The Frugalwoods Guide to a Simple, Yet Rewarding, Credit Card Experience
My credit card strategy has been, heretofore, unoptimized. Woefully unoptimized. It’s been less of a “strategy” and more of a “doing what we’ve always done because it’s easy.” Mr. Frugalwoods and I decided to (finally) do some research and–wonder of all wonders–sign-up for the credit cards that make the most sense for us. We landed on:
- The Fidelity Rewards Visa Signature Card (more here)
- The Amazon Prime Rewards Visa Signature Card (more here)
- The Marriott Bonvoy American Express Card
Wondering what on earth a “credit card strategy” is? Wondering what “rewards card” even means? Well, my friend, you’ve come to the right place. I’m doing a deep dive into the world of credit cards today, which I promise won’t be horrible, boring, or complicated.
While I’m all for judicious and mindful spending, I’m also all for leveraging that spending when it makes sense. Using credit cards isn’t a license to overspend, but rather, a clever way to benefit from the purchases you were going to make anyway.
Disclaimers I want to share:
- I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises. I encourage everyone to do their own research to determine the best course of action for their finances. I am just a person who writes about money. You, presumably, are a person who likes to read stuff about money. Or you’re here for how hilarious and good-looking I am. Either is fine with me.
- This post contains affiliate links for the credit cards that I use. I don’t promote stuff that I don’t personally use, which is why it took me so long to write this post (I mean, I’ve only been writing Frugalwoods for FIVE years, so, not that long… ). Before writing about these cards, I had to first get these cards and use them for myself. I’m not going to write “affiliate link” after every affiliate link because that’s annoying to read. When in doubt, assume it’s an affiliate link.
The Three Levels of Credit Card Usage
As with most things in my life, I’ve decided to keep my credit card strategy simple and straightforward. There are many ways to leverage credit card points, but I do not–at this stage in my harried existence–have the time, energy, or spreadsheets to chase complex credit card bonuses, advantageous though they may be.
There are (in my opinion) three levels of sophistication/complication for credit card usage:
- Easy: Have one credit card that offers a flat cash back bonus on any and all purchases (the Fidelity Rewards Visa is a good card for this approach as is the Chase Freedom Unlimited).
- Medium: Have several credit cards that earn different types of rewards on different types of purchases (this is what I do and I go into detail below about my approach).
- Hard: Set up a credit card portfolio to manage multiple accounts that generate different rewards at different times for different things.
If you’re interested in embarking on the third, and most sophisticated, tier of credit card-ing, you’ll need to conduct your own research to determine the stable of cards that’ll make the most sense. CardRatings.com is a site that’s really helpful in determining which cards offer what bonuses and I’d start my research there.
If you want to manage multiple cards with different requirements and restrictions, more power to you! What I will caution, however, is that if you do so, you need to be extremely organized and careful about how you utilize your cards and manage your spending.
Credit Card Rewards: Getting Something For Nothing!
Let’s get right into the fabulous world of credit card rewards. Mr. FW and I buy everything we possibly can with credit cards in order to earn rewards, which are sometimes referred to as “points.” However, credit cards and their rewards are not all created equal.
There are two basic categories of credit card rewards:
- Cash back rewards (cold hard cash back on your purchases)
- Travel rewards (typically airline miles and/or hotel points)
Mr. FW and I have credit cards that fall into both of these categories:
- The Fidelity Rewards Visa Signature Card provides 2% cash back on all purchases
- The Amazon Prime Rewards Visa Signature Card provides 5% cash back on all Amazon purchases
- The Marriott Bonvoy American Express Card provides travel rewards (specifically hotel points)
1) The Fidelity Rewards Visa (the simplest, easiest credit card rewards to get)
The Fidelity Rewards Visa is a cash back credit card. This means it gives you a percentage back on all of your purchases. Cash back cards are pretty straightforward in that sense, but not all cash back cards are easy to use. Some require certain amounts of money to be spent at certain types of retailers within certain windows of time in order to qualify for cash back.
That is way too complicated for moi because I’d be in the grocery store going, “HALP! It’s March and I’m buying bananas! Which card am I supposed to use????!” I can barely remember that I’m supposed to be buying bananas in the first place, let alone which card I should pay for them with. Given my memory-related limitations (I blame my two children 100%), I decided to get the simplest, most straightforward cash back card that I could find: the Fidelity Rewards Visa. Even the name is simple, which I appreciate.
