Thoughts on credit cards that offer cash back or miles? - Mothering Forums

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#1 of 17 Old 01-31-2008, 03:20 AM - Thread Starter
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I have a friend that uses their miles card for everything during the month: groceries, car payment, utilities, etc....everything. I have another friend that does the same thing but uses a card that at the end of the year they get cash back to use at Costco or cash it out. Both pay off the card entirely each month. We have some cc debt right now that we are considering taking some from our savings to just pay it off completely even though it makes me nervous to do that. Once that's paid off we are considering using one of these types of cards to pay all our monthly bills with, pay it off each month and then at least be getting something for money we'd already be spending anyway.

What are your thoughts on this? Good or bad idea? If good, what is a good card? I've heard the Costco Amex is really good or the Amex Blue cash back. BTW we have excellent credit. Thanks!
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#2 of 17 Old 01-31-2008, 07:02 AM
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I just picked up a similar card. It's a Capital One card that offers 2% back on travel/entertainment and 1% on everything else. I got it because I am planning a trip to Japan, and most of the hotels, etc. there don't accept Mastercard (my pre-paid debit), so I needed to get a Visa card.

Now I am afraid to even put the card in my wallet. Even though I promise myself that I will pay the balance in full each month; experience has demonstrated otherwise. Even if I HAVE the money in my savings account, for some reason I feel compelled to keep the money in savings and only pay some of the cc bill. I promise myself that next month I'll pay the whole thing off... but then I add a little more to it. You can see where this leads.

So now I have this Visa. And it is 0%interest until Sept.08. So I have told my husband to make sure he sees the August statement. And if there is ANY balance, he is to take the card and cut it up. I know that I cannot be trusted w/ cc, even one that pays "cash back", because even one month's interest would wipe out any benefit from the "cash back".

I guess if someone is truly disciplined, using a cash back card would be okay. You just have to get really honest with yourself.
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#3 of 17 Old 01-31-2008, 07:21 AM
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I've considered getting a card that offers miles once we pay off our other ccs (at which point we will no longer be using them) and using it for this purpose. That way when DH gets his two weeks paid vacation time each year we can actually use it to go somewhere further than where we're comfortable driving.
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#4 of 17 Old 01-31-2008, 02:58 PM
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I have two cards, both with benefits. I would never have a CC that had no perks. One gets me "points" which I can redeem for gift cards. The other gets me coupon dollars to spend at my favorite store plus free shipping every time I buy from this store. I make purchases at this store 3-4x a year so even just the shipping is a huge savings, and I use the coupon dollars every year to buy my Christmas tree and anything else I might need/want (I just got new sheets for our bed, for free; I got a few small Christmas gifts for others, for free).

I keep thinking about a card that gives strictly cash back but the % on that tends to be lower so as long as I keep using the coupon dollars at this store I'll keep this card.

I don't have an AmEx and I'm thinking about getting either the Costco or the JetBlue AmEx cards - if you have a JetBlue AmEx, the points you earn to credit toward free flights never expire and you earn points as you spend too. I fly JetBlue 1-2x a year, but it takes 4 flights to earn a free one. I keep thinking this might be worth it.

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#5 of 17 Old 01-31-2008, 03:34 PM
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We do the same as your friends. We have a cash rewards program and we love it. We usually get $350-$500 back a year.

I will say it is very easy to get yourself into trouble if you do not stick to your budget. If you are willing to stick to a budget and pay it in full every month it is a great thing. Just proceed with caution.
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#6 of 17 Old 01-31-2008, 03:41 PM
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I put all my expenses on my credit card and pay it off every month. There are a couple benefits - the points back, and the fact that there's not fee per transaction (unlike with my Cdn debit card). I don't treat it any differently than cash, though.

The other nice thing about it is that often my income every month is spaced randomly - I might get money in my account deposited on the 1st, 18th, 24th, and 31st. So it's difficult to budget for the month when most of the money doesn't come in until the end.
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#7 of 17 Old 01-31-2008, 03:50 PM
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We have a Mastercard through our grocery store and use it for everything and pay it off. We earn enough points for at least 20 dollars of groceries every month.

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#8 of 17 Old 01-31-2008, 04:51 PM
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if you do it, budget your money and pay it off EVERY month, don't let even a small balance ride through a billing cycle, the money/miles/perks you have made is totally lost on the intrest.

I do it all the time, haven't done my utilities with a cc though, I love it when we have a large purchase to make that we have cash for and I use the cc to actually pay for it, then when I look at my statement on how many points we've earned just for a stamp and writing a check, I feel like I'm doing something great

when I first got a credit card and was trying to build up my credit and establish myself in the 'financial world' anytime I was out and about with others that were buying things I'd pay for it with my cc and my friends and family would give me the cash or write me a check that went straight into my bank account to pay the cc bill. I had some pretty high bills coming in but none of the spending was mine and I was able to pay off everytime!
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#9 of 17 Old 01-31-2008, 04:54 PM
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We have an American Express that we get membership rewards on. You have to pay it every month, so it's not like a regular credit card. I have used points for Crate and Barrel gift cards, restaurant gift cards, etc. Everywhere doesn't take Amex, so we have another credit card with rewards that we use also.

I put all the gas and other things on the Amex. My in laws put everything (groceries, etc.) on their credit card and earn miles. I worry that I would overspend if I paid everything with cards. But it can be a great way to earn points/rewards.
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#10 of 17 Old 01-31-2008, 05:10 PM
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That you have a credit card balance now tells me that it might not be a good idea to go for the points/miles cards and put everything on it to get the reward. I don't mean this negatively or critically - just a thought...

