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Well, it’s that time of year again….when I look at my personal finance and review each individual aspect of my personal finances. The goal? To game the system and maximize my return on spend. Today, I researched every aspect of different credit cards, my personal habits, and decide which one is best for me.

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In selecting a card, I always recommend the following advice:1. NEVER carry a balance on a rewards or rebate card!
I cannot stress this enough. The APR (annual percentage rate) is typically higher than any rebate you’ll ever receive. If you carry a large balance, transfer to a low interest rate card and pay it off. On a lower balance, just pay it off as fast as possible. After you finish that, THEN look at rewards cards.

2. Ask yourself, “What is important to you?”
What are your goals with the card? Is it free travel? Hotel stays? Gas cards? Cash back? Or is it a flexible spending point system? From there you can start to narrow down the type of card you apply for. Right now there are literally hundreds of cards offering rewards from everything from travel, to gas, to even cold hard cash. Google is your friend!

3. Look at your spending patterns.
There is no real point in applying for a card where the points will expire before you can redeem for any reward. Some cards have thresholds that require a certain dollar spend within a period of time. If you don’t spend it, the value expires and you loose all associated value with the program. The Southwest Rewards card is one I can think of off the top of my head because their points expire 24 months after issue. Also be aware of the annual fees that some cards charge- If it takes you 2 years to earn 25,000 miles to redeem a free trip worth $300, but the fees charged were $120, you might have been better off to get a no annual fee cash back card and buy the ticket in cash.

Also, look where you spend your money. Many credit cards give bonuses for certain purchase types or retail locations that will help guide you in your search.

4. Look at the stability of the award structure and issuers

In 2008, a handful of airlines have gone into bankruptcy, some banks were tittering on the edge, and devaluations are still a constant threat. Please remember, award points have no value until redeemed. I myself, have been a victim of award devaluation and now vow to never let it happen again. Therefore keeping a huge balance of points “just in case” simply doesn’t make sense, since in the Terms and Conditions of pretty much every program state that they can change the program literally overnight. Therefore, I recommend burning as you reach thresholds.

Please keep in mind, not all programs are created equal. For example, cards that promote air travel on a certain airline may be slightly riskier as airlines currently have a fundamental cost structure issue that can make those hard earned points be worth nothing. On the other side, Hotel chains seem to be slightly safer as their costs are simply sunk.

5. Finally- READ the fine print.
Don’t be an ass. Nothing as bad as signing up for the card figuring you’d get something, but get something completely different. Credit cards are known for their fine print and almost misleading fraudulent advertising.

For example, today I found an interesting card offering “5% cash back on gas and maintenance purchases”. However, the fine print stated “Earn a full 5% Cash back Bonus on your first $100 in combined gas and auto maintenance purchases each billing period - up $1,200 annually.” I was flabbergasted. Pretty much this card is useless. Earn 5% on the first $100 in gas purchases? That’s $5 dollars. After the first $100 (or ONE tank of gas in California), you get a paltry 1% on your gas purchases. If I got this card thinking I’d get 5% back, I’d feel like a complete ass.

FYI- Many high percentage cash back cards have spending thresholds to get a higher percentage. Just be careful.

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Now you may be asking what cards do I currently have in MY wallet?Citibank Premier Pass card: Although I wasn’t happy with the Premier Pass devaluation recently, this card still makes me reasonably happy. Due to my travel, I do receive a lot of flight points, giving me a high rate of return. As an added benefit, I don’t see Citibank going anywhere anytime soon.

Starwood Preferred Amex: Hotels are EXPENSIVE nowadays. Nicer 4*+ properties…even more. Nowadays even with airfares going up, I can easily find a SFO-JFK ticket for $350.00, but each night in a hotel in Manhattan will cost me a couple hundred a night! Planning a trip to Europe? Last time I stayed in Milan the hotel I stayed at was 800 EUROS a night. How much did I pay? $0.00 + 15 Euros in tax! I prefer the SPG AMEX simply because the Starwood hotel program is awesome. If I want to transfer to miles, I receive a 1.25% bonus for doing so.

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My future plans are as follows… At the end of the year when my Citi Premier Pass Elite card is due for the annual fee, I will convert to a regular Premier pass and slowly use this card until all my flight points are used up. Then I’ll switch to the card listed below.I plan to use the SPG Amex more because I was bailed out by SPG in Amsterdam, when I got stuck by Alitalia and had to overnight in AMS. Instead of spending 350 Euros (currently about 700USD), (only hotels available were at that price) I used 10,000 points…effectively giving me a 7% return on spend. I figure in the next two years I will be visiting more expensive cities, so those points will come in handy..

With gas prices hitting close to $5 dollars per gallon at my location, I currently plan to get a PenFed Visa which offers 5% cash back on gas, 2% on groceries, and 1.25% on everything else. I think by far this would be the best card for my current uses.

Please keep in mind, these cards are what works for ME. Either way, please do make your money work for you. If you know of any better cards please let me know!

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