Optimize Rewards by Using Different Cards for Different Purchases (2021)
The most straightforward way to earn free travel is to get a credit card that offers a great reward rate on your purchases and use that card, rather than cash or check, whenever you can. Over the course of a year, you’ll effortlessly earn thousands of points you can use for free flights and hotel rooms. By simply choosing the right general purpose rewards card, you should be earning at least 2% in rewards.
However, you can do even better. Many credit cards offer higher-than-normal reward rates for spending within certain categories. For example, one card may give bonus rewards for purchases from gas stations and supermarkets, while another card may give bonuses on travel and restaurants.
By using different cards for different types of purchases, you can earn more reward points (or cashback) on your spending—with rewards rates as high as 10%!
Unless you have problems with credit, you don’t need to worry about getting a handful of new credit cards. Getting a few additional cards won’t trash your credit score—it may just improve it. For more information and general tips, see our Credit Cards 101 article.
Jump to
- Using different cards for different purchases isn't for everyone
- Tips
- The best cards for increasing your rewards
- Best options for each category
Jump to:
Using different cards for different purchases isn't for everyone
- Optimizing your rewards, by using different credit cards for different purchases, makes life more complicated. It is simpler to just carry around a single card and use it for all your purchases, rather than getting, carrying, and choosing from a collection of different credit cards.
- You can earn a lot more points by collecting signup bonuses, rather than optimizing your ongoing reward rates. Unless you have some means of spending a lot of money, the amount of extra reward points you can earn by using an optimized set of cards (over the course of a year) is often smaller than the signup bonus for just one or two cards. For example, if would be able to spend $20,000 per year in bonus categories, and you earned an average of an extra 3% using bonus category rewards, you would earn an extra $600 per year—about the same as one good signup bonus.
- Not everyone wants to bother using a bunch of different cards for different purchases, and we don’t blame them.
- However, many other people (and some of us) get immense satisfaction about earning the highest possible rewards from their spending and wouldn’t dream of “only” earning 2 - 2.5% on a purchase, when they could be earning 3 - 5% or even more. It is not just the extra points—it is the extra sense of satisfaction from taking your game to the next level. If you are hardcore, you can often find ways to generate additional spending, so that you can meet the initial spending requirements for as many cards as you can, while still collecting bonus rewards with your best cards.
- Within the “points hobby”, this is a famous source of tension between spouses—one spouse gets frustrated when the other spouse doesn’t wind up using the “right” credit card for different purchases. Don’t let it bother you. If you or your spouse is not interested in having one more thing to worry about, stick to a great general purpose rewards card (or maybe a two-card strategy like the Chase Unlimited combo).
Furthermore, if you choose to focus on signup bonuses, most of your spending will be focused on meeting initial spending requirements and you'll have less opportunity to take advantage of optimized reward rates. Receive Hundreds of Thousands of Points by Signing Up for Credit Cards.
Even more importantly, there is a limit to how many credit cards you can collect during any span of time. You’ll get more value by using those slots to get good signup bonuses (and ongoing travel benefits) rather than getting cards simply for their high reward rates. Ideally, concentrate on signup bonuses first and worry about optimizing your reward rates later.
Tips for getting reward cards for different spending categories
The right set of cards to get, and the order to get them, depends on your individual circumstances.
- There is no single card that earns great bonus rewards in every category. To optimize your rewards, you’ll need to get a set of cards and use a different card for each category. However, you can typically get one card that is good for both travel and restaurants and another card that is good for both groceries and gas.
- Focus on the cards that earn bonus rewards for the categories where you spend the most money. If you mostly go out to eat, a card that earns bonus rewards on restaurants is going to be more valuable than one that earns bonus rewards on groceries, and vice versa.
- Don’t focus on the NUMBER of points earned, focus on the VALUE of the points. The value of different types of points and miles varies widely. On one end of the scale, credit card reward points (like Ultimate Rewards) are usually worth at least 1.5 cents each. On the other end of the scale, some hotel points, like Hilton's, are only worth .4-.5 cents each.
- To determine whether a card is worthwhile, you need to determine whether the extra points you'll earn justifies the card’s annual fee. To figure out the value you expect to get from a card, you need to take the amount you expect to spend and multiply it by the extra points that you will earn, above-and-beyond the points you would have earned by just using your general purpose reward card. Then you need to subtract the card's annual fee.
