As new interns, you will finally be getting paid a paycheck after four years of spending tens of thousands of dollars on your medical school education. For many of you, residency will be the first significant paycheck of your lives. Since you are getting a fresh start with residency, you should look at your current credit cards and see whether you can make any easy changes to maximize your cashback and travel rewards.

I personally put almost every transaction on a credit card to earn points. Sure, a $8 burrito at Chipotle will only get you $0.16 in cashback, but multiplied by many transactions, it can add up to hundreds of dollars over the course of a year. Plus, using a credit card is faster than cash.

It may feel like pennies of cashback per transaction, but it adds up quickly…

Frequently Asked Questions

What if I have credit card debt?

If you have any credit card debt, I do not recommend that you actively try to maximize your cashback rewards. Your focus should be on paying off your debt as soon as possible. Credit card interest rates are often 15-20% a year, and paying off these debts is a way better investment than anything you can expect in the stock market.

Will this affect my credit score?

In the short run, yes, your credit score may be affected. The credit card company will run a credit check before approving you for your credit card, which will temporarily hurt your credit score. However, in the long run, having more credit in your name is actually beneficial to your credit score. It shows banks that you can handle credit responsibly. As a rule of thumb, I would not open any new credit cards if you’re planning to finance a new purchase (i.e. a home) within the next year.

Will I spend more if I use credit cards?

Most likely, yes. You have to balance the convenience of a credit card with the dissociation between a purchase and its monetary cost when you use credit cards. Some people do not use credit cards at all (cash only) because they believe it helps them spend less.

What should I do with my current credit cards?

If any of your credit cards have an annual fee, I would strongly encourage you to cancel those credit cards. While your credit score will take a temporary hit when you close your card, it is not worth the annual fee you are paying each year. If one of your current credit cards does not have an annual fee, then I would keep it. The length of your credit history is very beneficial to your credit score, so even if you don’t use the credit card, I would continue to keep it. You don’t need to keep it in your wallet or purse; I have a stash of old credit cards that I don’t use in a drawer in my house.

Single card – Citi Double Cash or Fidelity Visa

For residents who want to only have one card in their wallet, I would recommend either the Citi Double Cash or the Fidelity Visa credit card.

The Citi Double Cash credit card pays a flat 2% cashback (1% at the time of purchase and 1% when you make credit card payments). All purchases receive the 2% cashback, and there is no limit on the amount of cashback you can earn. Most importantly, there is no-annual fee with this card. This is a great card for everyday spending, especially if you don’t want to think about using different cards for different purchases.

Citi Double Cash

The Fidelity Visa credit card is an excellent alternative for those who already have a Fidelity brokerage account. This credit card also pays 2% cashback on all purchases. The 2% is paid for all purchases, not just in rotating categories (see Chase Freedom below). Your cashback is automatically deposited into your Fidelity brokerage account. Like the Citi Double Cash, there is no annual fee. I personally own this credit card, because I have a Fidelity brokerage account.

Fidelity Rewards Visa Signature

Two cards – Add Chase Freedom

Many physicians will want just one credit card. They can use that card for all of their purchases and get a healthy 2% cashback. However, if you want to boost your cashback on select purchases, consider adding the Chase Freedom card. This card pays 1% on all purchases, but will pay 5% for purchases in categories that change quarterly. You can earn the 5% cashback on your first $1,500 in purchases in the category; after that, you will get paid the regular 1% cashback.

Here are the rotating categories in 2017:

  • January-March 2017: Gas stations and local commuter transportation
  • April-June 2017: Grocery stores and drug stores
  • July-September 2017: To be determined (“Summer Fun”)
  • October-December 2017: To be determined (“Holiday”)

You’ll also receive a 15,000 Chase Ultimate Rewards points (worth at least $150) when you sign up for the card and spend at least $500 in the first 3 months. In addition, if you add an authorized user (such as a spouse), you will receive an additional 2,500 Ultimate Rewards points (worth at least $25).

Chase Freedom

[Editor’s Note: If you use the Chase Freedom links in this post, I’ll get paid a referral fee by Chase. It helps keep the blog’s lights on. Thank you for supporting the blog! -WSP]

While the easiest way to redeem points is through cashback (1 Ultimate Rewards point = $0.01), often the best way to maximize the value of your points is through conversion to other rewards programs. You can convert Ultimate Rewards points to one of Chase’s airline or hotel partners, including Hyatt, IHG, Marriott, British Airways, Southwest, and more. Overall, noted travel blogger The Points Guy values Ultimate Rewards points at 2.1 cents per point.

Three cards – Add IHG

Many residents will travel to conferences during their residencies, so it may be worthwhile to get a hotel credit card. The hotel credit card that I use is the Chase IHG credit card.

Chase IHG Credit Card

There is an annual fee of $49, but you receive a free night voucher to any IHG hotel in the world. The best use of this annual voucher are weekend trips. For example, instead of taking a day trip on a Saturday, you can stay in a Holiday Inn hotel and stay the whole weekend. I have used this credit on hotels that would cost hundreds of dollars per night, so the card is well worth its $49 annual fee.