As a pp noted, the first time you carry a balance and get hit with the interest, you've likely eaten up any "reward" you've earned. As other pps have noted - if you're absolutely sure that you can pay the balance in full every month without fail - then you might as well get rewarded for it.

Best wishes, whichever you choose.

Oh - also - many rewards cards have higher interest rates, on average, than non reward cards. Another reason to be very careful with them.
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#11 of 17 Old 01-31-2008, 06:04 PM
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All of our cards are rewards cards. We pay the balances in full each month. I use the Discover for most things, because I like the flexibility of the rewards. We also have a card that puts 2% each quarter into ds's 529. We use that one mainly for tuition, since it's a mastercard, and some places don't take Discover. Lastly, we have a regular Visa through our bank. It has a crazy high limit, so we only use it for very large purchases that would mess up my budgeting, if I put it on a different card. It has a points system that you can cash in for gift cards, but it's more complicated.

You have to be very disciplined to do this. I track all of our expenditures in a small notebook that I carry around with me. If we run out of money, then we run out of money for the month. (By run out, I mean of the alloted amount in the budget.) I don't advocate this method, if you're seriously going to run out of money, because I think it could be too tempting to just put *one more thing* on the cc.

I looked at the AMEX cards, because they supposedly have a great rewards program, but I couldn't believe the annual fees. IMO, that is ridiculous. The cc companies make a percentage of every transaction just for you using their card. Even when you pay off the balance and don't pay interest, they still make money. There is no reason to have a card that charges an annual fee, IMO.
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#12 of 17 Old 01-31-2008, 08:41 PM
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I have an rewards card that gives 3 percent credit on purchases and 1 percent on everything else. This the card we use for almost everything, but we pay it off in full every month and have for as long as we've had the card. (I made the mistake of running up one credit card bill during grad school, paid it off as soon as I got out, and promised myself I would never again pay interest!) I wouldn't recommend reward cards universally. There are too many people who simply can't control their spending with a card. But we watch the bottom line closely, so for us, the card is a lot more convenient than cash. Plus, the reward certificates become my "play money." No, hubby really wouldn't care if I paid out of pocket for new cookbooks or board books for Baby, but the reward certificates help me limit non-essential spending.
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#13 of 17 Old 01-31-2008, 08:59 PM
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We used to have a miles card, we now have a cash-back card. We use it for most everything, and pay off in full each month. Annual usage on the two cards is about the same.

We dropped the "travel rewards" card for several reasons, but mostly the annual fee to get the "travel rewards" benefits. We figured that our annual spending would basically net us 1 RT ticket up to (at that time) $350 in value-- but we'd have to deduct the annual fee from that, leaving us really with a reward worth only about $300 each year. Add the lack of liquidity of rewards paid out in gift cards, travel vouchers, etc, and then factor in the shitty customer service from the travel reward card, and we felt we were better off with the no-annual fee 1% cash back card.

The 1% cash back is automatically rebated at the end of the year and put toward our monthly balance. I'm not sure what happens if the cash back exceeds your balance - I guess they'd probably send us a check for the difference. Doesn't much matter to me though, money's money.
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#14 of 17 Old 02-01-2008, 12:48 AM
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Originally Posted by MommyinMN View Post
I will say it is very easy to get yourself into trouble if you do not stick to your budget. If you are willing to stick to a budget and pay it in full every month it is a great thing. Just proceed with caution.
This is exactly what I would say. Be honest with yourself about whether or not you'll really pay it off every month.

My parents paid for my college tuition with their cash-back credit card and got some KILLER rewards for that because they had the funds to pay the balance immediately. I know other people who go all sorts of fun places, using the miles they earned on their credit card.

As for me and DH? Although we have some pretty cool rewards associated with our credit card, we're not using it at all these days. We know that for us, it's a slippery slope and we're better off not using it. Maybe in a few years when we've established better financial habits, we'll go back to using credit cards just for the rewards. But for now we know we're better off using credit cards only occasionally (for online purchases, hotel reservations, etc.)

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#15 of 17 Old 02-01-2008, 11:49 AM
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I use my Discover card for practically everything. Their stadard cashback rate is 1%, but every quarter they pay 5% on specific categories (restaurants, for example, or gas!) Those can really add up. The other thing I like about Discover is that you can redeem your cashback at many businesses that increase the amount - for example, if you redeem $20 for a Land's End gift card, you get a gift card worth $25.

One way to make sure you don't over spend is to pretend the credit card is a debit card, and subtract the amount from your checking account every time you use it. That way, you know for sure that you have enough to cover the bill when it comes, and you are much less likely to overspend.

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#16 of 17 Old 02-01-2008, 12:23 PM
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What about making sure you keep your current card paid off each month for 6 months and if you can do that, then switch? I'd look into fees and interest rates on the fancy cards too.
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#17 of 17 Old 02-01-2008, 12:30 PM
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This can be great if you really do pay off your balances in full every month. We've been doing this for almost 8 years now and it has worked great for us. We use Discover and a Chase Visa. Last year alone we earned $175 in bonus gift cards for bookstores, home improvement stores, and clothing stores.

Always make sure that whatever card you pick has a sufficient grace period and that you can line up the due date to be about a week after your payday that would cover the bill. Also make sure that you do not have to pay any type of annual fee. There are too many cards out there with reward programs for free to waste $25-75 on annual fees.

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