Today, I have applied and been approved for the American Express Blue Cash Preferred credit card. This is my fourth AMEX card in total. It is only my second personal card. The other two cards are business cards. We will go over why I chose to get this card.
I currently have the AMEX Business Gold Card, AMEX Hilton Honors Business credit card, and the AMEX Green card. In terms of credit, I don't "need" the Blue Cash Preferred card. Cards such as the Green and Gold adjust their spending limits based on your trends. Typically, your spending limit will be 3X what your average spending was over the past 6 months. So, if I typically spend $2000 per month on the card, then my spending limit would be around $6000. In time, if my spending increases or decreases, the spending limit will adjust.
One disadvantage to the charge cards like the AMEX Green and Gold is that they do not deal with sudden spikes in spending. For example, I could not put $8000 on my card based on $2000 in monthly average spending. I would only be approved for a balance as high as $6000. But, one does not always know what that spending limit is as it fluctuates over time. It adjusts to your spending patterns. And, if your spending deviates from that pattern, then you may have a transaction declined.
I faced this problem when I first got the AMEX Green card. As there was no spending history for me, my spending limit started off at $1200 in the first month. For daily spending, this is fine. However, if I were traveling (it is a travel card after all), then this could be a problem. As my first six months of spending data accumulates, they will adjust my spending upwards. Unfortunately, my spending limit would be insufficient to buy plane tickets abroad, for example. At least, it would be with my current spending limit.
AMEX credit cards, such as the Blue Cash Preferred, have set credit limits, unlike their charge cards. If they give you an $8000 credit limit, then you will always know exactly how much you can spend. This is an advantage that credit cards have over charge cards. They have a fixed spending limit that allows you to plan for large purchases without the guesswork.
The major factor for me in applying for the American Express Blue Cash Preferred card are the rewards. This card fills a hole in my spending category, which is Groceries. Currently, this card pays 6% cash back on groceries, 6% cash back on streaming services, 3% on transit, 3% on gas, and 1% on everything else.
Until now, we did not have a consistent reward card for groceries. One alternative is the personal AMEX Gold Card, which has 4 points per dollar on groceries and dining. However, the annual fee for the Gold Card is $250 compared to $95 for the Blue. Although, the value of AMEX Membership Rewards points is roughly $0.015 each, it adds up to the same 6%. However, that value is only if you use the points to transfer to airlines or hotels. If Membership Reward points are used as cash back, then they are only worth one penny each, meaning 4%. Therefore, we realize greater value with the Blue card.
As soon as we receive the physical Blue Cash Preferred cards, we will use them for those top categories: groceries, streaming, and gas.
The Green card is best suited for restaurants, travel, and transport. All of these get 3X points. Given the potential value of transferred points, we will continue to use the Green card for all other spending categories not covered by our cards, which are 1X points.
Business subscriptions and expenses are going on the AMEX Business Gold Card. We get 4X on some of that, not all.
We have other cards, such as the Chase Freedom Flex, Discover it, and Apple card which also have rewards. The disadvantage of the Flex and Discover cards is that they have rotating categories paying out 5% cash back. Therefore, the rewards aren't consistent every quarter. The Apple card only pays 2% cash back when using Apple Pay, and 3% cash back with select vendors. Although, 1% to 2% cash back is better than no cash back, it's hardly exciting.
We don't imagine we'll get rich from the cash back. That's silly. It's just a way to offset some of the cost of our living expenses. If you spend $100 in groceries each week, that's $5,200 per year. At 6% cash back, that's $312 in cash back. That's three weeks of groceries.
Ultimately, if you are paying cash for things, you are losing out on discounts. Saving 1% to 6% over a lifetime can add up to real money. Let's say you spend $25,000 per year with credit cards for 20 years. That's $500K. Getting 1% cash back would yield $5,000. Imagine you get an average of 3% cash back. That's not nothing. Sure, it takes 20 years. But, you're going to spend money. You're going to live 20 years. You might as well get something for it.
With the AMEX Blue Cash Preferred card, we expect to boost our credit card rewards game by using it to focus on groceries, streaming, and gas. The only drawback to all of this is that one needs to remember what card to use for what type of spending. It would be more convenient to use one card for all spending. But, that approach leaves money on the table that we could use for other things.
