Warning: Four Tips Before Getting Your New Rewards Card!

{The is the third article in a  series of articles on credit card tips.  These posts cover  many common credit card topics  with action steps you can put to work immediately.}

Credit cards-I know they are the devils spawn. The scum of the earth. The ultimate evil…
But for me, alas, a necessary evil.

I have been listening to Dave Ramsey for 5-6 years now when I am on the road. {He is  more entertaining than many talk radio heads yelling about Obama, or Ocho Cinco.  And you can only listen to 70′s music for so long…hmmm, I’ll have to ask my CPA if this makes XM radio deductible…}

I have also read his books and I agree with a lot of what he preaches-and if you’ve heard him, you know he preaches!  His credit card advice, however, is like a reformed alcoholic preaching the return of prohibition.

I will readily admit I have two personal credit cards:

• An American Express Delta rewards card-I travel out of the country and in Georgia the saying goes “if you are flying to hell, you have to change planes in Atlanta…I use the points for free flights.
• A GM Master Card-I keep this card ’cause my favorite low cost gas station won’t take AMEX.  I need to switch to a different card since I no longer buy new GM’s.

Since I need a new rewards card and I know many of you need to switch or get a new card, I’ll let you guys join my journey.

I asked an expert for advice.  Something I recommend all of you do when you have to make a money decision.

Flexo, the writer behind Consumerism Commentary, has been writing about money for years.  His top ranked and long running blog  regularly reviews new credit cards and offers.  He agreed to answer my questions.

Dr Dean: Where do you get info on new credit cards and how do you inform your readers?

Flexo: I find out about new credit card rewards programs and changes in advance and announce them on Consumerism Commentary as soon as possible.

By visiting the Credit Card Center at my blog and subscribing to our RSS feed or newsletter, you will be aware of the best credit card cash-back rewards.

Maximizing rewards is more difficult than it used to be thanks to the card issuers making frequent changes. Reward-seekers need to be more vigilant, and Consumerism Commentary helps with frequent updates.

Dr. Dean:  Can I get by with one rewards card?

Flexo: Not too long ago, all you needed was one cash back card if you wanted to maximize your rewards.

Today, issuers reserve the best rates for certain categories of spending. To get the top cash back rate on all or almost of your spending now, you’ll need three cards.

People with good credit and good spending habits can own three cards without affecting their credit score for the long-term, though signing up for three cards in a row might temporarily ding them.

The nature of credit card spending is that, in general, people spend more with plastic than they do with cash. Only those who are diligent enough to acknowledge this and fight against this tendency should bother with rewards programs. (in other words, remember the alcoholic quote above-if you have spending control issues-don’t get any credit cards…)

Dr. Dean:  What is a good cash back reward percentage to shoot for?

Flexo: 5% is the Holy Grail of rewards programs. You can earn even more by using the card issuers’ marketplaces for shopping or rebate sites like Ebates in conjunction with the cash back card.

Your combination of rewards credit cards should get you as close to 5% in all categories as possible, and then you have to remember when to use which card. The easy days of getting 5% cash back on all purchases on one card are over for now.

Dr. Dean:  When you get a rewards card, should you care what interest rate the card charges on the balance?

Flexo: The greater your risk of missing a monthly credit card payment, the more you need to worry about interest rates.

Anyone can have an emergency. If your emergency requires you to spend using your credit card and not pay the bill in full each month, your interest charge will eliminate your cash back bonus advantage and then some…..

If you’re well-prepared with a significant emergency fund or other savings, a credit card interest rate can be one of your least concerns.

If you’re not in great financial shape, work on that before chasing credit card rewards.

Thanks, Flexo.  You da man.

I’m a bullet point kinda guy, so I summarized Flexo’s points to help me in my search:

• I will use his website to help in my search. The least I can do for his help today…
• You may need more than one cash back card to take full advantage of cash back on all purchases.   I mainly want cash back on gas and groceries-and only want one more card so I will remember to focus on cash back for gas cards.
• Look for 5% cash back-but they are getting harder to find. 5% I got it…
  
• Interest rates don’t matter if you always pay your balances on time and in full!  No emergency fund, no rewards card!! I got it, I got it!  sheesh…

So I’m off to see the Wizard about my new cash back rewards card.  When I get to the end of the Yellow Brick Road-I’ll report back and let you know what I find!  Witches and flying monkeys, oh my!

(Gosh Dorothy, that guy behind the curtain looks just like a character in the Simpsons…)

This weeks carnivals:

Yo, Yo, Yo was how Budgets Are Sexy let me know I had made the Best Of Money Carnival this week. What a with it dude, huh man!  I’m down with ya dawg!

Carnival of Wealth at  Personal Dividends

Totally Money Blog Carnival at Thousandaire. Thanks Kevin…

Festival of Frugality at Free Money Finance

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This entry was posted on Monday, April 11th, 2011 at 6:00 am and is filed under credit cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.