I’ve always chosen cashback instead of air mileages for my credit card reward. The reason is cashback goes into your pocket directly, and unlike air mileages or point systems, it is not subject to the conversion factor change in the future.

I have arranged my spending on credit cards as follows:
1. Grocery, drugstore, and any gasoline purchases not at Costco for a flat 5% cashback on HSBC Platinum Cashback Card.
2. Restaurants for 3% cashback and travel related stuffs for 2% cashback on True Earnings American Express card.
3. Essentially 2% cashback on Citi’s Driver’s Edge Option credit card for everything else. It’s 1% + 1% via submitting mileage record. I just submit it for every oil change that I need to do for my car. On this card, it’s actually by point system. I only buy $100 Macy’s gift card using 10000 Thank You points so that I can get a conversion factor of 1 point for 1 cent. Unfortunately, this program is going away now.

I have searched on the internet for a better deal to replace the Citi’s Driver’s Edge card, but I can’t find anything. EmigrantDirect had a 1.4% cashback on everything but it’s gone too. The best thing that I could find is the 2% cashback on Fidelity Rewards American Express card, but the credits go into your Fidelity brokerage account.

I will need to think about this deal, since I’m a little wary of opening another brokerage account just for that. I have consolidated most of my accounts at WellsFargo (where I trade free through PMA account) and InteractiveBroker (for cheap options). I definitely don’t want to have my cash simply sitting in the Fidelity brokerage account doing nothing. Based on my past spending pattern, I can get about $275 just from 2% Citi Driver’s edge card. If I move that spending to any of my existing 1% cashback card, I would throw away $125 per year. Hmm. Something to think about.

In any case, if you don’t use any of the cashback credit card, you are definitely missing out BIG time. I got $362 back on my HSBC, $276 on my Citi Driver’s Edge, $250 on my True Earning AMEX for a total spending of about $34700 on these three cards. That’s $888 that you may be missing.

At the minimum, you should get yourself the True Earning AMEX (assuming you buy stuffs at Costco) and Chase Freedom card for basic 1% cashback & 5% cashback on rotating categories. That’s just a little effort to “earn” while you spend. It really adds up!

Frugal at 1stMillionAt33.com

Being the second bank after Citibank, HSBC has cut my credit card line from $7200 to $3000.

I don’t know how they evaluated this, but it is for certain that they don’t care that I have paid down all of the balance every month, and that my credit FICO score is at about 800 (well, if that means anything at all). And the speed that they do it is amazingly fast. Right after the monthly statement is cutoff, the credit line is changed immediately. I’m guessing that there must be increasing numbers of people who are behind and going delinquent.

Under normal circumstances, I would never advise people to get lots of credit cards. However, you should really get extra credits while you still can (and still holding a good job), before both banks and economy go tumbling down again. You should apply credits to different bank/companies, so that you could reduce the impact of credit card issuers cutting your credit lines after the fact. Especially for people who don’t have a lot of emergency reserve, I strongly advise you to load up your credit availability.

The wrong way to use your credit cards is to think that they are your money. Credit is not cash. Credit is for your extra financial buffer. Frankly, I think people need to be prepared for being out-of-job and without any income for 2 years at the minimum. Assume that you will go into “early retirement” for 2 years, and make sure you have enough credit/money to come out from the other end of tunnel.

So far, it appears that American Express still has very high credit limit. I have more than $15000 on that card thru Costco. If you need lots of credit, maybe you could try that.

It goes without saying that you should not get a card that has annual fee, build up more debts, etc. Better yet, you should get those cards that pay you back. Between the two cashback cards of HSBC & American Express last year, I had $500 max cashback from HSBC, and over $200 from American Express. That’s a total of $700 cashback. Not too bad at all. For some more details, here is my old post on this.

There are an increase in bankruptcy filing by corporations. It’s very important for every consumer to protect themselves in every possible way. The most important thing is don’t pay cash. Cash given to corporations is only good as long as the corporation exists.

If you buy gift cards, be sure to use them as quickly as possible. Gift cards are like loans given to the companies. The only commitment from the companies is that they will honor their gift cards before they go bankrupt. An example is the recent Sharper Image bankruptcy. They stopped honoring the gift cards.

If you pay by cash/check, it’s the same story. Aloha airline going bankrupt will not be honoring their sold tickets if they were paid by cash or check.

I know it sounds outrageous. But that’s just the way it works. Once a corporation files bankruptcy, the shareholders or the owners no longer have the control over the company. Rather, the corporation is “owned” by the bondholders, who will need to divide up the remaining assets in the bankruptcy court. If you have any cash left in the company’s control, you are just another lien holder.

