Sunday, July 25, 2010

Benefiting From Your Credit Card

Credit card debt is a huge problem for millions of Americans. Some put the blame for this on the credit card companies and their "deceptive business practices." I would certainly agree that the credit card companies do some pretty shady stuff and should be better regulated but I more strongly believe in personal responsibility. It wasn't the credit card company that made you buy that flat screen TV now was it?

I know about this all too well because starting in college and for a few years after graduation I carried far too much debt. It all began when I charged my first major purchase for $2300. It was a Dell computer with a 233 MHz processor and a 3.2GB hard drive (worse specs than my current cell phone). I spent years paying off that thing. Back then the only attribute of a credit card that I was (properly) concerned with was interest rate.

I am happy to report that I have long ago paid these cards off and now use them for convenience purposes only.

If you have no debt and pay your cards off each month than, contrary to most people, you are in an excellent position to really benefit from credit cards. There are hundreds if not thousands of different cards out there with a wide range of benefits. Choosing the right one depends on matching up your personal spending habits (e.g. do you buy mostly gas & groceries?) with cards that reward those habits with what you want (e.g. travel discounts?).

Over the last few weeks I decided to finally investigate a good rewards card for myself. After quite a bit of research I ultimately decided to go with the American Express Blue Cash card. Below are some of the benefits of the card and reasons I choose it.

  • Earn cash back
    • It has a very simple cash back reward program. Many rewards cards are "point" based which require you to redeem the points at specific locations. With this card you just earn straight up cash back at rates of between .5% and 5% depending on the type of purchase and how much you use the card.
    • The reward is given as an automatic cash credit to your account once a year. Other cards I found make you jump through hoops (call and request) the reward or issue you gift cards instead of cash.
    • NOTE: You can earn these cash back rewards by paying your recurring bills (gym membership, phone bills, etc..) with American Express Automatic Bill Pay.
  • No annual fee
    • Many other cash back cards (and many other AMEX cards) have an annual fee but this one does not.
  • Purchase Protection on your purchases
    • Covers theft or damage (whether by accident or vandalism) of your purchases for up 90 days.
    • NOTE: Pays up to $1000 per incident with a $50,000 maximum per calendar year.
  • Extended warranty on your purchases
    • Extends the length of the original manufacturer's warranty on purchases by up to one additional year. So no need to buy one year extended warranties from places like BestBuy.
    • NOTE: Pays up to $10,000 per item with a $50,000 maximum per calendar year.
  • Return protection on your purchases
    • If a store won't take an item back within 90 days of purchase AMEX will refund you the full purchase price.
    • NOTE: Pays up to $300 per item with a $1000 maximum per calendar year.
  • Car rental insurance
  • Roadside assistance
  • Global assist hotline
    • Provides 24/7 emergency medical, legal, and financial assistance, and more, when you're more than 100 miles away from home.

It is very important to realize though that these cards usually have a much higher interest rate than you could otherwise get so if you don't pay them off in full each month the benefits you may earn will be completely outweighed by the interest rate payments you make. So don't bother with these cards until you can pay them off in full each month.

P.S. I want to thank American Express for sponsoring my blog this week. Just kidding. I did all this research and figured I'd share what I found with everyone.

1 comment:

Webster said...

You should see if there is an affiliate program.

He made a ton of money off of Dreamhost.