back cards since my family doesn't travel too often.
My analysis showed me that most 'no-fee cards' give approximately 1% back. Most premium cards give approximately 2% back. However, because some credit cards gave a higher amount for certain categories, I am able to craft a mix of credit cards to optimize my rewards. I ended up with these 3 cards:
I use the free Costco Capital One Mastercard when I dine out for 3% back in Costco Dollars
I use Scotia Momentum Visa for Gas/Groceries for 4% Cashback. There is a $99/year fee for this card.
I use MBNA Rewards World Elite for all other purchases for 2% cash back. This card is changing as of Feb 1, 2019..I am currently trying to decide on an alternative!
It should be noted that my wife was slightly inconvenienced by the fact that we now have certain cards for certain types of purchases......okay she was VERY inconvenienced by this....so on 'paper' this is optimal for our family based on our purchasing patterns but you have to judge for yourself the benefits versus inconvenience of this approach. That being said, in terms of annual rewards to our family compared to say, a no fee card, our family generates an extra $400 a year from this approach! This is an example of optimizing one aspect of our financial life, essentially one VA/VE project that I conducted.
To see my other VAVE Cost Saving Projects, please go to my Project page.