I’m going to write a quick article today about a phone call I made to Bank of America recently. As any reader knows, I’m extremely frugal and I look to maximize my money saving ability whenever possible. One avenue I use is credit card reward programs. I don’t spend a lot of money, but if I can earn 1% or more back on my expenses than that’s completely ok with me! Also, everyone should know I pay off all expenses at the end of every month. I carry NO credit card debt whatsoever. That would be very counterproductive to my investment gains.
As I wrote about recently, I use my credit card not only for day-to-day expenses but also as a last resort to pay bills as an emergency backstop. It’s part of my emergency fund, and I’m ok with that. I like to have as much of my money as possible working for me in my Freedom Fund. I have, until now, only had one credit card. It’s through Bank of America and it’s a BankAmericard Cash Rewards credit card with 1% cash back on all purchases. It has a $5,000 credit limit. I’ve been generally happy with the card, however one minor thing did bug me a bit. Within a month of opening my card, BofA started running a promotion where new members would receive a rewards card with tiered cash back of 1%, 2% or 3% depending on the purchase (general, gas, groceries, etc.). On top of that, after spending at least $500 within 3 months the new member would receive a bonus $100 cash back reward. Pretty good stuff!
Well, this irritated me a bit, as I signed up over the phone and I called less than a month before the promotion started. Nobody told me about the upcoming promotion and every time I’ve had interactions with BofA they’ve never asked if I would like this card. I called up fairly angry this past weekend and demanded that I get that card with the $100 bonus. I was told that, basically, I’d have to cancel my card and start up a new card in order to get the new terms. Apparently they cannot make a change to my account without canceling it. This makes little sense to me, and I asked the account manager I was speaking to that if I was going to take the temporary hit to my credit score and go through the process of canceling my card and opening up a new account, why wouldn’t I just go over to Chase who’s currently offering a Freedom credit card with up to 5% cash back on certain transactions along with the same $100 bonus after three months? He had no answer for me, and basically dared me to move to the competitor.
So, I did.
I just received my shiny new Chase Freedom credit card in the mail and I’m pretty happy with it so far. The online management system is very intuitive and it came with a $3,000 credit limit. Everything they’ve promised so far seems to be true and it comes with attractive terms. I’ll be enjoying my 1-5% cash back and will really be enjoying that $100 four months from now. The card also comes with a bonus 10% cash back quarterly with select retailers. For this quarter, it’s Kohl’s.
Now I have to decide whether to actually cancel the BankAmericard through BofA. I’ll probably keep it open as part of my emergency fund as a line of credit. Besides, having a low usage of available credit boosts one credit score and I usually have less than 5% of available credit used at any given time. I’ll likely be calling the customer service as little as possible as they do nothing but anger me.
I talk about credit cards on this blog rarely, but if used correctly it can be a small, but completely passive, separate income stream. I’ve already received my first $25 check from Bank of America and I’ll receive $100 from Chase in four months. Every little bit counts!
Do you use credit cards for the cash rewards?
Thanks for reading.
Please don’t get me wrong, I love your site and read it everyday, but this is the second post in a week that has bothered me.
Last week it was investing in defense contractors, profiting from the spoils of war (and taking a huge karmic hit in the process) and now it is banking with BoA and Chase? There are two of the major players in the mortgage fraud fiasco and recipients of untold billions of bailout dollars?
Do ethics not factor into your investing strategy? I’d like to see about a post on that?
Check out PerkStreet – debit card with rewards! No need to apply for credit cards to take advantage of cash rewards.
http://www.perkstreet.com
I did apply for an account and found it to be a seamless experience.
William,
You need to switch to decaf. You sound like my mom.
Best wishes,
Joe
🙂
But seriously, what is ethically wrong with trying to find a good deal on a credit card?
Mantra,
Great work! I love credit cards because they can enhance a frugal lifestyle with cash rewards and 0% APR offers. Everyone demonizes them but few understand they can enhance wealth if you practice a little self-restraint. Right now I’m using the Blue Cash Everyday card from American Express, which offers 3% cash back on food. That’s 80% of my recurring non-housing expenses, so it saves me several hundred dollars per year.
-Dividend Dude
William,
Thank you for your readership and support. I appreciate it.
I’m sorry to disappoint you with some recent articles. I’m not real sure how to respond to you. As far as investing in defense companies, I think it’s important to remember that war and defense are not one and the same. Even if we stay war-free for the next 20 years (which would be great) there is still a great need to defend our country from invaders and enemies. And because of this, as well as the unlikeliness of decades without war, defense companies will always be needed. It’s just a fact of life.
Also, another point that needs to be made is that you can find just about ANY company on the planet that somehow profits from other people’s misfortunes. If you invest in Coke, you profit from other people’s diabetes and weight gain..same for McDonald’s. Investing in oil companies? Bad for the environment. The list goes on.
That leads me to banks. If you think JP Morgan Chase and Bank of America are the only two banks in the world to profit from deals that hurt the little guy you should probably just take all your money out of your bank and rely on cash alone. I don’t mean to be sarcastic, but unfortunately certain things are a part of life.
Take care, and again I appreciate your support!
Rene,
Thanks for the tip. I’ll have to check it out.
Take care!
Dividend Dude,
Thanks for stopping by.
I completely concur with you. Credit cards can certainly enhance a frugal lifestyle by providing cash back on what little expenditures one has, but also credit cards are a great budgeting tool. I have my credit cards linked to my Mint account and all transactions are automatically sorted by expense type. Great job on having self-restraint and allowing yourself to take advantage of a wonderful program.
