On a weekly basis, I get this question from clients and friends alike: “Which credit card should I use? Before I go any further, let me deliver a quick disclaimer. I only recommend using credit cards if you are diligent enough to pay them off on a monthly basis. If this is the case it is a great way to both build credit, and benefit from some very enticing rewards.
I break credit card rewards points into two categories: cash back rewards and travel rewards. While there are many different categories offered these days, I find these two give the best bang for your buck. The market is flooded with credit cards now, so I wanted to look for something that is easy to monitor and understand. For example, I have my two main cards and a few specialty cards. I find trying to manage (or have my wife manage) more than two becomes a futile attempt.
Citi Double Cash:
The Citi Double Cash card is Citibank’s premier cash back card, and quite frankly the best I’ve seen on the market. I am a cash back fan; it’s really the simplest thing anyone can understand, since we all know “cash is king.”
So, how’s it work? Simple; you get 2% cash back on every dollar you charge. This comes back as 1% off when you make a charge and 1% cash back when you pay the charge. In essence, everything you purchase is on sale for 2% off. I’ll typically let my cash accumulate and when the cash builds up high enough, I’ll use it on a big purchase (or around the holidays when expenses tend to creep up). Some cards give rotating cash back or higher amounts in certain categories. However, this card gives 2% on everything you purchase, with no limit. I like not needing to keep track of specifics, and knowing I’ll get the full 2% cash back regardless of category. Besides, it’s also fun to watch that savings accumulate!
Chase Sapphire Reserve:
The newest rage in credit card rewards is Chase’s Sapphire Reserve. It’s dubbed the best travel reward card ever, and honestly I agree. When Chase debuted the card earlier this year they ran out of physical cards (it’s that popular). Chase grossly underestimated the high demand. But, what makes it so great?
For starters, by signing up Chase gives 100,000 points (as long as you spend $4,000 over the first 3 months). You get 3 reward points for every dollar spent on travel and restaurant categories (which if you are like me is quite a bit of my monthly expenditures). Also, Chase rewards 1 point for every dollar spent on everything else. As a reminder, 100,000 points is equivalent to 1% in reward dollars, so think of those points as worth $1,000 cash back. The real reason for the hype though is if reward points are used for travel (hotels, flight, rental car, etc.), Chase will give an additional 50% in reward points. For example, you could take your 100,000 points and just get $1,000 cash back, or you could redeem them for travel. Now you have 150,000 points, or $1,500, to use on your next trip! This is an enormous benefit — essentially equating to 4.5 reward points for every dollar spent on these travel categories.
The card has other benefits too, like being able to move over existing points with other Chase cards instantly making them 50% more valuable. In addition, you’ll get access to airport lounges, and $100 credit every 4 years for Global Entry or TSA Pre-check.
To be fair, I can’t mention all the positives without discussing the negatives. The main thing worth mentioning is unlike the Citi Double Cash card (which has no annual fee), the Chase Sapphire Reserve card does come with an annual fee. The card costs $450/yr to maintain (although you do get $300 statement credit every year on your first $300 of travel effectively bringing the cost down to $150/yr).
Boiling it all down:
At the end of the day, you can spend a lot of time researching the latest cards, chasing the best reward program, and possibly get very confused.
To make this whole thing simple–I use my Chase Reserve card for all travel and restaurant categories and my Citi Double Cash for everything else. This way I have the best of both worlds: heavy cash accumulations and points I can utilize for that next big family vacation. Guess I got to figure out how to pay them all off now!
Feel free to reach out if you have any questions as always and hope you enjoyed this week’s lifelong blog post.
In his role as Financial Planner, Andrew forges lifelong relationships with clients. He coaches them through all stages of life and guides them to better achieve their life goals. For more information about Andrew or the other firm partners, Kyle Hill and David Levy, click the link below.