To avoid these heartache, the only way is to pay by credit card. A payment by credit card is only a commitment to pay the amount of cash through credit card company. Since credit card companies don’t give these money to the companies immediately, but only extend credits to the company, there is no money exchanged (yet). Therefore, it’s a much safer way to pay. And that is the reason that credit card company has the bargaining power to allow you to dispute your payment when the service/products are not received.

With global liquidity drying, I expect that both big and small companies are going to go through a rough time for quite a while (years, I mean). Those that don’t have enough cash on hand for daily operation will need to file bankruptcy. And you don’t want to become a victim of such happening.

Best luck shopping.

Frugal at http://www.1stMillionAt33.com/2008/03/i-will-take-the-new-3-cashback-credit-card-from-chase/

For those who have missed the HSBC 5% cashback credit card offer, I must say that it’s a great pity. Like the previous citibank dividend platinum card which eventually had its 5% reduced to 2%, I’m a little afraid that the 5% cashback on my HSBC credit card will eventually go away. Quite often, good things just don’t last very long.

Therefore, I decided to apply for this 3% cashback card not only as a backup, but to also increase cashback in my other spending area. What’s good about this “Freedom” card is that you don’t need to be mindful about where you are spending your money. By default, it’s going to give you 3% cashback on the 3 categories where you are spending most of your money. Some of the categories include grocery, gasoline, drugstore, pet supplies, utilities, etc. I’m actually getting $100 cashback instead of the $50 after the first purchase. My offer was in the mail. If you apply from this link, you just get $50.

In any case, 3% is not too shabby. Especially considering that the cashback is tax-free, I’m much more motivated in getting them. A dollar saved is two dollars earned. The statement pretty much applies to my personal situation since my marginal tax bracket is at 40%.

Why is it important to get a cashback or a good deal on your credit card? You can read more about my arguments in this post on Two Must-Do Money Saving Tips.

Good luck on your savings,

Frugal at My 1st Million At 33 .com

It’s near the end of year. Time to sanity check your finances.

I just pulled my free credit reports from annualcreditreport.com which is a site mandated by government to provide annual free credit reports for consumers. Since there are 3 reporting agencies, I normally just check my credit reports twice or three times a year by spacing out the check every four months. This way you can catch the credit fraud in about four months before the identity theft becomes totally out of control. And if you worry about remembering which credit agency you used last time, it’s not a problem. The site will deny your access if you have checked your credit report from the same agency within the same year.

And yeah, mine and my wife’s have all checked out clean. I even closed a couple of accounts that I was not using at all.

Of course, you can buy any of those monthly credit guard services, so that you don’t need to review your own credit reports once in awhile. I opt for these free reports. This is just another inconvenience and precaution needed caused by rampant frauds in our society.

Less than a year ago, I applied for this credit card to replace the old Citi Dividend Platinum Select card. This is the only credit card that I know that still gives 5% cashback on any things bought in grocery, drug stores, and gas stations. For more details, you can see my post from last year.

With some $200 saved from cashback, it’s equivalent to earning $400 pre-tax (at least in my case). Certainly easy money, since you don’t even need to make any efforts (besides applying for the card). And if you buy those gift cards for Circuit Cities or any other restaurants in a supermarket, by default, you get 5% off too.

If you know another better cashback card, please let me know. I’ve stopped using my Citi Dividend cards, since their cashback is only 2%.

Thanks to the latest genius or scammers (whichever you choose), now you can improve your FICO score by renting other people’s credit. Some people even get a monthly income of a couple of thousand dollar by renting out their credit cards. Boy, that’s some 10X than I am making from my blog.

In fact, I have never really fully caught up with the idea of FICO score. Scoring your credit worthiness based on your past payment history? To me, the capacity to repay is equally if not more important than the past payment history. Without considering the capacity to repay is simply asking for trouble. These days I can’t believe the credit lines that credit card companies are giving out. It is almost an invitation to convert your FICO score to junk by running up tremendous debt. If I simply add up all the credit lines that I have, it probably amounts to more than $50,000 dollars. But I don’t think my income level can afford such a high debt.

In any case, you can rent out your credit cards at www.addatradeline.com and www.seasonedtradelines.com if you are interested. But I won’t be renting out mine for sure.

A coincidence on the location of addatradeline.com and many other major subprime lenders all in Orange county, California?? Looks to me that it’s the perfect combination to scam the bank legally.

Yes, Citibank Dividend Platinum Select card will no longer pay out 5% but 3% cashback on gasoline, grocery, and drug, starting October. I have found my replacement credit cards.

I have planned to cancel my cards, and have applied & received the following two new credit cards:

1. HSBC Direct Rewards Platinum credit card: Flat 5% cashback on gasoline, grocery, and drug purchases. Up to 1% on other purchases. Because it has a tier structure on the cashback for other purchases, I won’t be using this card for other purchases. You also will get the cashback every 12 months, and it needs to be more than $10.
2. Citibank Driver’s Edge Option credit card: 6% rebates on supermarket, drugstore and gas station purchases for 12 months, 3% after that. 1% rebates on other purchases. And $1 for every 100 miles you drive, . The downside is that rebate dollars must be spent through ThankYou network.

