Hard Truths-Actual annual spend vs rewards.

[1LostArk]

Over half of people in the U.S. don't / can't pay their statement balance. The difference between paying interest or not is so much bigger than any rewards structure. With that in mind, someone who simply puts all their spend on a 1.5% card and pays in full is probably 98.5% optimized relative to the majority (a statistic pulled out of my hat). As far as the hobby aspect goes, don't forget the value of offers and benefits. Earlier this year my iPhone bit the dust and I was reimbursed for it by Mastercard, a benefit with a cash value on par with the largest SUBs. This month I got an Amex offer that netted almost 7% CB on groceries on top of the MR points. I'd bet the difference between optimizing and not is considerably higher than what comparing reward structures would indicate.

[NoMoreE46]

I am still bummed about being denied for that AOD.   Anyway, I am leaving about $250 of rewards on utilities annually.  The USB Cash + is really the last specific category card for me.

I don't have any AF cards currently.

 @_ptatohed wrote:

I can not speak to "points", "miles", and the like.  I'm strictly cash back on organic spending, no AFs.

So, yeah, I could, and I have thought about using my 3% AOD for everything and call it a day.  One card, done.  I know mrs. ptatohed would like that. 

But, as brought up, for me it's a fun challenge to see how I can maximize getting 5% CB or more when I can.  I enjoy it.  And I do know for sure, for me it's much more than $50 - $100 or $100 - $200 extra per year.  Lots more.    

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[_ptatohed]

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@NoMoreE46 wrote:

I am still bummed about being denied for that AOD.   Anyway, I am leaving about $250 of rewards on utilities annually.  The USB Cash + is really the last specific category card for me.

I don't have any AF cards currently.

 @_ptatohed wrote:

I can not speak to "points", "miles", and the like.  I'm strictly cash back on organic spending, no AFs.

So, yeah, I could, and I have thought about using my 3% AOD for everything and call it a day.  One card, done.  I know mrs. ptatohed would like that. 

But, as brought up, for me it's a fun challenge to see how I can maximize getting 5% CB or more when I can.  I enjoy it.  And I do know for sure, for me it's much more than $50 - $100 or $100 - $200 extra per year.  Lots more.    

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I've thought about that too..... getting a card for 5% utilities.  It's just that 3 of my biggest utility purveyors - Gas, Electric, and Water - yes accept credit cards, but you can not set up autopay using a credit card.  You need to log in manually and pay each month.  And two of them have small fees to pay with card.  I hate to admit it but, up until now, we have just been paying with a checking account using autopay.  Do I want to get a 5% utility card but have to log in 3 times every month to manually pay?  Maybe.        

[UncleB]

Many if not most people in this community are quite bright, and they tend to be rather savvy when it comes to finances and credit.  For those with many cards (including myself) it's not really a "hard truth" that rewards/benefits can be marginal depending on the setup and how much one is spending. 

Folks here know what they're doing, and they're doing it because they enjoy it.  People who don't enjoy optimizing and juggling cards can go enjoy other stuff, and that's fine.  Some people like oatmeal and some people like grits (and some oddballs -j/k- like neither)... and that's all OK.  It takes all types.

Just my 2¢.

[Anonymalous]

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@_ptatohed wrote:

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I've thought about that too..... getting a card for 5% utilities.  It's just that 3 of my biggest utility purveyors - Gas, Electric, and Water - yes accept credit cards, but you can not set up autopay using a credit card.  You need to log in manually and pay each month.  And two of them have small fees to pay with card.  I hate to admit it but, up until now, we have just been paying with a checking account using autopay.  Do I want to get a 5% utility card but have to log in 3 times every month to manually pay?  Maybe.        

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You could minimize that a bit by paying say 3 months of estimated charges at a time, but yes that's definitely one of the trade offs. Some people don't have those fees, or have combined utilities, or even have the ability to set up autopay, but that's all part of the calculation.

I generally consider learning about credit to have value in itself, so I've definitely played around with the different options. But I also recognize that there are diminishing returns, and I value simplicity over the longer term, so I've deliberately chosen cards that are simpler to manage, and resisted the urge to apply for more and more.

[Anonymalous]

One of the things I did when I started to play with credit was to download all the transaction I made over a single year on all my different accounts, combine them, categorize them, and then run the totals. That gave me a precise list of actual expenses, by categories. Which I then compared to potential (and actual) cards, looking at the incremental value each provided. I focused on cashback, so this doesn't involve any speculative points and miles valuations.

I started with a flat cashback card, which gave me 1.5%. My second card (3% in broad categories) increased this to about 2.2%. Swapping out the 1.5% card for a 2% card bumped this to 2.5%. Adding a couple 5% in specific category cards bumped this to 3.4%.

Adding more 5% cards would help, but since I've already got my most optimal categories covered, the incremental value of any new card is considerably smaller. In general, getting anything above 3.7% would be hard, and involve a lot of cards. So I end up with questions like: Do I really want to deal with Comenity to get one of the AAA cards? Do I want to remember to activate and use the rotating categories of the Freedom Flex? And my answer is typically: I'll think about it. They don't bump the percentages up all that much, so there's no real urgency.

This also really highlighted the value of something like the AOD VISA Signature. A single 3% back card, by itself, captures a large majority of the potential value. And even a 2% card isn't bad. I think the optimal cashback setup, when considering the value of the time and effort required to manage things, is probably 1 card, though there might be an argument for 2 complementary cards. And the potential value drops off steeply after 4 or 5.

Of course, for various reasons, I can only put about half my spend on credit cards, so the actual percentages are about half that. And there will be variation from year to year (I chose a pre-pandemic year, to minimize that distortion). And those numbers also assume I always use the most optimal card. While I do have a pretty decent track record, adding more cards would make slips more common.

[longtimelurker]

So lets a) close this thread and b) close this forum!

[hdporter]

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@swankytiger wrote:

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I'm mostly talking about the people with 18+ credit cards and 8-10 of them having annual fees.

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Oh ... you're talking about idiots.  End of discussion.  (You should have said this up front.)

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Between my wife and I we have about 40 revolving credit cards, with 5 of them having annual fees.  The premium rewards/cashback we score on those fee cards represents a handsome surplus vs that available from non-fee cards.

[swankytiger]

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@hdporter wrote:

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@swankytiger wrote:

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I'm mostly talking about the people with 18+ credit cards and 8-10 of them having annual fees.

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Oh ... you're talking about idiots.  End of discussion.  (You should have said this up front.)

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Between my wife and I we have about 40 revolving credit cards, with 5 of them having annual fees.  The premium rewards/cashback we score on those fee cards represents a handsome surplus vs that available from non-fee cards.

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yea I was mainly talking about people that have the Amex Plat, Gold, CSR, A high end hotel card if not multiple, 2-3 Airline cards, then like an Amex Business plat, then Business golds, then like 8 no AF cards plus a few store card.

[okurosetta]

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@hdporter wrote:

Oh ... you're talking about idiots.  End of discussion.  (You should have said this up front.)

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Between my wife and I we have about 40 revolving credit cards, with 5 of them having annual fees.  The premium rewards/cashback we score on those fee cards represents a handsome surplus vs that available from non-fee cards.

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Hypothetically speaking, if one could pay a $100 annual fee and see at least $150 in return (gain of at least $50), and there are 10 cards that they could earn this return on, should they stop at 5?

Is 5 a magical number, or is it the magical number for you?