A friend asked recently how I decide about the 3% credit card fee. Couple of things I'll lay which she never considered. Starting with the easy 2% back CC. You have to pay 1% for the privilege of using the card. Pretty straightforward. Only consideration is how much? Let's use the easy number of $10,000.
$10k = $300 = 3% fee
2% Credit Card = $200, so $100 to pay for the privilege.
But that $10k can be left in an online savings account. Currently I use Capital One at 3.6% APR because it's easy but it is not the highest out there. Vanguard MM is 4.1%. But let's go with Capital one. $10k @ 3.6% is $360/year in interest. It is $30/month or a little more if it compounds. But for simplicities sake let's go with $30/month.
So now you are paying assuming 30 days $70/month for the privilege. Personally I think it's 45 days of float so $45 in interest earned on the $10k. That means to use a plain vanilla 2% credit card you are pay $55 or 0.55% fee to use the CC at todays current savings rate.
Now there things get tricky are the credit cards that are less. Say a Chase Freedom Flex @ 1.5% points back or Alaska Card which you get 1% back but status and possible transfer. Let's do the Chase Freedom.
Now you get 1.5% back in points so you are looking at $150/fee. But you transfer it to the chase sapphire preferred and you can redeem it for 1.25 points to book through their portal. So the $10k charge for $300 gets you 18,750 points. You still get the $45 in bank interest assuming 45 days of float. Chase assumes that $18750 is $187.50 in cash value so you have $232.50 in "cash value" and paying $67.50 for the privilege. This is assuming you use the points on chase and don't transfer it to other hotels redemptions or airlines.
Now I pick Alaska CC because I use them. 1% back means I get 10,000 miles on Alaska. 30,000 miles recently got my kids a redemption flight for $832. That is worth 2.77 cents per mile. So the 10k miles is worth $277. That plus the $45 in interest, the points pay for themselves. That along with the recent bonus of 10k miles is worth 3333 Elite Qualifying Miles towards status. So using a CC I am getting paid to charge it. Basically you need about 2 cents a miles redemption on airline points.
Is it worth it? I don't know. But DH and I have managed to redeem our travel points for a high value so yes it's likely worth it for us. But your mileage may vary (YMMV) as they say. You have to do your calculation. We also recently redeemed 150k miles for $4500 business ticket so 3 cents/mile redemption rate. Again that paid for itself with the 3% fee. But not everyone can get that sort of redemption.
June 9th, 2025 at 05:36 am 1749447403
Some people can have money in the bank without it burning a hole in their pocket.
Others can’t.
Knowing whether you have the discipline to win the credit card game is key.
I charge everything I can and pay off every month. I play the points game and the cash back game, but not the low interest game or the balance transfer game. I’ve played the open account bonus game but I find it kind of stressful.
Finding the discipline is good. Knowing if you have it is everything.
June 10th, 2025 at 07:24 pm 1749583450
June 13th, 2025 at 06:54 pm 1749840890
I also charge most things and then pay it off. I actually pay some halfway through the month. I know people say you can watch your spending if you pay cash and that's true, but living in rural American, our bank is 45 minutes away and we get charged to use the ATM. So, I usually use the card unless it is something just a couple of bucks.