The best thing that I like about the old Citibank Dividend Platinum Select is that it pays cash, and you don’t need to wait for one year. Too bad that I will be settling for something else because the 5% rebate really adds up very quickly.

Here are the posts from other PF bloggers from whom I’ve found out about the above cards:

1. From Consumerism Commentary
2. From Blueprint for Financial Success

P.S. Today is a Thursday on which I normally don’t post. But I have decided to at least put out this short but somewhat important money-saving post. Because of the increase in traffics in the last few weeks, I have put in extra efforts for posting everyday except Sunday. Higher traffics certainly incentivize me to post more often. Not sure if it is an incentive for you to social bookmarking my posts by digg, reddit, del.ici.ous, any other sites or through emails. But in any case, I thank you for just visiting my website.

J.D. Roth at Get Rich Slowly has one of the best and comprehensive guide on credit card that I have ever seen. Any questions related to credit card probably can be answered here in his article. The article has collected the best sources of information from all of the PF bloggers, plus a lot of good information from government on legals, and resources from around the web.

Other articles that I think will be useful to many of you are:

1. Ten Secrets of Success (for Entrepeneurship)
2. 27 Money Tips for College Students
3. Nine Tips For Young People Starting Careers

Check it out! This is My Digg of the Week.

You may not want to clip coupons, or you may not go to discount stores.  But at least, you should follow these two effortless saving tips that will save you big money in the long run:

1. Earning interest from idle cash: Open an Emigrant Direct Saving account at 5.15%, or HSBC or Capital One accounts that consistently pays a higher interest rate.
2. Earning cash while you spend: Get a Citi Dividend Platinum Select Card to get 5% cashback on your gas/drug/grocery purchases, and 1% cashback on all other purchases.

There may be other better banks or better cashback credit cards, but if you do the above, at least you have a very good start.  How much money you can save in the long term?  With #1, assuming that you have just an average balance of $1000 in the account, and let’s use the comparison of 5% in Emigrant Direct and 1% in Bank of America savings account (it’s probably lower), the difference in yield is 4%.  I’m going to use 3% for the yield difference to be more conservative, since the money market account won’t always yield as high as 5%.  Because of a consistent 3% higher interest rate, in one year, you can save $30 extra in interest money.  For the next 40 years or so, you can get $1200 interest money.  I’m using simple compounding because most likely you will spend those $30 right away every year.  And that’s just for an average balance of $1000.  If your average balance is higher, your extra savings will be higher.  Now, tell me how much time does it take to open an online bank account?  Yes, in about 30 minutes of one-time effort, you can probably earn $1200 in additional interest for every $1000 average balance.  You just get paid at an hourly rate of $2400/hr.  That’s a huge return on your time spent (using just $1000 average bank balance).

Now on the credit card, it’s an even better return (well, for people who spend more but save less).  Monthly, let’s assume that your family needs to spend some $250 on gas, and $500 in grocery store, and another $750 in other expenses that you can charge on credit card.  Using the Citibank card, you can get ($250 + $500) * 5% + $750 * 1% = $45 per month or $540 per year (by the way, Citibank card has an anual limit of $300 rebate, so you will need to apply for two cards to split this $540.)  Now, multiply $540 by the next 40 years, and you will get $21600 in cash rebate in total, TAX-FREE by the way.  Again, how much time does it take for you to apply credit cards?  Half an hour or so, and you would have paid yourself at the rate of $43200/hr.  Now, if that is not good use of your time, then I don’t really know where else you can earn $43200 per hour, tax-free.  (Unfortunately, if you have some debt on your credit card, you may need to shop differently for a lower APY instead of getting cashback.  Now you know why credit card debts are not good.)

Of course, the above scenarios assume that both the bank and the credit card continues their end of deal.  As far as I can see, and from my personal experiences too, there seems to be no reason that they will change their way of doing business.

Please do yourself a favor.  When you have time, go to the links and open those accounts.  I’d rather see you get richer than big corporations getting filthy rich from scalping average people.

For more information, you can read the following posts on credit cards and banking:

1. Why I would choose EmigrantDirect over others
2. How I Bank
3. Comparison of Cashback Credit Cards for other good deals on credit cards.

It appears that one of the easiest way to get a cashback offer on American Express TrueEarning credit card for Costco is not to use the card too much except at Costco.  I have got this offer every year since I signed up the credit card.  My shopping pattern for this card is I only use this card at Costco, and very occasionally I use it besides at Costco.  Then during the summer, American Express will mail me this offer of “spending $750 outside Costco in two month to get $20 bonus rebate” which is in addition to the regular cash rebate of 3% for dining out, 2% for travel, and 1% for everything else.

