Arguments For And Against Carrying Multiple Reward Credit Cards
Published 4/20/08 (Modified 5/9/13)
I had lunch with my brother at an Asian noodle place a few days ago and the subject of money came up. Somehow our conversation turned to credit cards, which prompted me to pull out my wallet and enthusiastically display my collection of multiple reward credit cards that I use to make virtually all of my day-to-day purchases. I carry multiple cards for different purchase functions such as having a dedicated gas credit card, grocery credit card, dining out credit card, and an all purpose credit card not covered by other reward programs. My card strategy has always been to maximize my use of credit cards to get the most out of reward points and cash back offers. Not including the ones I regularly carry around, I also have a few other balance transfer cards sitting at home, having already tapped out their 0% APR offers with no other remaining reward deals to offer me as a card consumer.
I See Reward Credit Cards As The Way To Earn Lots Of Arbitrage Cash Back and Free Gift Rewards From Everyday Purchases
What can I say - I'm a big proponent of using credit cards and rarely resort to using cash, which I see as an old school payment system that will someday be phased out in favor of more efficient and sanitary card payment methods. Since I started maximizing my use of credit by carrying around multiple reward cards, I've been consistently earning more than $1,000 in purchase rewards and cash rebates every year - and I'm not even married. Imagine if I had a family and children to shop for - imagine the sheer amount of credit card rewards I could earn from the inevitable higher spending rate.
For those who don't want to rely on credit-based payment systems and deal with the risks and spending hazards involved, there's always debit cards, which offer the same speedy and compact access to money that credit cards offer but without the potential out of control credit card debt issues. However, the biggest downside with debit cards is obviously the lack of purchase reward offers. Unlike credit cards, which tend to entice consumers with attractive cash back and rebate incentives such as airline miles or gift cards, debit cards don't usually offer rewards (although some do). A few banks and debit card issuers like Citibank do offer purchase reward incentives for customers who opt to use their ATM/debit cards to make purchases. These debit card purchase incentives are usually in the form of some type of reward points that can be accrued and redeemed for gift rewards and merchandise. In the case of Citibank, the company offers Thank You reward network points for every purchase made using their ATM/debit cards. However these debit reward points pale in comparison to the lucrative reward promotions offered by credit card issuers. Of course, in terms of money making ability, credit cards offer card issuers a much higher profit potential in the form of interest and penalties gleaned from those unable to make their monthly credit payments. That's why they are able to offer much higher reward percentages for credit users.
While They Offer The Most Efficient Use Of Your Money, Reward Credit Cards Are Powerful Financial Tools That Admittedly Must Be Used Carefully and Responsibly To Avoid Overspending
Despite my seemingly zestful support of credit cards and belief that their use can be a part of a complete and well rounded financial planning strategy, I don't necessarily recommend them to everyone. Like the powerful engines that drive today's automobiles, credit cards can be a useful tool for convenience and efficiency. But like the car you drive, a credit card can also be a tool for disaster. The unsafe and irresponsible use of credit cards can lead to major financial mistakes and rampant credit card debt. With any such powerful tool, in the hands of an uninformed and inexperienced user, both cars and credit cards can cause much heart ache. Having a credit card does not mean you have the license to spend and not reap the ultimate billing consequences. Likewise, having a license to drive does not mean you have the right to drive without regard for the safety of those around you. If you simply cannot handle the responsibility and awareness they require, it's best to resort to more primitive and basic modalities. For the car, the undeveloped and immature driver should resort to biking or traveling on foot instead. For the overwhelmed and financially uncertain credit card consumer, he or she should probably stick to cash and debit before adopting an all credit strategy. Being able to successfully juggle and handle multiple credit card statements and payments can be a daunting task, and while the practice may certainly yield very impressive rebate results, it's not for everyone.
So Who's Smarter? My Brother Who Uses A Single Non Reward Credit Card - Or Yours Truly, Who Uses Multiple Reward Credit Cards To Capture the Maximum Possible Amount Of Credit Card Cash Rebates, Airlines Miles, and Gift Cards
It took a while for me to develop the ability to manage the use of multiple reward credit cards and to develop the responsible approach of always paying them off timely every month - something I'm quite proud of. That's why I'm always a bit puzzled when I talk to someone like my brother who accepts the practice of using credit cards to pay for everything, but doesn't receive a single purchase reward incentive for using it. During our lunch together, my brother responded to my wallet collection of credit cards by pulling out his credit card collection - a single Citibank credit card - the Citi Platinum Card. While this particular card offers the benefit of a 0% balance transfer period, once the introductory promotion runs its course, it doesn't offer any further rewards for card purchases. Every single dollar spent with this non-reward credit card offers no reward rebate in return. The only thing you get is a 20-30 day grace period for payment and the usual credit card guarantee shield against unauthorized and fraudulent purchases.
My brother's explanation for not carrying more than one credit card is that he's fine and happy with just having one. The lack of any card rewards doesn't seem to faze him and my so-called dazzling display of credit card rewards didn't seem to encourage him to carry more than one card. In his view, having one card is enough for him. He sees credit cards as more of an efficient method of payment with useful purchase protections, than as a juicy arbitrage source of money and credit card rewards. His reliance on a single non-reward credit card has always been a compromise to capture the convenience of debit cards but still enjoy the excellent purchase reward protections offered by most credit card issuers. Apparently, he views the lack of non rewards as almost a plus of sorts since it doesn't encourage any unnecessary or gratuitous spending habits that might afflict users of reward credit cards. Between my brother and I, he's probably the more frugal and thrifty spender, which now makes me wonder if that has something to do with the fact he owns and carries around only a single non-reward credit card. Although I would rather think otherwise, but have I become a more liberal and uninhibited credit card spender as a result of my long history of subconsciously justifying my credit card purchases by rationalizing that I am getting part of my money back in the form of credit card rewards?
I still tend to think I'm on the right track - that the smart and strategic use of multiple reward credit cards should be an integral part of one's financial planning, but I'm always open to better view points. So who's right - my brother or I?