By being an IHG credit card holder, you are automatically upgrade to Platinum status, which will give you an additional 5 IHG points per $1 spent on IHG hotel rooms.

When you stay in a IHG hotel as a Platinum member, you receive 15 IHG points per $1 spent. By using your IHG Credit card, you receive 5 additional IHG points. In total, you receive 20 IHG points per $1 spent on IHG hotel rooms. IHG points are less valuable than Chase Ultimate Rewards points (The Points Guy values 1 IHG points at 0.7 cents), but I have been able to redeem hotels for greater than 2 cents per point in the past.

You would also receive 2 IHG points per $1 of purchases at gas stations, grocery stores, and restaurants, and1 IHG point per $1 for all other purchases. However, I would not use the IHG credit card for anything other than IHG hotels.

Summary

Number of cards Credit Card
One card Citi Double Cash or Fidelity Visa
Two cards Chase Freedom
Three cards Chase IHG

Beyond these three cards, you could add additional cards to further optimize your cashback awards. I personally have six credit cards, but there are people who have 20+ credit cards, mostly to cash in on their signup bonuses. If you are interested in more advanced credit card rewards strategies, there are many blogs dedicated to maximizing your cashback rewards. My two favorites are The Points Guy and Million Mile Secrets.

What do you think? What is your credit card rewards strategy?

18 COMMENTS

  1. I don’t use credit cards. I pretty much stick with cash or my credit/debit card. A couple of years ago I had my credit card number stolen, and it wasn’t until I lost several thousand dollars that I discovered the fraud. Whoever was using my card swiped small amounts every week at the same grocery store that I went to, so I didn’t detect it or a while.

    • I’m sorry to hear about your experience with credit cards. Certainly credit cards have their negatives, and fraud is one of them. Most credit cards have some sort of fraud protection to help you recoup some or all of your losses.

    • Fraud protection is offered by every credit card issuer because it’s a federal law; you’re legally not obligated for fraudulent purchases. The rub comes in if you don’t catch fraudulent charges fast enough, as it seems there are no hard and fast rules on notification timelines except when a card is lost/stolen and not reported which determines your max liability. Sorry for your situation; it sounds like that would be a bit tricky to catch! This is one of the reasons I personally recommend going with something like Mint to track your finances; getting in the habit of reviewing charges regularly to categorize each transaction at least makes me stop and think about what I’ve purchased and when. And see how much I’m spending in general and on what.

      Probably from using shady fly-by-night deals websites I’ve had fraudulent charges on at least 3 cards in my life. Shout out to Capital One that has by far been the best; they remove the charge and that’s it. Even shipped me a replacement for a lost card in the middle of Europe within 24 hours. Try getting cash back after being pick-pocketed. Others send documents they want you to sign and have notarized, but thus far, I’ve never been liable for fraudulent charges. I wouldn’t stay away from credit cards for this reason, personally. 1) It’s really easy to loose cash or have it mugged off of you and that you’ll definitely never see again, 2) One of my fraudulent charge situations WAS on my bank-issued credit/debit card. Still got the money returned in the same way just with a little more effort. 3) It’s my personal belief credit card companies are better at recognizing questionable charges and putting a hold on the account vs. local bank cards. IMO, credit cards offer far more protection, convenience, and rewards than cash and make tracking your finances so much easier; which also has long-term financial benefits!

      • Great insights, Westeasterly. I agree with periodically checking your account statements for unusual charges. On multiple occasions, I’ve had my credit card company cancel my card without me notifying them because they detected suspicious charges on my account. I didn’t lose anything, except I needed a new card and new number.

  2. I have the Citi Doublecash and the Chase Freedom cards myself. But recently I found myself charging everything on the Chase Sapphire Reserve card. Sure it came with a $450 annual. But all the included benefits including the extra 50% when booking travel with points really made it worthwhile.

    • I have the Chase Sapphire Reserve as well. I didn’t recommend it to new residents because of the annual fee, but for more savvy residents, I highly recommend it. I use it for all travel and dining purchases since they give triple points (equivalent to 4.5% cash back if used through the portal, and potentially 6% or more if you use The Points Guy’s valuations). I don’t use it on dining this quarter because the Chase Freedom currently has restaurants as one of its 5% categories.

      • Glad to see the Reserve getting an honorable mention. A $450 fee is a tough sell, but 3x points on travel and dining in addition to $300 travel reimbursement/yr (plus the 3x travel points) leaves a fee of $141, $100 of which can be gained by doing the Global Entry/TSA Pre Check reimbursement every 4 years. That’s all ignoring the sign-up bonus as well (currently 50K valued at $750 in the portal, or $37,500 worth of spending on the Citi card that offers no sign-up bonus but with no fee). Assuming a resident spends at least $300 on reimbursable travel a year, the bonus alone covers the $141 fee for 5 years (almost 7 years if you also count the Global Entry reimbursement every 4 years) even with no other spending/points on the card. It also does seem widely regarded that Ultimate Rewards points are some of the most valuable if used for travel through the portal with competitive prices (or transferred directly to airlines) and never expire. Chase is also pretty good about being generous about what both “travel” and “dining” includes. For residents, it means all those post-call McDonald’s stops and Uber nights out commiserating over life are rewarded with bonuses. Furthermore, residency and job interview travel generates bonuses in addition to visiting back home and residency-reimbursed conference trips. I think I would have been generating more bonus points spending in residency than I do now (if the card had existed at the time).

