November 1st, 2012
This was originally posted on 07/26, but 2 of the 4 cards below are being downgraded. If you’re into optimizing your spending you may want to get yourself grandfathered before it’s too late. More info in this Blue Cash post and in this Freedom post.
And be sure to call reconsideration before the 5th for the Blue Cash and the 11th for the Freedom to make sure your approval goes into effect before the downgrades!
Find other articles like this by clicking on the “credit card posts” tab on top of the DansDeals banner at the top of this site.
DDF user “azhoopsfan” has a bit of a dilemma. He and his wife have 4 primary credit cards that they use, but his better half has a hard time remembering where to use each card and it’s costing them points!
First of all, that’s a great lineup of cards! You may want to also dabble in business cards like Chase Ink Bold, Chase Ink Plus, or Ink Classic or the American Express Starwood Business card, or in a charge card like American Express Premier Rewards Gold. All of these new cards open new realms of possibilities, but just taking your small lineup should make for a fun comparison.
Determine the value:
The first thing is to do is to cover every scenario, based on your card portfolio. The only way to do that is to come up with a value for the various point currencies.
Let’s assume a value of 1.9 cents for Chase Ultimate Rewards points and 2.3 cents for Starwood Starpoints. Both currencies are excellent and can transfer into many different valuable programs. Ultimate Rewards transfers instantly into gems like United and Hyatt, among many other options. Starpoints transfer into dozens of different airlines at favorable ratios like 20K:25K or even 20K:50K and can also be used for incredible values at Starwood hotels. It should not be too difficult for people to achieve these values, but feel free to use any value that you are comfortable with. The rest of this post will be based on these numbers though, which are rough numbers I use when deciding when to redeem points for an award.
-The Starwood card earns 2 Starpoints per dollar at Starwood hotels, or a 4.6% rebate. It earns 1 Starpoint per dollar everywhere else, or a 2.3% rebate.
The Starwood card also carries American Express’ top-notch protections that are light-years better than any other banks. Other banks always look for a way to get out, but that’s not the case with American Express. If you need to return an item they will gladly refund you, if you have an warranty issue they’ll pay to have it fixed or refund your purchase price, if you need to dispute a charge there’s nobody who makes it easier or as pain-free as American Express does, if your item is stolen or damaged you’ll be covered. Thus figuring out what items should always be put on a card like this, like expensive electronics or purchases from risky vendors, is important.
-The Blue Cash Preferred card earns 6% cash back at grocery stores, 3% cash back at gas stations and department stores, and 1% cash back everywhere else.
-The Freedom card is awesome, but makes the equation much more complicated. Because “azhoopsfan” also has a Chase checking account he will earn 1.1 Ultimate Rewards points per dollar plus 10 bonus points on every transaction. On a 5 cent library fine this means a 418% rebate, or over 4 times your money back (love getting fined!). On a $1 transaction this means a 21.1% rebate. On a $10 transaction this means a 3.99% rebate, on a $1,000 transaction this means a 2.1% rebate. He will also earn 5.1 Ultimate Rewards points per dollar plus 10 bonus points on every transaction in select rotating categories, on up to $1,500 in quarterly purchases. On a $1 transaction this means a 28.7% rebate. On a $10 transaction this means a 11.6% rebate, on a $1,000 transaction this means a 9.7% rebate. Note that you or your spouse will need a Sapphire Preferred Visa , Sapphire Preferred World Mastercard, Ink Bold Mastercard, or Ink Plus Mastercard in order to transfer points earned on the Freedom card into airline/hotel/train points and miles.
-The Sapphire Preferred card gives 2.14 points per dollar on travel and dining, or a 4.07% rebate. On other purchases it gives 1.07 points per dollar, or a 2.03% rebate, which will never beat the Freedom rebate. However the Sapphire Preferred card is the only card from this bunch that does not charge a foreign exchange fee, which is 2.7%-3% on the rest of the cards.
