Last month, my colleague Mike Winters profiled a couple who successfully manage 15 credit cards in order to maximize their perks.
Considering the results — the couple recently used miles to fly business class with their son from San Francisco to London — it’s hard not to be impressed. But I’d be lying if I told you that the process of managing rewards across 15 accounts didn’t sound utterly exhausting to me.
When it comes to credit, I keep it really simple. Pretty much everything but my rent and utilities goes on one card, for which I get 2% cash back on everything.
As a baseline for a credit portfolio, “you could do a lot worse,” says Ted Rossman, a senior industry analyst at Bankrate. An all-purpose cash-back card “is a really good foundation, and should be in anyone’s portfolio who’s interested in cash back, which is most people’s favorite reward.”
I’ll never be the sort of person who considers the whole process of redeeming credit card points and miles a game or a hobby. But there’s no reason I can’t be getting more out of the spending I’m doing anyway.
For people like me, who just want to get the most out of our spending without poring over credit rewards websites, “you could come up with a pretty solid strategy with as few as two or three cards,” says Rossman.
By strategically adding cards that align with your spending habits and money goals, you boost what you earn beyond your basic cash back without feeling like you have to jump through hoops.
Here’s how Rossman and other credit experts say you can choose cards that work for you.
Avoid debt and start with cash back
Before you start trying to boost what you earn, make sure you’re comfortably paying off your cards every month in full. On average, credit cards come with an interest rate of 20.1%, according to Bankrate. Any points, miles or cash back you earn are small peanuts by comparison.
“The last thing anybody should ever do is spend themselves into debt to get credit card rewards, especially in a time when interest rates are sky high,” says Matt Schulz, chief credit analyst at LendingTree and author of “Ask Questions, Save Money, Make More: How To Take Control Of Your Financial Life.”
If opening more cards might make you more tempted to spend, dip your toes in gradually, he says. Start with a single card that earns 1.5% to 2% cash back on everything and see how it goes.
“In six months or a year, if you want dabble a little bit in bringing in some extra rewards, go and get that next card,” Schulz recommends.
By strategically adding cards to your roster, you can boost the return you earn on your spending above and beyond what you get from a simple cash-back card. Rossman and his family operate with three cards, and he calculates they earned about 2.7% on their spending last year.
That’s above the 2% he’d earn with a simple cash-back card and came with very little extra effort. In addition to a blanket cash-back card, Rossman carries plastic that offers more generous rewards on certain categories. When those expenses come up, he swipes the appropriate card. For everything else, he sticks with his 2%.
Audit your spending and your goals
Once you’re confident you can manage a few more cards, it’s time to do a self-audit. Start by determining where most of your budget goes each month.
“I would urge people to think about their top spending categories, and that’s going to vary from person to person,” says Rossman. Common examples include groceries, travel, dining out and gas.
From there, you can likely find a card or two that offer generous cash back on your biggest categories. Rossman, for instance, uses a card that offers 6% back on groceries — a perk he says is well worth the $95 annual fee.
“It comes down to what kind of spender you are,” says Daisy Hernandez, credit cards editor at The Points Guy. “Then it’s what kind of rewards currency is most important for you and what exactly you want to do with the rewards currency you’re earning.”
That’s the other half of your audit: determining what you’d most like to do with the rewards you earn. If booking fabulous vacations is important to you, getting an all-purpose travel card will give you more bang for your buck on flights and hotel stays than a straightforward cash-back card.
Once you’ve got a couple of new cards in your wallet, the strategy is simple. Use your rewards cards on expenses that offer you the best perks and default to your cash-back card for everything else.
But remember — expanding your credit card portfolio is about finding products that fit in with your financial life. Not the other way around.
“Don’t ever change your spending to suit a card. It just doesn’t make sense,” says Hernandez. “Get a card that’s going to work for you.”
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Source: You only need 2 or 3 cards to maximize rewards, says credit expert—here's how to
