[Musing] Don’t Be the 1%!

I’m not talking about the ultra rich and the Occupy protests, I’m talking about the millions of Americans who have credit cards that get them only 1% (or less) cash back. I don’t want to be a part of this 1% group and neither should you! There are countless banks and credit unions that offer a variety of credit cards with these dismal returns to the point where it seems to be the norm. For the longest time I also believed my card’s cash back at less than .5% was the norm and I accepted it. Sure, something is better than nothing but compared to what else is out there, 1% (or less) is practically an insult nowadays. Trust me when I say: you can do better than the 1%!

As I start rolling out my credit card reviews and discussions you will begin to see how anything less than 1.5% or 2% is really unacceptable. 1.5% or 2% doesn’t seem like a major difference but it really adds up over months and years of spending. It really pays to take a careful look at what the rewards programs are for a credit card before you decide to apply for it. Credit card companies make much more than 1% off each of your transactions so you should make sure a little more of that goes back to you!

The Points and Miles Façade

The problem for some credit card users is that they think they are getting a better deal than they really are especially when it comes to travel cards that give out points or miles instead of a cash back percentage. For some credit cards, a user gets a few points or miles per dollar spent which on the surface sounds like a really good deal but in reality might be worse than 1% cash back. The system is designed to be tricky. Saying you get “.25% cash back” is definitely not as sexy as saying you get “5 points per dollar spent” but they could equal same thing. The key is to actually find the cash value of each point or mile to ensure you aren’t failing into the dreaded “1%” group. In many cases a “point” or a “mile” is actually worth a fraction of a cent which normally translates into dismal returns on your purchases. With each of my credit card reviews I will lay out the cash value if the card uses points or miles instead of direct cash back.

Loyalty at a Price

Many people argue that if they are loyal customers to a particular brand (like an airline or hotel chain) then it doesn’t matter they are only getting 1% (or less) equivalent cash back because they use the company often enough where it is easier for them to redeem miles or points with them. Unfortunately that is what those companies want you to think. They want to lock you in with their company branded credit card that may give less than mediocre rewards. There are so many non-branded credit options out there where you can get much out of your rewards while still using the companies you like. Don’t sacrifice flexibility and cash back potential with blind loyalty. With that being said, there are some fantastic cards out there with affiliations to specific companies that are worth looking at that I will be talking about in the coming weeks.

In summary, I encourage everyone to scrutinize their current credit cards and see what they are actually getting back from their spending. There is a very good chance that it will leave you disappointed. But do not despair, stay tuned for my reviews which will lay out all kinds of better options!

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