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Last week I made a post about how I gladly pay over $1,000 per year in credit card annual fees for cards I don’t even use. That’s because by my valuation, I get more benefits from those cards per year than the annual fees I pay. I of course try to get a retention bonus on those cards to lower those fees further, but I certainly don’t mind paying those fees if it’s the only choice.
Beyond that, I spend a lot of time focusing on which credit cards are best for which spend categories, though I think it makes sense to go back to the basics. I like having a dozen credit cards in my wallet and choosing the best card for each spend category with each transaction. And I also put a lot of spend on credit cards, much of which is reimbursable or pays for itself.
But for the average consumer it doesn’t make sense to have a dozen credit cards just to maximize value in each spend category. For example, the American Express® Premier Rewards Gold card offers triple points on airfare, double points on gas and groceries, and 15,000 bonus points when you spend $30,000 on the card in a calendar year. But the catch is that after the first year the annual fee is $175, so how many people actually come out “ahead” by maximizing spend on the card and paying the annual fee? Probably not many.
But that’s not the only reason to keep a simple wallet. The fact is that many people don’t want to deal with the hassle of keeping track of a dozen different cards. I always try to advise my parents on which cards to use for which spend category, but they can’t keep track of it for the life of them. They’re still convinced the Chase Sapphire Preferred® Card gets double points on gas while the Chase Ink Bold gets double points on groceries. Grr! So if you have a spouse or family member in the points game that doesn’t really “get it,” it probably doesn’t make sense to bombard them with a dozen cards.
That’s why I’d like to propose two “simple” approaches that I think will work for just about anyone, and will maximize benefits while minimizing annual fees. It’s worth noting that I highly recommend signing up for more cards for the sign-up bonuses (as that’s the easiest way to earn hundreds of thousands of points per year for next to nothing), but instead with this post I’m just focusing on which cards I think it makes sense for the average consumer to keep long term.
Approach one ($95 in annual fees): Chase Sapphire Preferred® Card and Chase Ink Classic® Business card
The Chase Sapphire Preferred is a card just about everyone should have. It offers double points on dining and travel, has no foreign transaction fees, and offers a 7% annual points dividend. Just about everyone spends money on eating out, though I think the “travel” category is often underestimated, as it includes things like cabs, parking, hotel, airfare, etc. I also think the annual fee of $95 is extremely reasonable, especially since it also gets you access to the Ultimate Rewards mall (which is among the most rewarding online shopping malls).
I think a really good complement to that is the Chase Ink Classic. The card has no annual fee, and most notably offers double points on gas, and 5x points at office supply stores, and on internet, cell phones, home phone, and cable.
Those are categories in which almost everyone has monthly bills, and if you’re creative with the 5x points category it’s a great way to earn bonus points as well. Office supply stores sell tons of gift cards, so there’s no reason not to take full advantage of that.
The fact that the card offers bonus points in such valuable categories without an annual fee makes it a keeper, in my opinion. Best of all, the points from both the Chase Sapphire Preferred and Chase Ink Classic can be pooled, and can be transferred to United, Hyatt, and many other programs, meaning they’re extremely flexible.
That being said, the sign-up bonuses on the Ink Bold® Business Charge Card and Ink Plus® Business Credit Card are better. After completing the minimum spend you earn 60,000 Ultimate Rewards points instead of 20,000 Ultimate Rewards points. They do have an annual fee of $95.
This is one of those cases where I’m conflicted in writing a post like this. I’d recommend getting the Ink Bold and Ink Plus since the sign up bonuses are better and there’s no annual fee the first year, but if the goal is to minimize the long term value of the card, I think the Chase Ink Classic is better. That being said, you can always apply for both (or all three) to earn the bonuses. Or get the Ink Bold, keep it for a year, then cancel. Then do the same with the Ink Plus. And then lastly get the Chase Ink Classic and keep it open.
I value Ultimate Rewards points at 1.9 cents each, so by my valuation you’d be getting the following return on spend using this strategy:
Office supply stores, internet, cell phones, home phone, and cable: 9.5% (5x points)
Dining and travel: 4.07% (double points plus the 7% annual dividend)
Gas: 3.8% (double points)
Everyday spend: 2.03% (7% annual dividend)
Approach two ($160 in annual fees): Chase Sapphire Preferred® Card and Starwood Preferred Guest® Credit Card from American Express
If the above strategy was too complicated for you (or those important in your life), it doesn’t get much easier than this.
I still recommend the Chase Sapphire Preferred for the reasons stated above (double points on dining and travel plus the 7% annual points dividend), though instead I’d complement it with the Starwood American Express.
The Starwood American Express doesn’t have any bonus categories aside from Starwood hotels, but it accrues Starpoints, which are among the most valuable points currencies out there. I value Starpoints at 2.2 cents each.
So if you put your dining and travel spend on the Chase Sapphire Preferred and other spend on the Starwood American Express, I’d say you’re pretty well positioned in terms of your return on everyday spend and also your diversification of points.
Starpoints can efficiently be used for stays at Starwood hotels and can be transferred to airline miles at a 1:1 ratio, with a 5,000 point bonus for every 20,000 points transferred.
By my valuation you’d be getting the following return on spend using this strategy:
Dining and travel: 4.07% (double points plus the 7% annual dividend)
Everyday spend: 2.2%
Other card complements
There are a couple of other no annual fee cards that can be added to a card portfolio to even further maximize return. Again, I think the above does a good job of maximizing return while keeping things simple, though if you want to do even better…
The Chase Freedom® offers 5x points in rotating categories, with a cap of $1,500 of spend per quarter. That’s an easy 7,500 Ultimate Rewards points per quarter, which can be combined with Chase Sapphire Preferred and Chase Ink Classic/Bold/Plus points.
The American Express Hilton card offers 6x points at drugstores, gas stations, and supermarkets, and gives you access to Hilton AXON awards. If you spend a substantial amount of money in those categories, that can be a good return as well, especially for a no annual fee card. Just keep in mind that Hilton points aren’t as valuable as Ultimate Rewards points or Starpoints.