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Friday, March 6, 2009

More ways to save. . .

A week or two ago, I noticed that my ING Direct interest rate had decreased from 2.2% to 1.85%! Still better than the almost zero percent I receive on other accounts, but discouraging all the same. There are other online and bricks and mortar banks with whom I could stash my slowly growing savings accounts, but I really do love the online environment at ING.

This did, however, start me thinking about other ways I could save money. One way is with 'rewards' credit cards. Since I'm pretty sure I've kicked the credit card habit. I pay my balance as soon as I possibly can---in full. Sometimes this takes a couple of months, but I've now come to a point where even having a $100 balance on my credit card makes me uncomfortable. Unless some huge tragedy occurs that forces me to put my LIFE on credit I don't foresee running a monthly balance regularly.

With that in mind, the rewards credit cards seem to be a nice deal---provided you use your credit card a LOT, AND pay it off every month. Here are three programs I recently came across on a CNN Money blog.

  • Wells Fargo: My mortgage (well, the first mortgage, anyway) is held through Wells Fargo, which has a rewards credit card with which I could earn 1% of my purchases, to go toward my mortgage payment. Of course, even if I spend $200 a month using my credit card, that's only $2 extra toward my mortgage---I suppose every little bit helps, though! Also, it occurs to me that I'd be 'earning' around 6.9% on that $2, since that's what my interest rate is on my mortgage.
  • Fidelity: Fidelity Investments has a program in which credit card holders can earn 2% of your purchases, which can then be added to an IRA, a 539 (college savings) account, or any other Fidelity investment vehicle. This means I'd be earning $4 a month on my $200 of purchases, which could then in turn earn interest.
  • Schwab: Perhaps the best deal is on Schwab's 'Invest First' credit card, in which 2% of your purchases is deposited into a Schwab investment brokerage account. There are no fees, no minimums, no caps, AND you can either choose to access the cash directly, or use it to make trades (there are trading fees, of course)! This seems to have the most flexibility, in my opinion.
Of course, the key to any of this is that you pay your balance off each month---if you don't, the interest rates (between 10-22% according to the blog article) will destroy any potential rewards. Note that I'm not suggesting that anyone apply for a credit card and use it regularly, unless they have self-control and won't get into trouble. Research does show that we spend more money when we use credit cards, and this is what these companies are counting on. I'm not sure yet that I'll take advantage of these rewards deals, but they're in the back of my mind----an extra four or five dollars a month might not be worth it----but the more my ING Direct interest rates drop, the more likely I'll be looking for other ways to 'earn' interest within the parameters of my budget.

6 comments:

Jennifer said...

ING is actually down to 1.65% as of Tuesday! If one of my paid off cards had rewards, I would consider using it for every day purchases, but as it is my only card with rewards still carries a balance. And I'm not so sure I'm to the point where I could trust myself not to buy some extras just because I "can."

Sharon said...

Thanks for reminding me about this... I've been meaning to check my reward balance! I bank with USAA and only use Debit (kicked the credit habit ala Dave). The great thing about USAA is that they give us reward points on our DEBIT card if I choose Credit when I swipe it. So, I don't have the risk of CC debt, but I get the benefits.

Not sure if other banks do this as well, and USAA is only available if you have a military connection, but might be worth looking into!

Thanks again for the good post.

Finally Frugal said...

Aaack! You're right, Jennifer, it is now at 1.65%!! That's two decreases in a month, if I'm not mistaken. Well, I did look into FNBO which I believe is now at around 2.6%. I'll consider it, but with my still relatively measly savings (less than $4,000 total) it won't make much different. I'm certainly bummed about this, though, as I've been having fun watching those little $2 and $3 deposits increase my savings, even if only a little bit!

Gopal G. said...

Great indeed! Money saved is money earned. Your appreciation of the reward system for prompt credit card payments is absolutely right. Avoid or minimize credit card usages.

Add me as your friend please. I am following you in my blog.

Trevor @ Financial Nut said...

I use Fidelity right now and hadn't realized that they had a card like that. That's great news! Thanks for sharing. I'll look into it right away.

See? This is why reading others' personal finance blogs is so great!

anita said...

My hubby is so disciplined when it comes to credit cards. We own several small businesses and he pays for almost everything with credit cards, then pays the bill off every month. We have so many frequent flyer miles we are able to take trips all the time and never have to purchase the tickets with cash. He just complains that he wishes we could pay our property taxes with his credit card, too!

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