Credit cards better for my net worth than high yield savings like ING Direct?
Soon after I got my first job I got my first credit card. Because I traveled a lot for work and ended up putting a lot of company expenses on my credit card, I decided to get an airline miles card so that I could rack up the points. I put absolutely every possible expense that I can on my credit card and its amazing how fast the miles add up. In fact after only two years of owning the credit card I had racked up over 60,000 miles. I believe that was good for one round trip ticket to Hawaii and plenty of points left over. The only problem is that I have a kid now and my wife and I don’t see my wife and I traveling anywhere anytime soon. Luckily Chase recently allowed me to cash my points in for gift cards as well as airline tickets. So I cashed out all my points and got a load of Home Dept gift cards.
This got me thinking, why am I racking up all these airline miles if I don’t fly anywhere (again I’m not always the quickest guy). So I called up Chase and had them switch me over to the Chase Cash Plus rewards card shortly before Christmas. The Chase Cash Plus Rewards card lets you accumulate points that can be cashed in for something I actually use on a regular basis……money. You get 1 point for every dollar of purchases you make and 5 [points for every dollar you spend on gas and groceries. Once you get 5000 points you can have them send you a check for $50.
Well when I got my first statement after switching cards, I was amazed to learn that I had amassed 4222 points!! Here’s where it really gets good. My wife and I shop almost exclusively at Wal-Mart and did pretty much all our Christmas shopping at Wal-Mart. Well because we shop at a Super Wal-Mart that has a grocery store in it, ALL our Wal-Mart purchases were treated as groceries and we got 5% back on everything we purchased there. Our first statement we averaged 3.25% back on our purchases!!
Well the next couple months were had very similar results and I am pretty sure I am going to hit the $300 annual redemption limit probably halfway through the year and am thinking about ordering a 2nd reward card for my wife so that once we have our current reward card maxed out at $300 in rewards we can switch over to the new card to keep earning money back.
Granted Christmas increased our spending quite a bit, but I am pretty sure we will average about $30-$35 per month in rewards. In order to get that kind of return on my money I would have to have to have well over $10,000 sitting in my ING Direct Account at 3.8% to get that same kind of monthly cash flow. With the rewards card I don’t have to do anything but put my normal monthly expenditures on it. Granted people are stupid and don’t pay off their credit cards in full each month, so banks do actually make money, but its kind of interesting to look at it from my point of view.
I believe my Chase savings account yields .45% or some measly number. I would have to put nearly $100,000 in my Chase savings account to match the yield I am getting by using my Chase Rewards Credit Card. With my credit card they actually give me their money for 30-45 days and then when it’s said and done send me a big fat check every month to boot. To me this is too good to be true and I will honestly be surprised if the rewards cards in the current form are still around a few years down the road. Like I said earlier all it takes is for one idiot to ring up a good balance on their credit card and not pay it off to make up for 2 or 3 people using the card smartly, but man this is a great deal and I hope I am wrong about banks doing away with the cards down the road.
In conclusion, I would be hard pressed to beat the yeilds I am getting on my rewards card with any high yeild savings account. They truly are a great deal if you are disciplined to pay off your balance in full each month.
[Tags]Rewards Cards, Credit Cards, Savings[/Tags]