Sunday, January 25, 2009

Financial rewards of credit card usage

I have been reading in various blogs about credit cards reducing the rewards associated with using their cards or raising the bar for submitting rewards. Others blog about which reward credit cards have the best return on the money you spend. I am a one credit card kind of gal so once I choose a credit card, I keep it in my wallet and use it. (Full disclosure: I do have a second card, but it languishes in a file folder.) My well-used card is a CitiBank Driver's Edge Options credit card, which rewards me with 3% back on purchases at pharmacies, gas stations and grocery stores (6% for the first 12 months), 1% on other purchases and if I submit my mileage, gives me a rebate for the mileage accumulated on my car. I can redeem my rewards for an auto service of at least $25 or for leasing or buying a new or used car. Since I knew I wanted to purchase a newer car in the near future, I thought this rewards card was a good fit for my lifestyle and suited my goals.

Recently, I sent my bill for auto repairs to the Rewards Redemption service for my credit card. If I am enrolled in the mileage rewards, which I am, that bill will also use the mileage noted on the bill to add the Driver's Rebate to my account. When I received my credit card bill about two months after submitting the auto repair bill, I saw I had a credit for my Driver's Edge rewards. I took the credited amount ($105.57) and transferred it to my car savings account. Why? All the other purchases on my credit car were subtracted from my budget, and this money was intended for my future car purchase. I put it in my ING savings account where it currently earns 2.4% APY. This may be a paltry amount, but better than 0% in my reward account.

Using this method of rewards submission, I add to my car savings account and make the rewards I earn by driving my current car more liquid than sitting as a number on my credit card statement. Furthermore, the Driver's Edge rewards must be used within five years so I am ensuring I use the full extent of my rewards without any penalty.

What do you think of my methodology?

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