Maximizing What’s in Your Wallet Q1 2011

Perhaps it's a bit ironic or just plain mean that I'm using the Capital One catchphrase but not their credit card. Oh well. 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 Q1 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.

Groceries and Drugstores– This quarter you should be using your Chase Freedom card. 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.

Airlines, Car Rentals, Hotels, Cruises, and Restaurants – This quarter use your Discover® More Card!. The Discover Card works on a tiered system that I honestly don't like very much. Thus, I only use this card for 5% rewards. In March, they will also be offering 5% back on groceries and drugstores in direct competition with Chase Freedom. However, why bother signing up if you are already getting the 5% with Chase Freedom? Additionally, if you happen to use your Chase Freedom at a store you think qualifies but for some reason does not, then you'll still get 1% whereas with Discover Card you'll likely get .25%. I'd rather reward Chase for not having a ridiculous card program.

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. 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. Did I miss anything? PS I called PenFed to see if there is a reason that they have no rotating rewards in January, and the CSR did not know why but noted this did not indicate a change in policy. Rather they were simply not doing anything special to influence card use.

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