The credit card I use

Posted at 12:59 on Thursday August 03, 2006 | Filed Under Miscellaneous

After I wrote about how my credit card saved me $600 on a flight, a bunch of people asked what credit card I use. Normally, I don't write about too many specific companies, but this is a card I've used and I trust. I use a Citibank Premier Pass Elite card. There's a no-fee card and a fee card. I ran the calculations and decided to get a fee card, which is about $75/year. I chose this one because a friend recommended it, I earn 1 point for every dollar I spend and every mile I fly, plus I get free companion fares for domestic flights over $379. The reason I saved $600 was that I redeemed 25,000 miles for a domestic flight.

In my experience, the cash-back cards ("get 1% back on all your purchases, plus 3% at gas stations!") are a joke. My friends report getting back pitiful amounts at the end of the year. I'm sure some people are happy with theirs, but my friends almost uniformly hate them.

Anyway, if you travel a lot, I encourage you to look into a rewards card. This one happens to be great for me (because I earn rewards when I spend and when I travel), but you can search through a huge list of cards at Bankrate.com. Be sure to run a break-even analysis to see if the extra rewards you get with a fee card are worth it (for most young people, it should be a no-fee card).

If you're just getting started, you may want to read All About Credit Cards or Why your credit card interest rate doesn't matter.

Also, my Citibank card just sent me 5 referrals to give away, so if you're interested, let me know. First come, first served.

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Comments (20)

1.: During the last 9 months, I have saved the pitiful cashback of $220. By doing nothing else than reminding myself to use the Citi Dividend card everywhere.

For people who drive and who buy in grocery stores, the 5% cashback is more than enough.

Mileage cards? No way! Every day I read some story about how difficult it is to redeem those miles.

Just to show how worthless these miles are: one can get 1 Continental mile per every dollar spent at ShopRite just by signing up for it at shoprite.com. Not to speak about all the frequent flyer programs.

If I want rewards when I travel, I use my Amex TrueEarnings card, with 2% cashback on travel. And so on.

Maybe for big spenders or big flyers a Premier Pass Elite is worth the $75/year. For me, it's not even worth the hit on my credit score, no offense.

Posted by Anon at August 3, 2006 02:05 PM

2.: We're a family of 4 and we easily max out the benefits($300 per card) from 2 dividend cards over the year. Well, 600 bucks for buying needed groceries and gas is pitiful. I think we would save a lot more by not buying the groceries and gas.

Posted by Chris at August 3, 2006 02:18 PM

3.: for folks that loving buying stuff online, I really suggest the Amazon.com card. I use it for both personal and business expenses...and their 1-3% back in amazon.com certificates add up quickly.

In the past 15 months I've gotten prolly $1200 worth...but that's also because my month bill is like $10k bc the business side.

check it out.

Posted by tjv at August 3, 2006 03:17 PM

4.: Ramit,

You know I love you, but I think you failed to do the math here.

25,000 miles = $25,000 spent.

The value of your ticket was $600. That means that the imputed cashback % was 2.4%.

For your groceries and drugstores and gas, you'd still be better off with 5% back.

Posted by Chris Yeh at August 3, 2006 05:43 PM

5.: Ordinarily you'd be right (and I know you're way better at math than I am), but I earn points for every dollar I spend and for every mile I fly. For example, if I flew to NYC and back, that would be ~6,000 points, and a flight like that might cost $250. In that case, I'd earn points on both the purchase price and the miles.

Plus (this is less relevant), I got a bunch of free points for signing up.

Posted by Ramit Sethi at August 3, 2006 05:58 PM

6.: it's all about what cards work for you. 5% back from gas & grocery via the popular citi dividend is hot, it's hardly a joke. as mentioned, most people spend enough to qualify for the $300 per year for stuff they'll buy already.

I can't imagine paying almost $400 for the amex plat card, but for a lot of people, the benefit pays for itself within a few use.

Posted by Cap at August 3, 2006 07:03 PM

7.: I can see how this card would be great if you intend to fly somewhere, but I think the cashback card is better for my more grounded, family lifestyle. Now, when my wife and I intend to take that trip to Hawaii, then it'd probably be reasonable to switch cards. That's an interesting topic though...switching cards for the sake of the benefits you recieve from them.

Posted by Don at August 3, 2006 07:07 PM

8.: For college students (if you only want one card)--the MTVu card is quite good.

5 pts/dollar on purchases at bookstores, 25 pts for paying your bill each month, and bonus points for having good grades. Those are all good incentives.

If you JUST use it for books (like me), it's a nice perk to just recieve points having the card sit there doing barely anything (which works well when you're trying to save money all the time).

Just don't fall into the trap of spending (even marginally) MORE money to get points...

Posted by Paul Kerl at August 3, 2006 11:34 PM

9.: So how is your experience of redeeming those airline miles?