The Fidelity Visa gives me 2% cash back on ALL of my purchases. It doesn’t matter what I buy, when I buy it, how much I buy, or where I buy it. Every single purchase made with this cards yields 2% cash back. That, to me, is the definition of a simple credit card strategy. How many times can I say simple? A lot, apparently.
Q: What exactly does 2% cash back mean?
A: It means that I receive 2% back on all purchases I make with this credit card. For example, if I were to spend $1,000 with this card, I’d receive $20 (because 2% of 1,000 = 20). For free. For buying stuff I was going to buy anyway! This is the beauty of credit card rewards. They’re literally something for nothing.
Other stuff I like about the Fidelity Rewards Visa:
- No annual fee. Some credit cards charge a flat annual rate just for the privilege of having them in your wallet. Without an annual fee, it’s an easy decision to have this card and keep it open (and paid off) for years, which is beneficial to your credit score.
- No minimum spending requirement. Some cards require a set amount of spending over a set amount of time in order to earn your rewards. This card does not.
- No categories for spending. As I mentioned, some cards specify different types of expenditures that qualify for rewards at different times (for example: all restaurant purchases qualify for rewards in the month of March, but not in the month of April). This card has no such parameters.
- You can earn a $100 bonus if you spend $1,000 within the first 90 days of having this card (note: this is not an invitation to overspend, but rather, a nice bonus if you just so happen to spend this amount).
- Cash back is automatically deposited. Since we bank with Fidelity, they automatically deposit our cash back rewards into our checking account. So, so, so simple.
If you have zero desire to own more than one credit card and are looking for a simple way to earn credit card rewards, I think the Fidelity Visa fits that bill quite nicely. If you’d like to learn more about this card, you can do so here.
One note is that you need to have a Fidelity account in order to have the Fidelity Visa. I bank with Fidelity, am happy with the accounts they offer, and so this wasn’t an issue for me. But, if you don’t have a Fidelity account and don’t want to open a one, there are two other cards with similar benefits that might work better for you:
More on each of these cards below.
A Card That I Don’t Have, But That Might Work Better For You: Chase Freedom Unlimited
Choosing the best credit card has a lot to do with how and where you spend your money. And we all spend money differently and in different places. Given that, it’s totally possible that a different card is going to make more sense for you, which is why I’ll devote some time to two cash back cards that I don’t have, but that might be better for you.
The Chase Freedom Unlimited Visa is very similar to the Fidelity Visa. It offers:
- 3% cash back on all purchases in your first year, up to $20,000 spent. After that, earn unlimited 1.5% cash back on all purchases. As with the Fidelity Visa, there are no spending categories to manage and no limits to contend with. It’s a simple, straightforward 1.5% cash back.
- There’s no minimum spending required in order to to redeem your cash back
- Cash Back rewards do not expire as long as your account is open
- Being a cardholder provides you with a free credit score
- There’s no annual fee
The real difference is that, after the first year, it offers 1.5% cash back as opposed to Fidelity’s 2% cash back, but again, if you’d rather not open a Fidelity account, then I think the Chase Freedom Unlimited is a good cash back option with very similar benefits. If you’d like to read more about this card, you can do so here.
Another Card That I Don’t Have, But That Might Work For You: Chase Freedom Visa
If you’re up for a bit more cash back challenge–which comes with more rewards–then you might consider getting the Chase Freedom Visa card.
It entails a slightly more complicated scheme for earning points, but it does offer a whopping 5% cash back in certain categories of spending at certain times.
As we’ve established, I can barely manage myself these days–let alone spending categories–but if you’re slightly more organized than me (wouldn’t take much, people), then the Chase Freedom might be your ticket to a pretty significant amount of cash back.
I did some math for you: if you spent $1,000 on the Chase Freedom (in the correct categories and at the correct times), you’d get $50 in cash back (5% of 1,000 = 50), which is a hefty chuck of free money!
Additional pros of the Chase Freedom Visa:
- No annual fee
- You can earn a $150 bonus if you spend $500 on purchases in your first 3 months of owning the card (note: this is not an invitation to overspend, but rather, a nice bonus if you just so happen to spend this amount)
- Automatic 1% cash back on all purchases
If that appeals to you and your spending patterns, you can learn more about the Chase Freedom Visa here.
