Happy New Year! It’s time to shuffle our wallets around to take advantage of 1st quarter 2012 cash rewards credit cards bonuses. Since many credit cards now offer cash back on a rotating quarterly schedule, we have to reorganize each quarter to make sure we get the best cash back.

You know how it works: switch out the the 2011 4th Quarter 5% Rewards and maximize your cash rewards for 1st quarter 2012 to make sure you have the right cards, you are signed up for the 5% promotions, and you know where to use them.

1st Quarter 2012 5% Cash Rewards Credit Cards

Chase Freedom. The Chase Freedom card is bringing back gas this quarter! Another one I’m really excited to see on the list is Amazon.com! Too bad they didn’t add it for the holiday season last quarter, but it’s still a great Chase Freedom 2012 reward. The 1st quarter 2012 Chase Freedom 5% categories are:

• Gas Stations
• Amazon.com

See the entire 2012 Chase Freedom Rewards Calendar.

Discover More. The Discover 5% cash back is also bringing back gas for 1st quarter 2012. In addition they are adding entertainment to the list. The 1st quarter 2012 Discover More 5% categories are:

• Gas Stations
• Museums
• Movies

See the entire 2012 Discover More Rewards Calendar.

Citi Dividend. It looks like Citi is making the most of a popular New Years resolution: fitness. If you can prepay your fitness club membership for the year, it’s going to make sense using the Citi card this quarter! The 1st quarter 2012 Citi Dividend 5% categories are:

• Fitness Clubs
• Health Care
• Utilities

No Sign Up Needed

And as always, here are the easier cash back categories, since you don’t need to sign up:

Grocery Stores. My favorite card is still the American Express Blue Cash Preferred Card which gives 6% cash back on groceries.

Gas Purchases. The Pen Fed Platinum VISA gives 5% cash back for pay at the pump gas purchases. If you aren’t into switching around your quarterly cards above, you can keep this one in your wallet all the time.

Restaurants. I’m on the hunt for a new card for restaurant purchases. The Citi Forward caught my eye. They offer 5 ThankYou Points for every $1.

Target Purchases. Target purchases will keep going on the Target 5% discount credit card.

Wireless and Office Supplies. Wireless and office supplies get charged on the American Express SimplyCash Business card to get 5% on both of those categories.

Costco. We’re doing a new twist at Costco. After showing our TrueEarnings Card from Costco and American Express as our membership card, we put our purchases on the Fidelity Credit Card for 2% cash back.

Everything Else. All other purchases are now going to gift cards purchased on our American Expess. If you aren’t into the gift cards, you can put the rest of the charges on the Sallie Mae Card for 2% cash back.

How to Get Your 5% Cash Back

As a reminder, here’s my checklist for rotating cash back programs:

1. Sign up for all of the new quarterly cash back programs, even if you don’t know if you’ll use that card. To sign up, just log in to your account online and select the 1st quarter 2012 5% cash back information. In order to earn the 5%, you have to enroll in each program quarterly.
2. Write which categories to use each card for using a marker on the front of the card. It works really well to keep the cards straight!
3. Add your cards you’ll be using this quarter to your Envaulted account.

Sign Up Bonus Offers

If you don’t have the 5% cash rewards cards I’m using, here are the ones currently offering sign up bonus offers:

• Chase Freedom $200 Sign Up Bonus
• Citi $100 Sign Up Bonus
• American Express Blue Cash $150 Sign Up Bonus

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Two readers, Kelly and Barbara, are taking the 6% from Blue Cash Preferred Card from American Express straight to the bank, literally!

Barbara first came up with the idea to cash out the gift cards for actual cash instead of using the cards for spending in our American Express 6% Cash Back Q & A.

After they reported back on their test runs at the bank, I’m more than excited at the potential this card has!

Cashing Out at the ATM

Kelly was originally working on using the gift cards for large payments but couldn’t resist the challenge of cashing out the gift cards at the ATM. Here’s a summary of Kelly’s adventures:

• Kelly bought a $500 PayPower brand gift card with her Amex Blue Cash Preferred at the grocery store (Safeway) to earn 6% cash back.
• She activated the gift card and established a PIN number.
• She cashed out the gift card at an ATM, paying a $3 ATM fee and $1.95 to PayPower.