Posted by nick at August 4, 2006 07:12 AM

10.: Not to pile on, but I get back between $500-$1000 a year on the "joke" cards. Tip: all purchases at a Wal-Mart Super Center are counted as groceries as long as at least one grocery item is on the receipt.

Posted by Anon at August 4, 2006 07:28 AM

11.: My wife and I used a mileage card for a while. Over several years, we racked up over 100,000 miles which we intended to use for a trip to New Zealand.

However the airlines have made it very difficult to redeem miles for tickets.

Meanwhile, so far this year we've earned $800 cash back on our Citibank, Chase, and Amex cash back cards plus around $100 in Amazon coupons with our Amazon card.

Posted by samerwriter at August 4, 2006 07:47 AM

12.: Another vote for the 5% gas/supermarket card is great. I don't know what your friends are buying to make these cards "pitiful" but I definetly see the payback. No fee's and 5% (not 3) and 1% on everything else is worth it by far.

Posted by Tim at August 4, 2006 11:32 AM

13.: I have a no-fee card that gives me 5% back on gas purchases, up to 1% of my total purchases. It hasn't made me millions, but I probably get about $20+ back each year.
Since I pay my credit card off every month and don't pay a fee, I can't see the harm in using it at the pump every time. It's also my only credit card that I use regularly, so i can stay on top of the balance.

(It's from MBNA, if anyone's interested.)

Posted by Stacy at August 5, 2006 07:56 AM

14.: Hi Ramit,

I have to strongly disagree on this one... the percentage one receives back on points/mileage cards is almost always close to 1%; you're lucky that you got yours higher. But where the real catch is that that 1%-3% you get back goes toward purchasing something at RETAIL COST, be it flights or electronics or whatever. I used to use the AMEX Rewards but realized that the $50 XYZ I was buying could be had online for $30...and I would've been better off just getting cash. (So I ended up cashing in for gift certificates and buying stuff when it was on sale at those stores).

Since then I've switched to Chase Rewards (5%/1%) card and I get close to whatever their maximum is--I think 300 or 400 per year, then I have another couple cards I use for certain business related expenses and make roughly the same on each. To me, that's found money.

And to agree with other people here, I used to use frequent miler cards...but it's really difficult to redeem those miles. I'd much rather have flexibility to fly when I want at a good price.

One last tip: if you get a rewards card and want the same psychological benefit of the points cards (i.e., noticing that you're saving money), consider using a card that mails you a check when you request it (like Chase Rewards) so you SEE the real rewards as opposed to just getting it deducted from every pay cycle--in which case that $30/month or so just gets ignored.

Best of luck,
Jared

Posted by Jared Goralnick at August 5, 2006 04:20 PM

15.: "Also, my Citibank card just sent me 5 referrals to give away, so if you're interested, let me know. First come, first served."

Since you mention it, what is the kick-back on those referrals?

Posted by debt-free at August 5, 2006 06:35 PM

16.: 5,000 miles per person who signs up (max of 5 people).

Posted by Ramit Sethi at August 5, 2006 09:05 PM

17.: I use a Citi Diamond Rewards card. 1 point on purchases, no annual fee, bonus points at gas stations & grocery stores (and sometimes special offers on other types of stores). I use my rewards to make payments on student loans. No extra points for flights, but I haven't been on an airplane for years, so that wouldn't help anyway.

Posted by David Robarts at August 7, 2006 01:59 PM

18.: I used a United Airlines card during my first few years out of school. During that time I spent enough money (furniture, electronics, travel) to make the annual fee worthwhile. All my spending plus a few trips earned me two tickets to Hawaii.

Now that I don't spend or fly as much, I've switched a pair of cash back cards. My Citibank card gets 5% back from gas, groceries and drug stores. I also have a Chase card with 1% back on all purchases and no annual limit, which I use to buy everything else. While I don't earn miles anymore, I just buy cheap flights that I couldn't get with miles anyway.

Posted by Jeremy at August 8, 2006 08:41 AM

19.: Another voice of dissent! I think most people are way better off getting the 3 or 4 hundred cash back and finding their own good deal on a flight to spend it on. Also you could argue that airline miles cards cost you more for all of your flights since you're forced to use one airline, which surely others are sometimes offering a better price. I'd be interested to see what your "savings" are if you tallied up the price difference between the flights you took on the airline you have the card with and the cheapest flight available.

Posted by Laura at August 10, 2006 07:02 PM

20.: The best card (or best mix of cards) depends on a person's spending patterns -- especially how much they spend in each category (e.g. gas, restaurant, home improvement, utilities, etc.). I recently went through this analysis due to changes in the terms of the Citi Dividend card. That analysis inspired me to build a general-purpose tool that anyone can use to find the best cash back card (or cards) for their spending pattern. As far as I know, this tool is currently the only one of its kind.

You can see the tool at http://www.creditcardtuneup.com/.

+Joel

Posted by Joel at September 18, 2006 07:55 PM

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