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.
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
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.
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.
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).
[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.
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.
|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?