Ok back to the cards that I have. Next up is….
2) The Amazon Prime Rewards Visa
Yep, we have a second cash back Visa card. Why? Because the Amazon Prime Visa yields 5% cash back on all Amazon purchases. Since we live in the middle of nowhere (and hate to shop), we buy a fair number of things from Amazon. We have this credit card linked to our Amazon account, so it’s automatically the card we use for Amazon purchases.
This makes for an easy way to manage our spending to leverage maximum rewards. If you’d like to apply for this card, you can do so here.
Important Note: the 5% cash back card is only available if you have Amazon Prime, which we do. If you don’t have a Prime membership, Amazon offers a different card, the Amazon Rewards Visa Signature Card.
However, I would select the Fidelity Rewards Visa over the non-Prime Amazon card because if you’re not a Prime member, the benefits aren’t as good: 3% cash back on Amazon; 2% cash back at restaurants, gas stations, and drugstores; and 1% cash back everywhere else. If you use Amazon enough to warrant an Amazon cash back card, it would probably make sense to also be an Amazon Prime member and thus have the Amazon Prime Rewards card.
To redeem Amazon points, we go into the credit card interface (which is hosted by Chase) and choose to redeem our points as a “statement credit,” which puts that money towards our monthly credit card bill. The reason being: if you redeem your points for merchandise on Amazon (which is another option with this card), you lose out on the 5% discount you’d be getting if you instead purchased the items with your Amazon Prime Visa.
3) The Marriott Bonvoy American Express Card
Formerly known as the Starwood Preferred Guest Starpoints card, this is the third and final credit card we have. The reason we have this card is that: 1) we’ve had it for over a decade; 2) we both used to travel a lot for work and we racked up tons of points; 3) we used to travel internationally at least once a year (this was, obviously, pre-kids… ).
Marriott Bonvoy is a merger of several hotel loyalty programs including Marriott Rewards, Ritz-Carlton Rewards, and Starwood Preferred Guest. It now covers a bunch of different hotel properties (including Sheraton, Westin, Courtyard, and Marriott), which is convenient.
This card only makes sense if your travel lines up with these properties and if you will redeem travel rewards points. This card does have an annual fee, which means you need to be pretty careful about deducing whether or not it’ll be worth it to you. Back when we traveled regularly (aka before we had two kids), this card made a ton of sense for us and our points enabled us to stay in gorgeous hotels all around the world. These points are not currency dependent and they don’t fluctuate with exchange rates, which worked in our favor when, for example, the Euro was strong against the dollar.
At one time, we were traveling so frequently that we had platinum status, which earned us hotel room upgrades and–something that goes down in Frugalwoods family lore–a free, high-end, daily breakfast buffet overlooking a canal at our hotel in Amsterdam. We started every morning with smoked salmon, capers, custom espresso drinks, champagne, homemade pastries, omelettes-made-to-order, bacon, champagne, smoked salmon, espresso, champagne, and uh… we got our points worth on that one.
Travel Rewards Cards Generally
It’s entirely possible that the Bonvoy won’t make sense for you because travel cards are all about how and where you regularly travel. The reason we got the Bonvoy, lo those ten years ago, is that our business travel patterns synced with the properties rewarded by the Bonvoy. If you travel a lot, and are organized enough to manage different travel cards, then it’s probably a good idea to sniff out a travel rewards card that–crucially–matches your travel patterns.
My friends who are into travel rewards told me that these three cards offer excellent rewards and are also ideal for accruing points that transfer to lots of different airlines and hotels:
- Capital One Venture Rewards Card (you can read more here)
- Chase Sapphire Preferred Card (you can read more here)
- The Platinum Card from American Express (you can read more here)
If you want to analyze and compare travel cards, take a look at this list and figure out which one matches your travel patterns. This is a higher level of credit card sophistication, but if you travel a lot, this can be an excellent way to earn rewards and free travel!
When We Use Which Card
There’s a modicum of organization required with owning three different cards; namely, remembering which card to use for which purchases. Fortunately, this is a simple calculation for us:
- When booking a Marriott-affiliated hotel, we use the Marriott Bonvoy American Express
- When buying on Amazon, we use the Amazon Prime Rewards Visa
- For everything else, we use my favorite, the Fidelity Rewards Visa
Even I can keep this straight!
