Sunday, March 23, 2008

Personal Finance Simplification - Credit Card Consolidation

During March, 2008, I am working towards consolidating our bank, credit card and brokerage accounts. Last week, I shared our progress on reducing bank accounts. This past week I have been working primarily on reducing our credit card accounts. Our goal is to get to and maintain two cards, one for each of us. For reference, we use our credit cards for convenience. We pay off the balance each month.

Over the past year, we have already been consolidating credit card accounts. We've already eliminated new cards from our bank, stores or brokerages. Here is a summary of the remaining accounts, my analysis, and the decision:

  • Visa - This is my wife's credit card and is a platinum card with additional benefits such as reward points, rental car insurance, and extended warranty insurance.

  • Discover - This is also a platinum card, which I have had quite a while. Discover is the original cash back card, although the levels are relatively low, initially at 1/2% and up to 1%, with monthly specials at 5% for certain purchases. It also has additional benefits such as rental car insurance.

  • American Express - In 2005, I applied for a True Earnings card through Costco since American Express is the only credit card they accept. The card provides cash back at 3% for gasoline and restaurants, 2% for travel and 1% for everything else. The annual fee is waived as long as I am a Costco member.

  • To maintain credit ratings for both of us, we want to each person be the primary account holder for one credit card. Since the Discover and American Express cards are both in my name, the elimination choice was mine to make.

    I decided to keep the American Express card. While Discover was a Platinum card, it did not have any benefits above the Platinum Visa card. Also in my experience, Discover is not accepted outside of the U.S. While the American Express card does not have Platinum benefits, it does have better cash back rewards, and can be used at Costco. Once I receive the Discover cash back payment, I will cancel my Discover account. In addition, we won't add a new credit card, unless we plan to cancel an existing one.

    For more on New Beginnings, check back every Sunday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

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