        Combined with the fee-free Chase Freedom to maximize bonus categories at 5x, points can be pooled into the Reserve to make them go further (extra bonus on redemption with the Reserve account). It’s at least an honorable mention strategy when you consider how easy it is to make up for the fee between the two cards and beyond. Citi Double Cash would be my pick for the truly frugal resident that cooks all their own meals, lives close to home, and doesn’t travel hardly at all (air/hotel/taxi(Uber/Lyft)/rental cars) and doesn’t plan to attend any conferences. Which is of course the smartest way to go in the end, just probably not the reality for most residents living far from home and working 80 hours/week (hard to find time to cook!)

        • Thanks Westeasterly for your comment. I definitely tried to focus on keeping my guide as simple as possible for new residents. I personally use your exact strategy, where I have CSR for travel and dining and Chase Freedom for bonus categories. I also have Chase Freedom Unlimited for everyday purchases (1.5% cash back, but with the 50% bonus with a CSR becomes at least 2.25% when redeeming for travel).

          The great thing with my strategy is that there is no cost to starting with the credit cards I recommended. As residents become more advanced in their credit card rewards strategies, they can keep these cards in their sock drawers, as they have no annual fees. The IHG credit card has a $49 annual fee, but that is easily recouped if they stay at least one night in a hotel room each year.

  3. Nice round up. I use the Citi Southwest card to get a companion pass. Since we have a high spending level and travel a lot it makes sense. Still reading your post makes me wonder if the Fidelity card is the way to go. Thoughts to ponder on….

  4. I would also consider AMEX blue preffered, it has a $95 fee, but gives you 6% cashback on groceries up to $6,000, ($360 cashback for the year). As a starting physician you are going to want to cook more, eat out less, travel less. They also usually have some sort of bonus sign up. Groceries should be a substantial fixed expense, more so than traveling. This card motivates me to cook more, which also saves money.

    • AMEX Blue Preferred is a great card, but I hesitated to include cards with annual fees. I made an exception for the IHG card, where you get a free night anywhere in the world in exchange for the $49 annual fee.

    • Bonus category cards are tempting but only if they fit into your lifestyle. In the case of Amex and most others (Chase Freedom included) for “grocery” stores, this means only “pure” grocery stores. No superstores (Target, Walmart), club stores (Costco), convenience stores/bodegas, specialty grocery stores, etc., etc. Hopefully you have some low cost stores in your area that count, but for me it means shopping at stores whose products are often a 6% plus premium to Walmart, Target, Sam’s, or Costco. Food Lion is about as low-class as it gets and yet the prices are still significantly higher than Walmart. Spending more to “save” at least comes out as a wash for me. Give me a straight 2% back off everything, or a program like Ultimate Rewards where points are at least worth more than 1x. Now if you’re going to buy imported, organic, non-GMO, free range apples at Whole Foods anyway, 6% definitely beats nothing. 😉 Personally for those with limited incomes and debt who need to save, I would argue forming a habit of buying groceries at the lowest price far trumps saving 60 cents in credit card rewards on every $10. Just shop at the place that has it for $8 and still save an extra 1-2%.

      The one exception for me was the Sally Mae Barclaycard which had a 5% category that included superstores. Unfortunately, it died.

      • Good points. You do need to look at your general spending patterns. If you do all of your grocery shopping at Costco or Walmart, than the BlueCash may not make sense. But if you ordinarily get your groceries at a grocery store like Giant or Kroger, then cards like that may make sense. I wouldn’t switch my grocery shopping patterns from Walmart to Stop&Shop because of the credit card rewards; you should tailor your credit cards to your grocery shopping patterns.

        • Certainly good points if you don’t shop at traditional grocery stores. I live in a moderate sized town and have access to Trader Joe’s, aldi, Publix, Kroger, in a 5 mile radius. I have found prices to be competitive to walmart. But if you used Walmart certainly don’t go for this card

  5. We just have one credit card, a BofA Cash Rewards Signature Visa. I think it offers something like 2% cashback on all purchases, 3% on gas. We currently don’t have any travel rewards cards.

    I think one thing you mentioned in your article is spot-on, especially for med students and residents. If you have credit card debt, or a history of poor credit card usage, then you’re better off paying down your balance. Once you’ve improved your financial behavior (i.e. paying off balances in full every month), then cashback and travel hack away.

    • I have the BofA Cash Rewards as well, although right now it sits in my sock drawer. 3% on gas is great, especially when you redeem into a Bank of America account, where you can get a 10% bonus, making it equivalent to a 3.3% cashback rate. It has no annual fee. I didn’t include it in the post because its standard rate is 1%, with 2% for groceries and wholesale clubs, and 3% for gas. I felt that a 2% flat cashback rate made more sense as a first card.

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