- You only need to pay attention to bonus rewards that are better than 2% back. Because you should be earning 2% or more with your general purpose card, earning 2% on a bonus category is not valuable. Only pay attention to cards that have category bonuses worth 3% or more. Just remember that depending on the type of points, a card that only earns 2x points may be earning more than 3% in value.
An example may make this clearer. The Amex Blue Preferred Card offers an amazing 6% cash back on your first $6,000 worth of supermarket spending. If you spend $5,000 on groceries each year, you’ll earn $300 cash back. But the real added value of the card is lower. If you already have the Chase Unlimited combo, you could have used your Unlimited Card to earn 7,500 Ultimate Rewards points on the same $5,000 of groceries. If you value the Ultimate Rewards points at 1.7 cents each, that works out to $130. The Blue Preferred Card only earns $170 in extra rewards. And, to earn those extra rewards, you’ll need to pay the Blue Preferred Card's $95 annual fee.
The final net benefit works out to $75 per year, not the $300 of expected rewards. If you spend less on groceries, you'll earn less. If you spend the full $6,000, you can earn slightly more.
When you are determining whether it makes sense to get a card for ongoing use, we recommend ignoring any waiver of the first-year’s annual fee. You are usually focusing on whether these cards make sense for the long run. The waived annual fee is essentially just part of the signup bonus for the card and doesn't affect the long-term value proposition.
The best cards for increasing your rewards
Before you can determine which cards to get for different spending categories, you need to make some decisions about 1) which types of points to earn, 2) whether you are willing and able to use business cards, and 3) how much extra work you're willing to do.
- The type of reward points you should earn depends on how you plan to use your points. We assign a "value" for each type of point based on a range of typical travelers. Depending on your plans and situation, these points can be much more valuable or much less valuable than our base values. How Much are Points Worth?. For example, if you don't have a lot of flexibility, it might be very hard to get good value by using Membership Rewards points to book frequent flyer tickets and they may only be worth 1 cent each. At the opposite extreme, if you have more flexibility and you highly value premium-cabin award redemptions, Membership Rewards points may be worth 3-4 cents each (or even more).
- Standard approach. It is hard to go wrong with our normal points optimization approach, which primarily focuses on earning Chase Ultimate Rewards points, but also takes advantage of cards that earn cash-like points when good Ultimate Rewards options are not available.
- Optimized for frequent flyer tickets. If you have the skills and flexibility to get good value from your points by using them for frequent flyer tickets, you can earn higher rewards by including cards which earn Amex's Membership Rewards points and Citibank's ThankYou points. Introduction to 'Transferable' Reward Points.
- Cash Only. Some people might prefer focusing strictly on cashback cards or cards that earn cash-like points (which can be used for a very wide variety of travel purchases). For these people, each type of transferable reward point is only worth its cash-out value.
- Small business credit cards expand your options for earning bonus rewards. If you have any type of small business (even if you also have a full-time job and you haven’t made any money yet), you are eligible for small-business credit cards. Many of these cards offer bonus rewards on spending categories that aren’t often available from personal cards—such as purchases from office supply stores or telecom providers. Technically, you aren’t supposed to use these cards for personal expenses, but many people do, with no problems. If you are eligible for these cards, and willing to use them for your spending, you’ll be able to boost your rewards. Unlock Extra Reward Points with Business Credit Cards.
- Some cards are primarily attractive for people who are willing to make an extra effort to optimize their reward rate. For example, the Amex Gold Card has a high annual fee, but a great reward rate (4x Membership Rewards points) on groceries. For most people, their natural grocery store purchases aren't likely to be high enough to justify the annual fee. But if you are willing to purchase gift cards from the grocery store and then use those gift cards at other merchants (or otherwise "liquidate" them), you can earn enough extra points to make this card very worthwhile.
Different people will want to follow different approaches towards earning rewards:
It aims to earn the highest possible reward rates, assuming that you plan to use the points on EASY redemptions (for a variety of travel purchases). It provides the upside of using your Ultimate Rewards points for frequent flyer tickets and serves as a good gateway to advanced travel reward strategies, but still provides excellent value even if you never find good frequent flyer award opportunities.
This is true, even if you are just using them for coach tickets. But if you highly value business and first-class award tickets and have the patience to build up large quantities of points, you should always try to earn as many "transferable" points as you can. You don't want to mess around with cards that earn cash-like points when you could be earning extremely valuable transferable reward points instead.