How Did We Find These Credit Cards?
I’m so glad you asked. You won’t be surprised to hear that the credit card applications flooding your mailbox are usually not for great cards. The best way to find cards that’ll work for you is to search for them yourself. Fortunately, there’s a website, CardRatings.com, with a search function for this purpose that nicely aggregates information about tons of different credit cards.
This is where we learned about the Fidelity Rewards Visa. And again, if you want a simple, no fee, cash back card, then from my research, I think the Fidelity Rewards Visa is a good card as is the Chase Freedom Unlimited.
But if you want to optimize your card strategy a bit more, check out CardRatings and do your own research into which cards will offer the best rewards for your circumstances and spending patterns.
- Here’s a list of cash back credit cards to compare on CardRatings
- Here’s a list of travel rewards credit cards to compare on CardRatings
When researching cards, keep in mind:
- Whether or not the card has an annual fee.
- If there are restrictions on the types of purchases–or the timeframe of those purchases–that’ll impact receiving rewards.
- If you’ll actually use the rewards the card offers:
- This is probably the most important factor because there’s no point in earning rewards that you’re never going to use.
- This is another reason why I love cash back cards so much–I’m definitely going to use cash.
- Airline miles, hotel points, toaster ovens–these are all lovely, but they’re not as easy to use as cash. I speak from experience as someone who has approximately one billion unused hotel points (which I will use someday, I swear!!!!).
- Airline and hotel points can sometimes be converted to cash, but the exchange rate is typically abysmal. I wouldn’t recommend pursuing airline or hotel (or other specific) points unless you’re going to use them for their intended purpose.
Responsible Credit Card Usage
Now that we’ve established how awesome credit cards can be, I want to talk about how to use credit cards properly (don’t skip this section, people!!). I’m an advocate for responsible credit card usage, which entails the following:
1) Only Buy What You Can Afford
A credit card is not a license to buy stuff you can’t afford. A credit card is a way to purchase things you were going to buy anyway and that you can 100% afford.
Don’t go around saying, “Mrs. FW told me to put a ton of stuff I can’t afford on a credit card!!” I SO DID NOT, you guys! Pretend that your credit card is a debit card. In order to use your credit card, you must have actual money in an actual bank to actually pay for whatever you’re actually buying. Actual truth.
2) Pay Off Your Card(s) In Full Every Month
Responsible credit card usage means you pay off your credit card(s) IN FULL every single month. No exceptions. No nuance. No grey area whatsoever. If you cannot pay off your cards in full every single month? Then you are buying more than you can afford.
If you’re concerned about how much you’re spending and want to save more every month, you might consider taking my free Uber Frugal Month Challenge (which you can sign-up for at any time).
3) Ignore the “Minimum Due” Amount on your Credit Card Statement
You need to pay the full “balance” on your credit card statement, not just the “minimum due.” Paying only the “minimum due” amount means you’re keeping a balance on your card, which will start accruing interest, which means you’ll owe more money. Paying a card off in full every month means paying the entire balance every month.
4) Keeping a Balance on a Credit Card Is Bad. Full Stop.
It’s a dirty, dirty myth that carrying a balance on your credit card helps your credit score. IT DOES NOT. Paying your cards off IN FULL every month and keeping them open for many years, however, does help your credit score. Do not keep a balance on a credit card (in other words, do not owe money to your credit card company. Ever).
Have I repeated myself enough? All together now:
- Only use credit cards to buy things you can afford (and were going to buy anyway)
- Pay off all of your credit cards in full every single month
- Do not EVER carry a balance on a credit card
Making Payments On Time, Every Time: Set Up Automatic Payments!
Due to the extreme importance of never missing a payment, we have automatic payment set up to pay the entire balance on all three of our credit cards every month. Given my aforementioned memory-related limitations (CHILDREN) I wouldn’t dream of trying to remember to pay these each month. Back in the halcyon days of my twenties, I manually paid my credit card bill (IN FULL) every month because I had a lot less going on in my life.
There’s nothing wrong with manually paying credit card bills, as long as you are 100% certain you won’t forget to do so. Hence, the easiest thing to do is set up auto-pay (through your checking account) and never worry about missing a payment. Whether I’m having a baby, publishing a book, harvesting my garden, traveling to an exotic locale/let’s be honest: doing the laundry; thanks to auto-pay, I never have to worry about missing a credit card payment (flashes smile).
