I have been going through and working on my annual budget as well as my monthly budget and saw an offer on Mint.com for the Chase Freedom Unlimited Credit Card with 1.5% cash back and an intro bonus of $150.
It peaked my interest to see what I was missing out on since I hear from many other people that they have a card for the cash back that they earn. I was thinking I would dissect the offer as it pertains to my last year of spending and see how much I would make from taking advantage of an offer like this.
I Would Get Money Back
This one is kinda generic, but it's still true. I would make a little money on this deal from what I'm already spending each month.
Only have to use one card
Right now, my wife and I have it set up so that we have a main checking account card for normal purchases that happen every month. Then, we also have a second checking account that we call our "Sinking Fund" account.
This account is where we transfer money from the main checking each month to cover expenses that we've deemed non-monthly expenses. This includes:
- Home Repair
- Auto Maintenance
- Association Dues (ours are due yearly)
- Auto Insurance (we pay ours bi-annually or yearly depending on the deal)
- Dry Cleaning/Clothes/Haircuts
- Baby Sitting
If we got this card, we would end up using one card to maximize the rewards. This could be a good thing, since we wouldn't have to pay as much attention to what we are purchasing with which card anymore.
Gamification of your spending to earn more rewards
Have you ever been a gamer? You are always looking to get to the "next level" to earn the higher reward. I would say that this is exactly what they are trying to do to get you to earn more rewards. I know that I, personally, might be more tempted to purchase more so that I can get more back. Even though this reward system means that for every $1 I spend, I'm basically saving $0.015. As you can see, I'd have to spend quite a bit to make this add up to be beneficial.
Results are minute for the amount of money you're spending
As you will see with my theoretical results below, the savings are probably not there to justify the risk I'd be taking with using a credit card to get the rewards back. The credit card companies know this, and they are constantly tweaking their system in order to pull enough people in with an attractive enough offer without giving away as much. I'm not much into letting a credit card company dictate my spending habits.
Overcomplicates purchasing strategy if you use sinking funds
As I said above, we use 2 checking accounts for our purchases monthly. I think that sorting through these transactions all together would make it a little more cumbersome to divide out what I've spent on my sinking funds compared to my main checking account.
Could result in penalties that could wipe out your rewards
Looking into their fine print, my APR could end up at between around 15%-25% interest if I don't meet their terms. So, if I don't pay in full each month, I'm looking at getting smacked with between 15-25% interest to try to earn a measely 1.5%. Not sounding like such a great deal to me anymore.
And if you're just thinking that you would just move to another card, think about all the different things you might have to change to maximize the benefits. All the accounts would need the new card that you're switching to to pay your bills. You wouldn't want to get caught not having something in correctly and get smacked with a late fee from a bill because you posted the purchase on the wrong card.
Card rewards could change at any time
If I'm baking these rewards into my budget going forward, I may be in for an upset. Since they can change their terms at just about anytime they'd like, I might not earn as much as I thought I would later on. When I started out with my bank, my debit cards paid cash back on purchases. They have since taken that away and only give it to the credit card holders. What's to say that as I hold the card, they don't reduce the 1.5% down to 0.5% or cut it later down the road?
My Theoretical Results:
So, this is the part where I'm going to divulge my numbers about what I'd see as a result. I'm sure everyone's spending habits are different and you might come out with a bigger reward. I'm just trying to show how it doesn't really make sense in my situation.
Money I've spent that would qualify: $14,580
Rewards (intro bonus + 1.5% cash back): $150 + $222.88 = $372.88
Is it worth it?
Looking at my family's spending patterns and my system with my two checking accounts, I can't see how combining those two accounts into one spending account that I have to reconcile each month and make an additional payment to can be worth about $375. And it's only $375 for the first year. I would only be seeing about $220 each year thereafter. I saved more than that by shopping my auto and home insurance recently!
What do you think? Is it worth it to take on these cons to opening up a Chase Freedom Unlimited card?
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