Her comments:

In my learning process I ended up making two withdrawals and paying the fees twice. Keep in mind that even though you loaded the card with a value of $500 you’ll probably only be able to withdraw $480 at the ATM because most ATM’s only allow you to withdraw in multiples of $20 and because there has to be enough money on the card to cover both the ATM’s fee and PayPower’s ATM withdrawal fee….
Also, with the PayPower cards they require you to provide your Social Security number to them and from what I’ve read looks like you’re only allowed one PayPower card per person. That’s the other reason I think I’d have trouble repeating this, if I tried to buy another PayPower card I think I’d have trouble with PayPower’s verification process.

I promised Kelly that next time I’m at the grocery store I’ll check to see which brand of gift cards allow ATM withdrawals in our area so we can help Kelly expand beyond the PayPower cards. If anyone else has names of other gift cards that allow ATM withdrawals let me know and we can start a list.

Cashing Out with a Cash Advance

And I’m really excited to report that Barbara is back from her mission and has another way to empty the gift cards: cash advance. Here’s a summary of Barabara’s adventures:

• Barbara bought a $500 Visa prepaid card with her Amex Blue Cash Preferred at the grocery store to earn 6% cash back.
• She paid a $3.95 activation fee.
• She took the card to the bank and asked for a $498 cash advance. She kept $2 on the card to cover the cash advance fee.

Her comments:

In less than five minutes, I had $498 deposited to my account. Then I came home and checked the account online and for whatever reason, Visa did not charge me $2 so I have $2 remaining on the card. Glad I did not cut it up.

I’m glad you didn’t cut it up either! We found the easiest way to empty out small amounts left on various cards was to just add them to our Amazon account for the holidays.

Let’s Do the Math

We covered the basics of the American Express 6% Cash Back Credit Card when buying gift cards for the purposes of spending. Now let’s take a look at the math for cashing out the gift cards instead:

• Earn 6% cash back on the gift card purchase at the grocery store.
• Pay a $3.95 activation fee, and possible $2 cash advance fee.
• Earn $30.24 in cash back, less $5.95 in fees.
• Pure profit for each card: $24.29
• Multiply and repeat: ???

Wow. I’m only imagining at this point, but using just a portion of a $15,000 credit limit (saving some for actual groceries and other purchases), you could buy 20 cards a month for an extra $485 per month in free money….

And this is before we even talk about the gas rewards!

Blue Cash $150 Sign Up Bonus

This card just keeps getting better. American Express increased the sign up bonus for the American Express Blue Cash Preferred card to $150. Just spend $1,000 in the first 3 months… which shouldn’t be too hard now that we can cash out the gift cards!

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We’re starting this week off with some Free Money! FedEx and American Express are teaming up to offer a $25 gift card just in time for some holiday shopping.

The gift cards are part of Small Business Saturday, the day after Black Friday, to encourage you to shop at small businesses.

Mark your calendar for tomorrow morning to pick up one of the $25 gift cards!

How to Get Your $25 Gift Card

1. Visit FedEx’s Facebook page on November 1, 2011 at 1pm EST.
2. Register to receive a $25 American Express gift card.
3. Use the gift card on Small Business Saturday, November 26, 2011!

Terms and Conditions

• Gift cards are first-come, first-serve.
• Cards will be shipped to the first qualifying 30,000 consumers in time for them to shop on November 26.
• Only one Shop Small Gift Card will be sent to each Facebook ID that registers.

More on Fedex Shop Small

Stacking the offers. The gift card is in addition to the $25 you can get from American Express for Small Business Saturday.

Source: Thanks to Jonathan at My Money Blog for the scoop!

We’ll remind you on Facebook tomorrow as soon as the gift cards are available!

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As we convert to our new favorite card, the Blue Cash Preferred Card from American Express to take advantage of the 6% cash back, I discussed many of the ins and outs of this card with readers as we all learn how to maximize our cash back.

We started with an overview of how to get the American Express 6% Cash Back Credit Card & $100 Sign Up Bonus and use it for grocery store purchases, gift cards, and prepaid debit cards.

Since American Express reports cash back one statement behind, we had to wait until we got our second statement to confirm many of our cash back purchases.

American Express 6% Cash Back

Here are some of the questions and answers about the Blue Cash Preferred Card that might be helpful to maximizing the profitability of this card:

Does American Express payout in Membership Reward points or straight cash? – Wayne

Hi Wayne,
The rewards were based in dollars that I could use to purchase gift cards or as cash back. The cash back was available in multiples of $25 which was applied as a statement credit when I redeemed it.

I signed up for the AMEX Blue Credit Card for the groceries cash back. Thanks for the tip. My question is, what qualifies as groceries? I’m assuming it is by the store. What about a place like Walmart, Costco or Target that sells Groceries and regular stuff?

