Our New Credit Card

We’ve had the Delta American Express Card since 2001. We’re done with it.The rewards it gives are frequent flyer miles, one per dollar spent. That’s not good enough. Why?

  • We don’t always fly Delta anymore. We fly AirTran a lot.
  • Miles aren’t easily transferable. Mrs. Muttrox and I have separate ledgers based on our individual spending with the card. Trying to move miles around is logistically hard, requires a lot of lead time, and costs extra money.
  • It’s incredibly hard to redeem miles. They restrict the number of seats available. Cashing in a free flight is essentially impossible unless you are willing to fly at 3 am, or pay yet more money.
  • We want to be able to use reward points more flexibly. We do fly a lot, but since other programs allow you frequent flyer miles as well as other rewards, why not use those?

It was time for a new card. The last time I tried to cash in miles started the ball rolling. My Vegas trip in March cost almost as much as if I had paid the normal fee. I was finally triggered to take action by an interesting article in the New York Times that had some specific suggestions. I sat down to figure out what we wanted in a new credit card.

What were the criteria?

  • One of the majors: Visa or American Express. (I’ve had a MasterCard for 20 years, no reason to have two credit cards from the same group.)
  • No annual fee
  • We don’t care about APR or balance transfer rates. We pay in full every month, and always will.
  • Very flexible rewards redemption. There’s nothing more flexible than cash.
  • A high rate of rewards. The standard is 1% or 1 mile for every dollar spent. We wanted to beat that.

Capital One sucked. Their offers are all based around APR rates, terrible rewards program. Starwood Preferred Guest is a good program but wasn’t for us. It has a $45 annual fee and the rewards are all based around hotel rooms. We don’t stay at hotels much. It came down to two programs.

  • The Costco American Express TrueEarnings card:3% cash back for gas and restaurants, 2% for travel, 1% for everything else. Because we’re Costco members already there is no annual fee. Straightforward and generous.
  • American Express Blue Cash Card: The terms are a bit more complicated. On the first $6,500 a year spent, you get 1% back on groceries and gas and 0.5% on everything else. Not very good. But after $6,500 you get 5% back on groceries and gas and 1.25% on everything else, which is very good.

The next stop was Mint.com. This is a personal finance site. They make most of their money by making you offers on financial products like credit cards. The neat part is that they already know your financial situation. They can make recommendations based on true knowledge of your spending patterns. Sure enough, once I filtered out the “sponsored listings” I was left with the same two choices as before. Because it knows what I spend my money on it can make informed estimates of how much I can expect to save with each one. Costco came out barely on top. But I didn’t trust their numbers. I ran my own.

After 10 minutes of furious scribbling, I decided that the BlueCash card would have an approximate 1.6% rewards rate, and the Costco card would have a 1.4%. However, that was highly dependent on how much spending we did every month. Which is highly variable for us. With only slightly different assumption the Costco card looked better. And frankly, we like Costco. That’s what we applied for, our new cards should be here in a couple weeks.

What do you use for your credit card? And why?

Update: We’re approved.

5 thoughts on “Our New Credit Card”

  1. We used our credit card to feed our shredder about 3 years ago; we haven’t missed it. We canceled after they applied a $35 late fee to a $18 balance that was 1 day late. We have 1) debit cards 2) a HELOC on our home in Kentucky, which has a Visa attached to it, but is asset-backed. I honestly can’t think of a single instance in the last three years where I wanted or needed a credit card. For people who have sufficient capital, credit cards don’t provide much value. They are notoriously difficult to deal with when something comes up, their terms are difficult or impossible to understand, and what little protection they provide in the form of chargebacks, fraud protection, etc. can be as easily captured by dealing with quality vendors (e.g. Costco & their excellent return policy) and banks. The way I see it, their sole value proposition is to allow you to spend more money. No thanks.

  2. I’ll have to disagree with my brother there. We’ve had an AMEX Blue Cash card for several years, it’s been our primary card since Qwunkette and I got married, and then we’ve gotten a couple thousand in cash back. We had a 1.8% reward rate in 2008. We tend to put everything we can on the card (and pay off every month) which helps us track expenses. I’ve switched back and forth between using yodlee and mint, but tend to stick with yodlee, at least until mint rolls out some shiny new features and graphs. I also have a Chase Rewards card as a non-Visa backup, but they just nerfed the rewards program, so now it kind of sucks. I heard about and was tempted by the Citi Forward card, and might switch to that as the non-Amex backup instead of the Chase.

  3. Of the ones I’ve seen, the AMEX flavors are the best. It was particularly useful in Atlanta, where everyone took AMEX. Wasn’t as useful in Kentucky, as there were several places we went that didn’t accept. Same in Alaska (though not as bad as Kentucky). My “cash back” is in the form of not buying crap I probably don’t need anyway 🙂

  4. Qwunk, it’s good to see you. I haven’t noticed you around for a couple years now.

    Sidney, For people with sufficient capital and good fiscal discipline, credit cards are a bargain. You get the float on the money, and we spend tens of thousands a year. We get ~1.4% cash back on it which you are not getting. Frankly I think you’re crazy not take advantage of the free money they are offering. Sure they allow you to spend more money, and for some people that’s a bad thing, but if you have the right psychology it’s not a factor at all.

    Sid, did you argue about the late charge? I have occasionally been a few days late with my payment. I always call and ask them to remove it and they always do. The last one was great: “Sir, did you have a family emergency or some valid reason for missing your payment date?” “No, I just want it removed.” They did. If they give me any guff I threaten to cancel and that’s the end of it.

  5. Yeah, we threatened. Bottom line was that they made no money off of us (we weren’t using it much anyway–as evidenced by the low balance) so to them it made more sense to take their late fee and kill the account. We ended up canceling all of our cards that day. AMEX, Visa, all of them. Haven’t missed them. Might get one again if I started doing a bunch of travel……but I do have a business AMEX if I need it….which I don’t.

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