Tune up your credit cards!

Credit CardI will admit I am a credit card geek. I consider credit card one of the most influential financial tools ever invented. The notion of being able to charge now and pay later is not new but it is credit cards that made it wide spread. I just love credit cards and the power they give me to pay at my discretion not worrying if I have enough cash on me.

Borrowing money is not however how I use credit cards. I pay my monthly bill in full and carry balance only on some cards that offer 0% interest. The best part about credit cards is what some of them will pay me back in a form cash back or other sorts of rewards, miles or points.

Since every card is different and pays different percentages on different types of expense, I tend to carry a few in my wallet. I wrote about what exactly cards I carry back in February. That set of cards is a result of a careful selection among a number of offers available from several credit card providers.

Once in a while I have to update my cards as providers discontinue their offerings or new better credit cards are launched. Apparently I am not alone in my constant search for that perfect combination which will maximize my rewards. Joel, the founder of CreditCardTuneUp, was solving the same problem back in August 2006 when he faced the dilemma of what to use instead of the discontinued Citi Dividend Platinum Select MasterCard that used to pay 5% back on gas, grocery and drug stores.

I was surprised by how many options I found and the variety of the cards’ reward structures. I was OK with the idea of managing two or even three credit cards if it would mean a substantial increase in rewards. The trick was to figure out the best combination of 2 cards and 3 cards for my spending profile and see the difference in rewards. During my research I realized that there are plenty of other people out there trying to make the same decision about which rewards credit cards to use. So I thought I’d try to solve the general problem and maybe even make the solution available to others.

And so he did and as the result a web tool was born that helps you choose the best combination of up to 3 rewards credit cards based on your spending habits.

Before you rush checking out the website I should warn you that it was obviously made by a geek for geeks. As I first looked at it, the design hurt my eyes and the amount of information overwhelmed me. But I slowly got used to it and started to appreciate the powers it gave me as I was experimenting with different combinations of credit cards.

If you like CreditCardTuneUp you might also want to take a look at this other tool which helps you find the best card to transfer your balance to. However I honestly hope you don’t carry a balance and will not be needing it.

The photo is courtesy of Steve Woods at Stock.Xchng

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11 Responses to “Tune up your credit cards!”

  1. 1 XynamaX Mar 28th, 2007 at 7:18 am

    Rule #1: If you can’t pay them off every month, don’t use them.

    If you can’t get by rule #1, don’t bother with any cash-rebate cards. Your cash rebate will be wiped out by your financing fees. Credit cards should only be used as an extension of your savings account and for convenience purposes, not as a line of credit. Too many people get in trouble with cards, and it’s one of the worst debts to carry.

    I checked out the tuneup site, the card they recommend (citi drivers edge) only offers 6% cash back if you use it on car-related expenses. Not practical in my opinion, I stand by the Amex Blue for cash back. The cash-back reward is automatically credited to your account on your anniversary date, and you don’t risk the chance of losing your reward by “forgetting” to redeem it as most other cards require.


  2. 2 Yan Mar 28th, 2007 at 9:18 am

    Totally agree on the first point. I am sure this is the trap which the banks hope you will get into as you sign up for a rewards credit card. In that respect here is a good reading:

    Re Amex Blue, try increasing the total amount you spend monthly to say $3700 and you will notice that Amex Blue takes place as the best card. The card has progressive rewards ladder meaning you get very little initially (during the year) but more as you go. $3700 a month is apparently the threshold when it makes sense to use it.

  3. 3 Beverly Mar 28th, 2007 at 10:55 am

    I am totally different when it comes to every day purchases – I prefer doing plain cash (wherever I can)and save “time and money”…since My time is money! Even though there’s the “on-line paperless feature,” it’s still losing valuable time on keeping control. Of course, I wouldn’t survive without credit cards, but I had to narrow
    down my “charging trend” to avoid the bookeeping.

  4. 4 Yan Mar 28th, 2007 at 1:46 pm

    That is what I never understood, why do people still use cash in supermarkets? Please enlighten me!

    Don’t tell me swiping a card takes longer than paying with cash. The only reason I can understand is concern of possible identity theft. However this is just one little bit that contributes to the whole issue. All my friends who became a victim got in trouble for other reasons, some totally out of their control.

  5. 5 Mike G. Mar 28th, 2007 at 9:08 pm

    Hey Yan,

    Have you tried any Airline credit cards for frequent flier miles?

    I have USAirways card which has worked well.

  6. 6 Yan Mar 28th, 2007 at 9:26 pm

    Well, I consider airline credit cards a sort of scam since you are limited to just one airline to redeem your points.

    Another example is the GM card by Chase that offers straight 5% cash back on all purchases. The catch is you can only redeem it against a new GM car. What kind of reward is this?

    I prefer the freedom of Blue Cash or other cards that don’t get you on a hook with any particular company or merchant.

  7. 7 Mike G. Mar 28th, 2007 at 10:34 pm

    Good point. USAirways is the dominant carrier here in Philly so it’s not that bad. Plus you get express check-in. :)

  8. 8 XynamaX Mar 29th, 2007 at 6:03 pm

    It’s a brand loyalty thing, yes, you might get more of a reward, but you’re definitely limited to where you can spend it. If you stick with Amex Membership Rewards, you can get a free round-trip ticket for I think 20,000-25,000 points on most of the major US carriers, and you’re not just limited to airline rewards. The rewards program is pretty good, it’s equivalent to about 1% cash back if you redeemed your points for gift certificates (100,000pts = $1000 gift card to home depot, crate & barrel, etc etc).


  9. 9 credit card fan Apr 29th, 2007 at 10:23 pm

    Good post! I hold three credit cards and enjoy their use(by the way one of them is Blue Sky from AmEx for frequent flier miles, that works very well). It is no doubt, credit cards are convinient. When I need cash and do not have it, credit cards always help me.

  10. 10 Gillian May 2nd, 2007 at 1:35 am

    I, personally, am in search of the best gas reward credit card. Everybody uses a car and I guess this is the most practical card for me as of the moment. But you’re right, I should figure out first the combination of cards that would work best for me.

  11. 11 Steve "The Credit Card Debt Man" B Jul 15th, 2007 at 3:23 pm

    Using credit cards irresponsibly will be financial death. Has anyone seen the credit card documentary “Maxed Out”, hits the nail on the head. Paying minimum payments will take decades to pay off and will cost you tens of thousands of dollars in the long run. Its called the credit treadmill.

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