What's the Best Way to Use Credit Cards Now? A Financial Advisor and a Card Expert Talk Shop
You might think of spending as the opposite of saving and investing, but they have more in common than you might think. That's one thing I realized after speaking with Winnie Sun, a leading financial advisor, frequent contributor at CNBC and the host of Level Up with Winnie Sun.
She and I agree that earning rewards from your credit cards can be an important part of your personal finance strategy. Here are some of the things we discussed in a recent conversation.
Credit card travel rewards in the coronavirus era
Sun and I are experts at using credit cards to earn rewards, and over the years we've both been able to travel extensively at nearly no cost, by using points and miles. But now that travel is largely grounded, how are we adjusting credit card strategies?
Sun, who is based in southern California and normally has a very busy travel schedule, hasn't traveled since a filming in February. But she expects to be traveling again in the near future, and she hasn't really changed how she compiles credit card points or how she plans on using the rewards. "We are fully focused on just continuing to rack up miles and points, and using them in a smart mindful way, for not only today, but also in the future, because at some point this pandemic will be behind us," said Sun.
That's in-line with my current thinking, as I'm still using my travel rewards credit cards. I'm optimistic that it's going to be safe to travel again sometime next year, and that's why I continue to use credit cards to earn more travel rewards.
Using travel rewards cards for non-travel purchases
At the same time, both Winnie and I realize that not everyone shares our belief that safe travel will return soon. For those who have immediate non-travel needs, we've seen that the credit card industry has shifted quickly towards offering rewards that better fit the current environment.
For example, Chase's "Pay Yourself Back" feature allows you to redeem travel rewards for statement credits towards grocery store, home improvement store and dining purchases. Sapphire Preferred cardholders receive 1.25 cents per point towards these rewards, and Sapphire Reserve cardholders receive 1.5 cents in value per point redeemed. Chase had originally announced that this offer would be valid just through September 30, 2020, but has recently agreed to extend it for an unspecified period of time, and possibly changing the eligible spending categories.
Winnie Sun also pointed to a promotion that offers 5x points on Instacart groceries for purchases made with the Chase Sapphire Reserve, on up to $3,000 in spending through September 30, 2020. She also notes that the Sapphire Reserve is also offering 5x at gas stations through the end of September and 10x on purchases from select streaming services.
Travel cards with high annual fees: Cancel or keep?
I asked Winnie if she thinks that people should cancel their cards with high annual fees? "I think so," said Sun, who is re-examining the value of her expensive travel credit cards that offer benefits like airport lounge access, which she's no longer using. "I'm actually doing a deep dive in my own wallet and encouraging my clients to do so as well, and finding if that card still makes sense."
Besides simply closing a credit card account, there are also two other options for avoiding high fees. One is downgrading the account of a premium credit cards to a similar card from the same issuer that has a lower annual fee, or none it all. This is a little-known trick, which credit card issuers are often eager to help you with in order to retain their customers instead of losing them altogether. Later, you may be able to upgrade your card when you resume travel and need the benefits again.
The second strategy is to take advantage of all of the newly added fee credits that can justify the cost of travel rewards credit cards, even when you aren't traveling. For example, the American Express Platinum is now offering a $20 monthly statement credit towards mobile phone payments and another $20 per month credit towards select entertainment streaming services. These credits are valid until the end of 2020, and combined with other previously available statement credits, might justify this card's $550 annual fee, even when you aren't traveling.
Best credit card rewards and welcome offers today
Sun and I also suggest the following cards that are well suited to today's economic environment:
Chase Freedom Unlimited. Those who eat at home a lot more than before will appreciate this card offering new cardholders 5% cash back on up to $12,000 of grocery store purchases (excluding Target and Walmart purchases) in the account's first year. This is on top of the $200 bonus after spending $500 within three months of account opening. The Freedom Unlimited card offers 1.5% cash back on all purchases and has no annual fee.
Discover it® Cash Back. When cash back is your priority, you should consider this card, which offers 5% cash back on up to $1,500 spent each quarter on select purchases at places like Amazon.com, grocery stores, restaurants, gas stations and PayPal transactions, and 1% cash back elsewhere. It also features 14 months of 0% intro APR financing on new purchases and balance transfers (after that the ongoing APR is 11.99% - 22.99% Variable). However, balance transfers must post by October 10, 2021 to take advantage of the introductory offer. Discover will automatically match the cash back you've earned after your account's first year. There's no annual fee for this card.
American Express® Gold card. This card offers 4x points on restaurants and at U.S. Supermarkets, including a GrubHub dining credit (received in $10 monthly increments). You'll also receive $120 per year in Uber Cash to use on Uber Eats purchases or Uber rides ($10/month). So pretty much any time you buy food, you'll get bonus rewards. New applicants can earn 60,000 points after spending $4,000 within the first six months of account opening. The American Express Gold card also offers a $100 annual air travel fee credit and has an annual fee of $250. See Rates & Fees. Terms apply*
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