Some forum members suggested placing stickers on each card. Personally I’d make print an index card to keep track of all this as follows:
-Generic purchases $90 or less: Freedom
-Generic purchases $91 or more: Starwood
-Groceries if $5 or more and not during a Freedom category bonus: Blue Cash Preferred
-Gas and department stores if $21 or more and not during a Freedom category bonus: Blue Cash Preferred
-Dining, airfare, car rental, hotel, taxi, parking, or toll if $10 or more and not during a Freedom category bonus: Sapphire Preferred
-Purchases at Starwood hotels or the W store not during a Freedom category bonus: Starwood
-Purchases made abroad not during a Freedom category bonus and that won’t need AMEX protection: Sapphire Preferred
-Purchases that may need return, warranty, purchase, or dispute protection: Starwood
-Purchases between 01/01-03/31 on Amazon.com and Gas stations: Freedom
-Purchases between 04/01-06/30 on grocery stores and Movies: Freedom
-Purchases between 07/01-09/30 on Dining and Gas stations: Freedom
-Purchases between 10/01-12/31 on Hotels, Airlines, Best Buy, and Kohl’s: Freedom
Make it simpler:
Now if your wife isn’t going to spending time in a Starwood hotel without you and isn’t planning on crossing any borders then make her life simpler and delete those lines from the index card. And the quarterly spending bonuses will likely be different next year, so perhaps just print up a card for the current quarter to keep that index card clean.
-Generic purchases anything $90 or less will be more valuable with Freedom due to the 10 point transaction bonus that gives more value to lower transaction amounts, while Starpoints being more valuable only overtakes that advantage once a purchase is above $90.
-Grocery purchases under $5 or during a Freedom bonus should default back to Freedom due to the low transaction bonus which is overtaken by the 6% on the Blue Cash Preferred card on purchases of $5 or more. The exception being during Q1 when there was a Freedom category bonus and then the Freedom card should always be used (at least until you max out the $1,500 category spend limit). Remember that grocery stores carry gift cards to lots of other stores and often provide incentives for buying them at the grocery store on top of the 6% cash back you can earn with Blue Cash Prefered!
-Gas and department store purchases under $21 or during a Freedom bonus should default back to Freedom due to the low transaction bonus which is overtaken by the 3% on the Blue Cash Preferred card on purchases of $21 or more. The exception being when there was a Freedom category bonus and then the Freedom card should always be used (at least until you max out the $1,500 category spend limit).
-Travel and dining under $10 or during a Freedom bonus should default back to Freedom due to the low transaction bonus which is overtaken by the 2.14 points per dollar on the Sapphire Preferred card on purchases of $10 or more. The exception being when there was a Freedom category bonus and then the Freedom card should always be used (at least until you max out the $1,500 category spend limit).
-Purchases in Starwood hotels or on a mattress from the W Store will do better on your Starwood card than any other card, except during a Freedom category bonus.
-Purchases made abroad during a Freedom bonus should default back to Freedom as the Freedom bonus will make it worth paying the 3% foreign transaction fee. If you are buying electronics abroad or from a store that you may need to dispute a purchase with then pull out your AMEX card. Office Depot in Israel once refused to take back a defective GPS from me even though their receipt said that they do accept returns. AMEX was more than happy to honor their return policy and refund my money.
-When your laptop breaks or you buy an item from a store on final sale it’s good to know that American Express will stand behind it. Don’t mess with maximizing points when it comes to items that you will want protected.
Now of course this is all based on maximizing value, but if you are aiming for a specific award then everything will change. If you are aiming to stay in the SLS in Los Angeles then focus spending on your Starwood card, if you want to experience the pure awesomeness of the Park Hyatt Sydney without paying $1,000 a night then focus on earning Chase points. If you want to fly on United’s awesome Star Alliance around-the-world award then focus on earning Chase points but if you want to have a shower on the plane after waking up from your private first class suite then focus on earning Starwood points.
Catch any mistakes? Post a comment.
Have a different lineup of cards? Post them in a comment and maybe I’ll examine them in a future post!