Monday, June 23, 2008

What benefits do you really get from your credit card program?

For quite a while I used an MBNA credit card with travel points (now bank of america).
The card has significant ups and downs:

+ they can book a flight on almost any airline
+ you don't have to be a member of a specific program

- they only give credit for the first $7500 in spend per month (effects me big certain months)
- they will not pay more than $850 for a ticket
- they sometimes need help finding the most competitive rate
- they charge 60,000 miles for international tickets to europe versus 50,000 for most airline programs

If you add up the math and buy a $1200 european ticket, they're only paying 2/3 of the ticket. that sucks. Better off with a UAL or AA card where you can get the full fair for less miles.

It seems like the airlines cards have the best deals - though they're expected to be made less attractive: 50,000 points for a $1200 ticket. That translates to $50k in spend yielding about $0.024 per dollar spent - it's pretty great deal. The BofA card gives $0.014 - almost half the benefit.

Now I've been looking at the American Express card for costco. This is attractive for several reasons:

1. Can't use any other credit card at costco - so at least you get some benefit
2. Amount of rebate varies on what's bought: 3% for restaurants and gasoline, 2% travel and 1% elsewhere - costco effectively becomes 2% if you're an executie member.
3. No limits on credit for spending.

so the real question is based on various distributions, what will you end up with?

I'm not really sure, however, I think it will likely be more that the 1.4 cents on the dollar BofA offers. I'm going to begin shifting things over slowly, but it will take a year to see what we really get.
I've been looking at the costco amex card.

Anyone have any ideas?



Terry Lange said...

We use the AMEX card for Costco. It has come in very handy for us over the last two years. The rebates are helpful also. Only one drawback, the rebate that you get, you have to use at Costco. There is enough merchandise at Costco, that I have never had trouble finding what to use my rebate on! Since we have a gas station here at our Costco, we already save on gasoline because Costco is usually much cheaper on gas than other stations and the rebate also helps.

Anonymous said...

It all seems so very complicated! In the UK credit cards either offer cashback on all purchases at the same percentage, loyalty points or airmiles. It seems so complicated to calculate which is the best as they all offer different percentages etc. The airline cards seem good but with us all trying to reduce our carbon footprint and pressure to fly less then they may start to reduce the benefits as their profits fall.

Anonymous said...

The decision for me to add the Costco card was pretty easy. Just the fact that they have the cheapest gas usually in my area has made it my regular fill up spot. Rather than using my bank debit, a 3% rebate on gas and no AmEx fee made sense.

Anonymous said...

We use AmEx blue cash and increase rewards by purchasing gift cards at the grocery store for other places. We average 2.5-3% cash back annually. A plane ticket or two...or three worth of cash back.

Wayne said...

You do not need to use the rebate just at Costco. You can cash in your rebate for cash. Head over to customer service and they will do it for you.

Anonymous said...

The problem with most reward cards is that the average consumer will eventually carry a balance on the card. This, as everyone here knows, will negate any benefits that a reward card can offer.

Average credit cards have lower rates and lower fees. The average consumer that eventually will carry a balance will be better served starting and ending with an average credit card like the beriaBank Visa® Classic Card ... Of coarse, if they do pay off their balance monthly the costco Amex card is an awesome credit card