Maximizing What’s in Your Wallet Q2 2011

I started doing this last quarter and people seemed to like it, so here's the latest installment. As a reminder, this post is for all the credit card deadbeats out there looking to maximize cashback rewards. So, if you never carry a balance on your credit cards, have them set to auto-pay in full every month, and want to make the most of Q2 2011, then read on.Here's how you should allocate your spending:

Gas – This is a no-brainer. It's the same card year round. It is the PenFed VISA Platinum Gas / Cash Rewards Card. You'll get 5% back all the time on gas purchases. Just make sure you pay at the pump. I used to use this card for a lot more, but the rewards have been really scaled back such that only the 5% gas reward makes sense.

Groceries and Drugstores– This quarter use your Discover® More Card! during June only. Hopefully, you bought some grocery gift cards during Q1 and got 5% back so essentially the reward carries forward for you. If anyone knows of a card offering 5% this entire quarter, please comment.

Restaurants – Same as groceries. Nada.

Home Improvement, Department Stores, and Clothing Stores – This quarter use your Discover® More Card!. Honestly, the Discover Card works on a tiered system that I don't like very much, but even if they offered 1% from the start I would still only use this card for 5% rewards because I have other cards (below) that get 2%. As a 5% cashback card it's great as long as you stick to the categories. Alternatively, you could be using your Chase Freedom card, but only in home improvement and home furnishings. With the Chase Freedom card you are getting reward points equivalent to 5% cashback. Once you meet a certain point threshold, you can redeem the points for cash or for gift cards at many retailers. Sometimes you can even get gift cards worth more than the 5% reward. For example, a $25 gift card to Lowes for the equivalent of $20 in rewards points. This 25% increase in your redemption bumps the cashback equivalent percentage to 6.25%. Note there is a $1500 limit on the 5% rewards spending during the quarter. Further, you could use the Citi Dividend Platinum Select Mastercard (again limited to home improvement and home furnishings), as they are also offering 5% back in the same categories. I do not own this card because with a $300 cap on rewards during the year, it just isn't worth the time and effort to keep up with it. Finally, please welcome the Fidelity Investment Rewards American Express Card to the 5% cashback category game. They too are offering 5% cashback on home improvement purchases with a reward limit of $25 for the quarter.

Gifts – For gifts I use the Amazon VISA year round. When you buy through Amazon with the Amazon VISA you get 3% back and the first time you sign up, they give you $40 off your purchase. It's well worth the sign up.

Everything Else – Frequent readers know I love my 2% cashback Charles Schwab Invest First VISA card. It is my catch-all card for any expense that takes a credit card and does not fall in the preceding categories. The card is no longer offered to new customers, but you can get a roughly equivalent card in the Fidelity Retirement Rewards AMEX which as I mentioned above is actually offering 5% back this quarter.

Two final thoughts: Please remember to sign up at Chase and Discover to be eligible for their 5% rewards, and remember this advice is ONLY for people who don't carry a balance…EVER.

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