Such high percentage rebate amount doesn’t come by often.  So I’m going to put all of my purchase on this card, besides grocery/gas/drug which I can get 5% back on Citi Platinum Select Dividend Card.

Hmm, spending $750 for two months besides grocery/gas/drug is a little high for me.  At such time, I may simply prepay some of my bills that are payable by American Express, stock up on miscellaneous items, or take the penalty of paying a fee of $5.95 to buy the Simon Mall Visa gift card which I can always use anywhere later.  If you have any other good ideas on pre-spending without wasting money, please do let me know.  Thanks.

Identity thefts has been on the rise, because of its ease and its potential “return” on theft.  If you think from the perspective of a thief, it is much safer to steal your mails, rather than intruding your homes.  But the potential “returns” go beyond your household items.  The thief can simply buy the stuffs that he or she really wants or make a mortgage loan ON YOUR CREDIT.

What are the things that one can do to prevent ID thefts?  Here is what I consider the most effective methods:

1. Never give out your social security number or use it as any passwords.
2. Properly thread or destroy any important personal financial documents.
3. Call 1-888-5-OPTOUT (1-888-567-8688) to reduce the mails on credit card offers.  If you don’t get those junk mails, your mail thieves won’t get them either.
4. Carefully shop online.  Only do business with reputable vendors.  Use www.bbb.org (Better Business Bureau) to check out the integrity of online/offline companies.  Try using services such as Virtual Account Numbers provided by Citi Dividend Platinum Select Card, which allows you to generate multiple one-time credit card numbers for online shoppings.  This way your true credit card information will not be given out to unreliable merchants.
5. Regularly check your credit report for frauds.  Yeah, I know there are a lot of “free” offers with some strings attached.  But if you go to www.annualcreditreport.com, or click on Free Credit Reports on the right column of this page, it will take you to the only and truly free credit report site.  This site was mandated by government.  You can get one free credit report every year from the three credit reporting companies: Experian, Equifax, and TransUnion.  The way that I use this service is that I request my credit reports every four months, but rotating through the three agencies.  This way I request credit report every year from each agency, but every four months I get to look at my credit report for any frauds.  The worst scenario is to have the fraud go undetected for four months.
6. If you are extremely worried, you can freeze your credit usually for a small fee, or you can place a fraud alert for free whenever you “think” your credits are misused.  A fraud alert message will stay in your credit report file for 3 months to 1 year, depending on which credit reporting agency.

Please let me know if you have other good tips.

The credit card issuers got more competitive again since the last time I shopped around. Because the average cost for Visa/Mastercard transactions is about 1.7%, and can be almost 3% for small merchants, I always thought that getting mostly 1% cashback out of 1.7% total on my Citi Dividend Platinum Select Card is pretty good already. I just found out an even better cashback credit card offered by Emigrant Direct. Here is the summary of some credit cards (all zero annual fee) that I think are worthwhile mentioning:

1. Citi Dividend Platinum Select Card: 5% cashback on gas/drug/grocery, and 1% on everything else. $300 max rebate per year. Cash rebate can be paid out once it’s more than $25. I currently have two cards because I usually run out of the $300 yearly limit. At 5%, you only need to have $6000 of gas/grocery bill to reach $300. (The term of this card has been changed, and I have replaced this card by two other cards in another post.)
2. TrueEarnings Card from Costco and American Express (AMEX): 3% for restaurants, 2% for traveling, and 1% on everything else. Annual fee waived with Costco renewal. Since Costco does not accept Visa/Mastercard, I also have this card. Two other American Express (AMEX) credit cards, AMEX Costco Cash Rebate and Blue Cash have tiered structure, and you will need to spend $11000 and $13000 a year separately to beat a flat 1% cash rebate card. Above those spending levels, you get only 0.5% extra back.
3. EmigrantDirect Platinum MasterCard (issued by Juniper Bank): this is my new find. It will pay a flat 1.40% cashback if your average daily balance of your EmigrantDirect Savings Account is at least $10000. Otherwise, it’s 0.50% cashback. It pays every six month, and goes into your saving account directly. I called EmigrantDirect, and have confirmed that the cashback will not be lumped in as part of the bank interest money on which you will need to pay tax. Since EmigrantDirect Savings Account earns 4.65% APY, this is really a no brainer deal.

Why is that I’m only interested in cashback credit cards? Other credit cards such as airline credit cards may end up giving you a slightly better value. However, accumulating airline miles or reward points is simply not straightforward enough. The credit card company can always change the reward schedule of airline or redemption point to their benefit. I prefer a simple straight deal of simply getting cashback.

P.S. I got most of my pointers from www.creditcards.com. It’s a pretty easy website to navigate, if you are interested in any other kinds of credit cards.