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Considering Credit Card Options

October 14th, 2007 at 03:32 am

Back around the beginning of the year, I got my first "rewards" credit card from Chase--their credit card. It gives me 1% back on most purchases and 3% back on purchases made through (I've spent $742 there so far this year). I put all my non-bill expenses on the card--about $1500 per month. After every $2500 put on the card, you get mailed a $25 gift certificate to use at I've earned 6 ($150) so far this year.

I saw some ads for the Chase Freedom card, and began to wonder if that would be a better deal--3% back on the top three places you spend each month--which for me would be grocery and pet expenses (about $800/month) and the third category would vary depending on whether there were car repairs or doctors bills, etc. I figure that if I'd been using the Freedom Card, I'd have earned $225 in gift certificates so far. The freedom card has a bit higher rate than the card, but since I pay in full every month, that doesn't matter. I started the application process and have a form to complete and send back to them, but then I found yet another alternative deal.

The third alternative is through my mortgage company, which is offering a 1% rebate back that goes towards paying down the mortgage. Since it's 1% on everything, that's less on rewards--but nice to have it go directly towards paying down the mortgage.

I suppose the most advantageous thing to do would be to continue the application for the Chase card to get the 3% back, then take the rewards in cash, and send the cash reward to my mortgage company as an extra principal payment when it arrives. At the rate of $225 extra every 9 months, each payment knocks about 2 months off my $550 mortgage over the course of time. Keeping it up would knock off over 3 years off the mortgage and eventually saves over $12,000 in interest payments.

(I just learned how to calculate amortization schedules, so I've been having fun calculating alternative scenarios.)

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