Reaping Miles and Points with Everyday Spending

Dear Cashing In,

I like signing up for reward credit cards for their sign-up bonuses, but I don't like signing up for too many cards because I worry about my credit rating. How can I make the most out of the cards I do have and put together a strategy for earning points without constantly applying for new cards?

- Amanda

Dear Amanda, That’s a good question. A lot of times it makes sense to apply for cards to take advantage of their generous sign-up bonuses. Just in the past few months, I’ve seen offers for 100,000 American Airlines miles with the Citi Executive AAdvantage MasterCard and for 100,000 British Airways miles with the Chase British Airways Visa.

Those are tempting offers, especially if you are comfortable with the minimum spending requirements, annual fees and with having another credit card to manage. The downside, of course, is that with every card application, your credit takes a slight hit. If you continually pursue this strategy, you can wind up with an awful lot of credit cards.

You can still have an excellent credit score even with a lot of cards, but many people don’t like keeping up with all the bills and paying lots of annual fees. Also, the cards you signed up for with a short-term purpose in mind -- reaping the sign-up bonus -- may not the ones that make sense on an everyday basis.

Instead of taking an approach that relies on succumbing to the marketing offers of credit card companies, an alternate approach is to examine your spending, figure out what cards line up best with your spending patterns and stick with those cards.

If you choose cards only based on the best sign-up bonuses, you’re probably earning just 1% back in rewards on most purchases (not including the sign-up bonus). On an ongoing basis, you can do better with other rewards credit cards.

For instance, if you spend a lot of your money at the grocery store, the gas station and on utility bills, go with cards that give you the biggest bonuses on those expenses. There are several cards that offer 2% back or more at supermarkets and gas stations, such as the Blue Cash Preferred card from American Express ($75 a year, 6% back at supermarkets, 3% back at gas stations) or the BankAmericard Cash Rewards card (no annual fee, 2% at grocery stores, 3% at gas stations). For utilities, the Chase Ink line of cards offers 5% back on cellphones, landlines and Internet and cable services.

If you want to keep things really simple, go with a card that gives you a higher rebate on everything. The BankAmericard Travel Rewards card gives you 1.5 points per $1 spent on every purchase and has no annual fee. You can earn even more -- 2 points on every $1 spent – with both the Barclaycard Arrival World MasterCard ($89 annual fee, waived the first year) and the Capital One Venture Rewards card ($59 annual fee, waived the first year).

The part that can be slightly complicated is remembering which card to use where. I have a friend who puts a small sticky note on the front of his cards to remind him.

If you want to go a little more high-tech in remembering what card to use, a smartphone app called Wallaby can help. You enter what cards you have, and it tells you which card to use where. It also cross-references that information with a maps app, so that it’s easy to enter your location and determine the recommended card.

You don’t need to completely neglect generous sign-up bonuses. But if you can align your cards with your everyday spending, you can get more from them than you probably are right now.