Our Next Credit Card

Last week I posted that I was looking for a good credit card which offers cash rewards specifically to improve upon the 1% we get for gas purchases on our current Citi Dividends card.

Two stuck out as the favorites, the Pen Fed card (which is for military based people but you can get around that pretty easily) or the Costco American Express True Rewards card.

My dad and a good friend ended up backing the Costco card pretty strongly, and the fact that we’re Costco members means that there’s no charge, so I’m pretty sure that’s what we’re going to get.

Basically, the card offers 3% on gas purchases, 2% on other categories (I think eating out is one) and 1% on everything else.

I did some research and it looks like they’ve had this for awhile, so while there are no guarantees, the fact that these payouts are in place seems to bode well for the long term viability of these percentages.

It’s not a straight cash rewards program. They send you a reward certificate once per year that you have to redeem in the store.  You can either get cash there or get a Costco gift card.  Since we do a once-per-month Costco trip, this should work out just as easily as cash.  We can just use the gift card that we get to pay for our purchases, and take that budgeted amount and funnel it into the earmarked portion of our savings account which we use for rewards.  Easy as pie.

My wife is nervous about adding one more card to the mix.  I don’t think we’re too card crazy, so while this is another thing to keep track of, I think the extra bucks we’ll get in reward money will make it worth the hassle, especially since we’ll be consuming a lot more gas given the camper purchase we just did over the fall.

What do you think?  Are we making a good choice? Am I putting too much effort into what will likely amount to a few bucks difference per month?

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22 thoughts on “Our Next Credit Card

  1. I don’t think it’s too much effort if you will derive a greater benefit by doing the research. Too many people are satisfied with the way things are even if there are better options out there, but happen to be too lazy to put in the little bit of energy to find something better. Plus, since you shop at Costco already, it’s a double bonus.

    • That’s the way I look at it. It’s not going to make me rich but why leave even $20-30 a year on the table?

  2. I think you did the right thing by comparing offers to see which one benefits you the most. In addition, it may only be a few dollars that you earn, but over time those dollars will add up.

    • Exactly. We all complain about gas prices so that’s a part of a tank for ‘free’ just for really, doing nothing more than we do now.

  3. We use the Chase Freedom card. I like the 1% cash back and the rotating 5% cash back categories. Although, I have looked at the Pen Fed card for awhile, and have seriously thought about switching. We don’t use COSTCO or I would also consider that one.

    • Our Citi card pays the rotating categories and I think they’re usually the same as the Chase categories, but gas hasn’t been one of the categories since they’ve started doing it that way.

  4. It sounds like a good credit card choice to me. I’ve worked in the credit card affiliate industry for several years. Often the credit cards issued by stores offer better deals since they are forcing you to use the rewards in their store. If you shop there regularly anyway, that’s not a problem. Credit card choice is quite important since it can save you a lot of money over time.

    • Costco will give you cash back but you have to go to a store to do it, so I’m sure most people just elect to spend the money on a gift card instead.

      • That’s smart of them to only give the cash back in the store. It would feel more rewarding to get cash or a gift card instead of just a statement credit. Plus, once you’re there you might as well stock up on some things.

        • I’m sure that they expect people go to blow the checks in the store and I’m sure a lot of people do. We probably would spend it but just defer the money we’d spend over to our savings account, meaning we wouldn’t put anything extra in our basket!

    • We have never bought enough to get their cashback membership. Back in 2009 we might have teetered on the edge as we bought baby formula from there, but after they surreptitiously raised the price (they reduced the price but put a bigger reduction in what you get), we started buying our formula from Target with Baby Girl Beagle.

  5. I have the Sallie Mae 2% Cash Back Visa Signature. It is 2% cash back on anything you purchase, including AmEx GCs. The most favorable redemption tier (cash back, statement credit, or other rewards) is at $12.5k of spend (for $250 cash back). I know some people like the rotating category bonus or rewards on specific categories like PenFed 5% back on gas. I do most of my spend in other categories, so a general 2% cash back card works better for me. Maybe it will be for you as well?

  6. I think you did a good job comparing cards. I am a bit intrigued that the american express credit card through costco has no fees associated with it. I need to look into that definitely sounds like a good deal. I have an american express card that I might be closing soon since it has an annual fee. Only reason I had it is because we went through a phase where we used it a ton for wedding, and fixing up our house that we accumulated a ton of points and gift cards.

  7. We have used the American Express Card via Costco for a couple of years now and like it very much. In that we rarely fly, we opted for a cash back card rather than air miles. We also did not want to pay any annual fees. We also like the idea of a steady, non changing category card, instead of those that rotate the cash back amount on categories. That always seemed like a marketing gimmick to us. The one caution I would suggest is that one must be careful when heading to Costco with their newly printed cash back check in hand. As with any trip to Costco is it easy to buy a bunch of unplanned for stuff, and before you know it you have spent way more than planned. In the case of the American Express card check, if one is not careful, he/she could blow the entire amount on stuff rather than carefully using it for needed goods. Costco allows the user to purchase as little or as much with the check and gladly hands back the unused dollars.

    • We always go with a list. I’m not going to say that we don’t buy the occasional extra thing here or there but we generally don’t go too crazy. And I’m not the type that would say ‘Oh, this TV looks pretty good’ and blow it on something big like that. Chances are if we got a check for $150, I might spend $15-30 of that on extra leaving still 80-90% of it for intended purposes. I’m OK with that.

  8. Doesn’t sound like either card is a bad choice. As to whether it’s worth the trouble, think about this. If gas is 4 bucks a gallon, and you could save 20 cents/gallon, or 4 bucks on a 20 gallon fill up, by going to one station over another-you’d do it in a heartbeat. (unless the distance to the station was huge.)
    So to me it’s worth the hassle. We try to get more than one thing out of our credit cards. It might be rewards, a free ticket, or whatever, they have to justify their existence. For me it’s just a tool to help me manage my money better.

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