Mr. FW and I still comb through our credit card statements every month to ensure there aren’t any fraudulent charges, but to ensure on-time payments every month, auto-pay is your best friend.
Should I Get A Credit Card?
Well geez, Mrs. FW, you’re probably thinking, now that you’ve terrified/browbeaten us about paying off cards, why should we use them at all? They seem like a snake pit of danger!!!! Well, yes and no. Credit cards have the ability to handily destroy your finances if you don’t use them responsibly. But as we just learned, it’s actually quite easy to use them responsibly. It’s no more complicated than paying off your balance every month and choosing a card that’s right for you. That being said, I’m not a universal credit card advocate. Some people should not use credit cards and those people usually know who they are and need to be honest (with themselves) about this.
I am a person who cannot keep bags of chips or boxes of cookies in my house. Why? Because I will devour every last crumb in an unrepentant fit of consumption. I cannot use junk food responsibly and so I do not use junk food at all. Similarly, if you are a person who cannot pay off credit cards in full every month, then you shouldn’t use credit cards.
I sometimes recommend that people stop using credit cards. The following Reader Case Studies contain just such advice from me:
- Reader Case Study: Longterm Planning When You Have a Chronic Illness
- Reader Case Study: Social Workers Who Need To Get Solvent
If you see yourself reflected in some element of these Case Studies, then it may be that credit cards aren’t for you. And that is perfectly fine!! There’s no “being an adult” mandate that says you must have a credit card. There are other ways for you to build credit and other ways for you to purchase your stuffs.
A debit card (which is a card that directly debits from your checking account) is a great option if you’re not a credit card candidate. I like debit cards for this purpose because:
- They’re just as convenient to use as a credit card.
- You can use them for online purchases.
- You can’t overspend because they pull money directly out of your checking account (hence the name “debit” versus the name “credit”). Most checking accounts come with a debit card linked to them.
The Advantages of Using Credit Cards
If you’re confident in your ability to pay off your credit cards in full every month, then I heartily encourage credit card usage for the following reasons:
1) Credit card usage makes it super simple (my theme, apparently) to track your spending. While I use (and recommend) the free expense tracker from Personal Capital to consolidate my monthly spending, purchasing with credit cards makes that consolidation easier.
2) Credit card usage makes it easy to spot fraud. Since I comb through my monthly credit card statements, it’s easy for me to spot fraudulent activity and I have the protections offered by my credit card companies. I’ve had a few fraudulent charges over the years and I’ve always been reimbursed by my credit card company.
3) Credit card usage builds your credit. Since Mr. FW and I don’t carry any debt other than our mortgages, having several credit cards open for many years (which are fully paid off every month) has greatly helped our credit scores.
4) Credit card usage can equal REWARDS!! Woot. This is perhaps the most significant reason to use credit cards since all of the above can be accomplished through other means. But credit card rewards only come from credit card usage.
In Conclusion (finally, I know, right?!?)
See? That wasn’t too horrible or too complicated or too boring (right????!!!!)…
Learn from my lazy/negligent credit card strategy and find a credit card that’ll pay you money for buying what you were going to buy anyway. Mr. FW wanted me to see how much cash back we DIDN’T earn by not having the Fidelity Rewards Visa until now, but I refused to perform this calculation. I am not a rear-window regrets-laden regretter (more accurately, I didn’t want to bother doing the math… ).
The point is, we left a lot of free cash on the table by not utilizing a card with a good cash back offering.
The reason it took Mr. FW and me so long to find a new credit card is partially because there are so many credit cards out there and partially because I was intimidated by the serious credit card maneuvering that so many people manage with aplomb. Turns out, once we actually looked around and spent, oh, five minutes researching, we realized there are great credit card options that we’d be foolish not to take advantage of.
For us, at this moment in our lives, maximizing travel rewards isn’t our priority. There may come a time when that is our priority again and when/if that happens, I’ll let you know which cards we choose. For the moment, the simplest, most straightforward thing for us to do is go with a cash back card.
In sum? I’ve decided to simple it out. If you too want to simple it out, then I think the Fidelity Rewards Card is a great choice, as is the Chase Freedom Unlimited, for people who are not into managing complicated credit card schemes, but who want to earn some cash back. The end.
Do you use credit cards? Which rewards/cards have you found most effective?
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