For most people, the more of these points, the better. But everything else being equal, Membership Rewards points are somewhat better than Ultimate Rewards and ThankYou points. Membership Rewards' larger number of airline partners, occasional transfer bonuses, and easier points accumulation, usually makes it the best choice if you are going to use your points for frequent flyer tickets. Of course, depending on the airlines you are likely to fly, you might wind up with slightly different preferences.
Similarly, you can earn fantastic reward rates from rotating category cards, such as the Chase Freedom Card. But you'll need to register for a changing set of reward categories each calendar quarter. And for many quarters, you are likely to have to shift purchases around or take advantage of gift cards to maximize the earning potential of the card.
If you've decided to make the Amex BUSINESS Platinum Card part of your core credit card collection, Membership Rewards points can be cashed-out at higher values. You can use your points at 1.54 cents each to buy airfare on your favorite airline or for any business or first-class ticket. This makes cards that earn Membership Rewards more valuable for people who are normally interested in our standard or cash-only approaches to earning points. Membership Rewards Guide.TravelStrategies:*303/Box
Standard approach
Our standard approach to optimizing rewards focuses on earning Ultimate Rewards points (when possible) and earning cash-like points when there are no good Ultimate Rewards options.
|
Start with the Freedom Unlimited Card and Sapphire Reserve Card or Sapphire Preferred Card combination to earn 3x Ultimate Rewards points (5.1%) on restaurants and drugstores, 5x Ultimate Rewards points (8.5%) on travel bought through the Chase website, 2 or 3x Ultimate Rewards points (3.4-5.1%) on other travel, and 1.5x Ultimate Rewards points (2.55%) on your everyday purchases. The Freedom Unlimited has no annual fee. The annual fee on the Sapphire Preferred is $95. The annual fee on Sapphire Reserve is $550, but an automatic $300 travel credit and a $60 per year DoorDash credit, drops the effective annual fee to $130-250. | |||||||||||||||||||||||||||||||||||||||||
|
Add the Blue Cash Preferred Card for 6% on your first $6,000 of grocery store spending, 6% on streaming services and 3% on gas. It is almost always your best option for groceries, even with its $95 annual fee. | |||||||||||||||||||||||||||||||||||||||||
|
Most people can substantially boost their rewards by using the Altitude Reserve Card to earn 4.5% on all purchases they make with Apple Pay, Google Pay or other mobile wallets. Once this card is added to your wallet, use it as often as you can, except when you can earn even more from one of your other cards. If you have a Samsung phone, you can use the Altitude Reserve through your Samsung wallet at any credit card swipe machine. If you have a non-Samsung Android phone, consider getting a Samsung watch to do the same thing. Unfortunately, if you want this card, you need to have an existing relationship with U.S. Bank and not many other recently acquired credit cards. $400 annual fee, but an automatic $325 travel credit drops the effective annual fee to $75. | |||||||||||||||||||||||||||||||||||||||||
|
If you are one of the many people who spends a significant amount at Amazon, you should probably get one of the cards that offers 5% on Amazon purchases with no annual fee. Your best option is probably the Affinity Cash Rewards Card, if you can get approved for it. It provides a rotating set of 5% categories on top of its 5% reward rate on Bookstores, including Amazon. Otherwise, we recommend the Amazon Prime Store Card because it doesn't take up a Chase or Amex Slot, is eligible for most of Amazon's cardholder promotions, and like the Chase and Amex cards, also earns 5% at Whole Foods (if you buy most of your groceries at Whole Foods, you may not need to bother with the Amex Blue Preferred). Depending on your shopping habits, you might consider the Capital One Walmart Card for 5% back on Walmart.com purchases and the Target Debit Card for 5% back on Target purchases. | |||||||||||||||||||||||||||||||||||||||||
|
If you can move enough money to Bank of America and/or Merrill Lynch to qualify for Platinum Honors status, you should get the BOA Cash Rewards Card to boost your rewards on online shopping. It earns up to 5.25% on up to $2,500 of purchases each quarter. Ideally, you would sign up for a different Bank of America card, collect a more valuable signup offer, wait a year, and then convert it to the Cash Rewards card. | |||||||||||||||||||||||||||||||||||||||||
|
If you spend a lot on gas, you might consider getting a card just for gas purchases—you can boost your rewards to 4 or 5%. There are several options that have no annual fee. TravelStrategies:*303/List If you are willing and able to get business cards, you can further increase your reward earning potential.
|