Best wishes!
Kyle,
Sounds like a pretty great deal! My credit cards do not carry annual fees but I’ll also never be anywhere near $650 in rewards…mostly because I don’t spend a lot of money. But, I’ll take the extra $100-200/year!
Thanks for stopping by!
Good stuff. I just signed up for the Southwest Airlines Chase card because you get 50,000 miles after any purchase. You also have to pay a $69 annual fee up front, but you can redeem the miles for $650 in Amazon gift cards. Pretty good deal.
C’mon William stop being a cry baby. I applaud Dividend Mantra for using the credit card companies to his advantage. He borrows their money short term, pays off the entire balance (thus depriving them of any interest), and then gets them to pay him cash back. Nicely done!
As far as defense stocks go…it’s a dangerous world we live in. There will always be wars and there will always be defense companies. DM also invests in oil companies and tobacco stocks. I guess you think he wishes everyone had lung cancer and the environment was ruined?
I have the Amazon Chase card, pretty satisfied with it so far.
Thanks for responding.
I guess I view it differently from you and apparently, most of the readers of this blog. I don’t see any ‘invaders’ coming to take over the USA. I see the rampant military industrial complex as a major reason why our country is in the sad shape that it is in.
Another reason we are in such trouble is the banks that apparently make policy decisions, commit fraud, pay themselves huge bonuses, while transferring their losses onto the back of the public. When you do business with these banks, you are contributing to the problem.
Are you familar with the expression, ‘Stave the Beast’? Why can’t you do your banking with a local credit union?
Until the American public takes action with their dollars, and refuses to do business with those who do not have their best interests in mind, we will continue to find ourselves in dire straights.
I am all for early retirement, but I don’t want to do it with a portfolio of missile makers and fraudsters.
So are there any companies you wouldn’t invest in? Do ethics play a role at all? Or is it strictly a financial transaction and as long as it pays it plays?
MoneyCone,
I’m glad that’s working out for you! Keep up the great work.
Take care.
William,
I understand your points. But again, if you look hard enough I think you could probably rule out every investment opportunity out there. Philip Morris produces cigarettes, but it’s up to you to smoke or not smoke them. Raytheon produces missles, but people still have to make the decision whether to use them or not. Products are not inherently evil, and ethics are a gray area.
As far as invaders go…just look at a history book. If we stop producing tanks and missles, people will just go back to bows and arrows. There will always be conflict. It’s human nature. If we stop producing defense systems, you’ll see invaders faster than you can type up a response.
Best wishes!
When it comes to credit I keep it very simple. I don’t really like these reward cards because it encourages the notion of ‘something for nothing’.
I’ve had the same card for 10 years with the same limit.
If I may chime in here –
I’m extremely heavily invested in a smaller, regional bank (think around 10 branches). They don’t have an investment arm, they’re simply a savings and loan bank, and did not have to take a penny of bailout money. I won’t personally invest in the large institutional banks mentioned above, but that being said, I can’t blame someone for doing so. The last people I blame the banking mess on are the little guy investors owning a few shares of JP Morgan or something. In fact, its probably a good play, the government has deemed them too big to fail, so you know your investment is relatively safe while you continue to collect dividends. As small time investors, we don’t make the rules, all we can do is play the game, so I think the anger here is misguided.
sfi,
Hey if that works for you, then that’s great! My “money for nothing” will be quite small since I don’t spend a lot of money. I could only imagine what high-end consumers get back in cash rewards! Of course, they’re also likely deep in debt, so it doesn’t work out quite the same.
Thanks for stopping by!
BigJ,
Thanks for stopping by. I’m definitely a “little guy” by investment standards.
How is your bank investment working out? I’ve been staying away from financials in general, but there are some attractive deals in that space. Just a little too risky for me right now.
Take care.
Hey DM,
Well, I’ve owned shares of this company for a little over 8 years now. The value of the shares has doubled, all while collecting around a 3% dividend year after year, so I can’t complain. I like these smaller banks that operate as only savings and loans banks; they’re local so they know their customers well and that makes them really good at what they do. Plus, a good number of them didn’t get in over their heads making terrible loans; most that did by now no longer exist.
Big J,
Glad to hear it worked out pretty well for you! I agree that smaller banks are better buys as they don’t have toxic loans/mortgage securities on the books, but on the other hand smaller banks don’t have the “TBTF” tag attached to them, so also something to think about.
For big banks, it seems the Canadian banks are a better bet right now, but there are still some large banks here in the U.S. that haven’t done too bad. USB comes to mind. BOH gets mentioned as a solid regional bet.
Take care!
@William: I don’t think it has too much to do with ethics, more with numbers. Well, you could take protestant ethics, but then that’s not quite the same thing either.
Kevin
I use the American Express Blue Cash card. Like you I keep no balances at the end of the month.. I love your site and wish I had started working toward freedom when I was younger. Im a 49 year old government worker with a defined Benefit pension. Im also saving a minimum of 50 percent of my salary and investing. Dividend in a Roth Ira and the balance once maxed out to a regular brokerage account. I started late but I should be very comfortable come retirement.
A good credit card to get is the Fidelity American Express card. It pays 2% cash back on all purchases.
https://www.fidelity.com/cash-management/american-express-cards
If you want to save money on dental work, a dental plan might be a better deal than dental insurance. The Careington 500 dental plan is one of the best.