Become a smart credit card user: Maximize cashback

Smart credit card Last time, I introduced the concept of five grouping (segmentation) of card customers, which is used as part of the customer strategy of credit card companies. Various companies perform such customer segmentation and provide services and products with marketing strategies suitable for each group. As a customer, instead of buying as offered by the company and as proposed, you are proactive about which segment you want to belong to and whether your policy matches the products and services provided by the company. I also wrote that it may be necessary to think about it.

This time, we will look at the most profitable group among the five groups, which is called the “wealthy & high satisfaction segment”. This group is well-managed, uses credit cards for most of their spending, and wants rewards such as points and cash back. I hate revolving high interest loans because my balance is paid out every month. This segment doesn’t use revolving credits so much, so you can’t expect interest income, but you can expect Interchange Income (commission income) from the shop side because you only make regular purchases with a credit card. It is a customer that card companies want to cherish. We offer attractive rewards because card companies know that rewards are essential to attracting this segment.

Benefits evolve

How many credit cards do you have? How many years have you been using the card? If you find a credit card that you like, many will continue to use it. There is no problem in itself, and changing the card company on the contrary has a negative effect on the credit score. However, if you think of a credit card as just a payment tool, it may be a bit of a waste.

If you’re in the Wealth & High Satisfaction segment mentioned above, it’s best to enjoy the benefits offered in that segment as much as possible, and even if you’ve already received such benefits. , If you have other cards that offer better benefits, it’s worth considering switching.

Consumer Reports is doing some interesting research and I would like to share it. According to this research conducted in 2016, 20 million people in the United States have never changed the card they use all the time, and 25 million people have changed it but have used the same card for the past 10 years. The result was a person. Credit card companies continue to offer new cards and perks. Maybe it’s time to review it now.

There are many card benefits with added value such as various insurance and warranty (see below), but here we will consider cash or points and mileage that are as valuable as cash.

Cash back is basic

This mechanism of cash return called cash back or cash reward, the one that can be checked after a certain amount of money, the one that transfers to the bank, or the one that credits back (refunds) to the statement of the credit card is also common. .. Most of them will cash back 1% to 2% of the purchase amount with a credit card, but depending on the category (grosserie, gasoline, travel related, restaurants, etc.), there are also cards that give 6%. In addition, the categories and shops that can obtain a high cashback rate may change with monthly promotions.

How cashback works:

Purchase amount with card ⇒ About 1% to 6% of it will be returned in cash

Frequently, the products and services that can be converted for mileage and points are often limited, and the value of mileage and points may vary depending on the products and services that are converted. In general, I think that it is better to get cash (cash back above) in terms of usability and the conversion rate. Cashback is a straightforward scheme in which you purchase and return a certain percentage of cash, but mileage and points have an accumulation rate at the time of purchase, a conversion rate after that, and two stages, and if you use a credit card It’s hard to see how much value will be accumulated in the end.

How mileage and points work:

Purchase with card ⇒ Accumulation of mileage and points (accumulation rate) ⇒ Shopping with mileage and points (conversion rate)

Therefore, the popularity of cards with straight forward cash back is increasing, and each company is trying to provide more delicious cash back. According to Consumer Reports, as of 2013, 25% of all cards had cash back, but now the ratio has risen to 50%. Now that we are in the age of cashback cards, we will examine your consumption pattern once and compare it with the credit card benefits in the streets to find out if there are any cards that will give you more cashback. I think it’s worth it.

Cashback Calculator

What’s great, Consumer Reports has created a calculator that makes this easy. With a database of benefits of more than 300 cashback credit cards (card cashback%,% information by category, annual membership fee, etc.), if you enter your monthly spending pattern in monetary amount, how much will it be per year? Calculate in an instant whether you will get cash back or how much it will be in 3 years (the value for 3 years is to see the part that can not be grasped by the difference of only 1 year, such as free annual membership fee for the first year). increase.

For example, the case below is for a household that pays just under $ 3,700 a month with a card. Gasoline, Grosserie, restaurants, and travel are separate because many cards offer higher cashback rates than normal use. Other than that, it is Everything Else, but in addition to what you pay regularly every month, you can also include insurance premiums and taxes that you pay only once or twice a year, if you are paying with a card. can do. You can also compare it with the card you are currently using.

In the case below, the card you are currently using is the First Bank card with a cashback of $ 1,241 in 3 years. This results in a cashback of over $ 3,000 in 3 years if you switch to up to 3 cards from the top right. Whether or not to actually switch is a powerful comparison, although it is necessary to look at the conditions and other benefits in a little more detail.

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