If it is by the store, then I am assuming (and you may have already written about this) that if my grocery store sells gift cards to Amazon, etc. that I can parlay my 6% cash back into non-grocery items that way. – Rory

Hi Rory,
Glad you like the amex card! I too am loving the 6% cash back. We have determined that it is coded by store. I looked at my account, and Costco doesn’t count (it shows up as Wholesale Stores). I haven’t tried it at Walmart or Target yet, but I have a feeling those are also probably not coded as grocery stores.

As far as your grocery store selling gift cards- yes, that’s what I’m doing, Amazon gift cards, restaurant gift cards, and the generic visa gift cards to use everywhere else.

Madison, can you confirm that you have already received the 6% cashback on the purchases where you bought the $500 Visa card at Grocery stores? I’ve only had this now for one statement cycle and in the last statement I did get 6% back on my purchases at Grocery stores but I did not make any purchases of gift cards during that cycle. I’m trying to arrange a very large payment with the $500 Visa cards… I feel like it’s a little risky to be sure I’ll get the cashback from American Express until I actually see the BlueCash gets credited on the purchases of Gift Cards I made at Grocery stores. - Kelly

Hi Kelly,

I just got my second statement in the mail this week, and I can confirm that all $1,286 of my grocery store purchases from my first statement, which included my first 2 $500 gift cards, earned $77 reward dollars, all at 6%!

For the record, both of those purchases included gift cards and groceries in the same transaction.

When I login to my account online to check the recent activity, you can expand the store purchase for more information. When I do that, I see the purchase labeled like this – Category: Merchandise & Supplies – Groceries.

I think the purchase category depends more on the actual store than on what you purchase.

I am looking at the AMEX card that gives 6% back at grocery stores, not that we buy that many groceries, but we do buy other things. I looked at our Safeway yesterday and they had tons of gift cards along with the Visa PrePaid Credit cards in amounts up to $500. I didn’t get much info b/c the small print was folded up on a white piece of paper inside the packet and since I wasn’t buying it, I did not feel I should tear it out. However, it did say on the outside of the packet I could add monies to it once I had used all the monies. That defeats my purpose of getting back 6% each time I buy in $500 increments.

Then I stopped by my bank to see if I could use it as cash and everyone there was uncertain. They thought I might be able to use it at their ATM (not positive, though) and they did not know if I could take out the entire $500 at once. I was thinking if I bought a bunch of these things, it would pay me to use them to pay everything, but I may be dreaming in lala land. Can you please help me? Thanks so much for your time. – Barbara

Hi Barbara,
Your lala land sounds fantastic! I think you might be onto something great here. You’re right, you don’t want to add money to it since you would miss out on the 6% cash back.

My husband and I have been stocking up on the gift cards every time we’re at the grocery store, and we now use them for almost all of our other purchases, but cashing them out at the ATM is another added twist I didn’t think of.

I pulled out the last few cards I bought, and one of them doesn’t look like you can cash it out at the ATM, however, 2 of the other cards do allow ATM withdrawals. One has a small fee for the ATM withdrawal, and the other says ATM withdrawals are free!

If I were you, I’d go ahead and purchase just one and do a trial run at the ATM. If it rejects it, then just spend the $500 on regular purchases. If it accepts it… I think you just found new part time job driving between the grocery store and the ATM every day. I’ve noticed that ATMs have different withdrawal limits. Our local bank (which has free ATM withdrawals) would allow a $500 withdrawal, so you might need to look around in case yours has a lower limit.

Good luck! I can’t wait to hear how it goes!

What other tricks, twists, and tips have you discovered with your American Express 6% Blue Cash card?

More on the Blue Cash Preferred Card

• Emptying Your 6% Cash Back via ATM and Cash Advance
• How to Stack Gas Rewards on American Express for Free Gas
• American Express 6% Cash Back Credit Card & $150 Sign Up Bonus

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A frequent question I see from readers is about the impact of credit inquiries on your credit score. How much do inquiries matter? I just applied for a credit card, how long do I have to wait before I can I apply for another one? I will be buying a new house soon, should I open a new credit card?

We’ve talked about credit scores before, but let’s dig deeper into the credit inquiries.

Why You Shouldn’t Be Scared of Inquiries

Inquiries on your credit report are a tool. They’re an indicator. They aren’t evil, and you should use them to your advantage, not be scared of inquiries and avoid them at all costs.

I’m an extremist when it comes to credit cards, we had 89 credit cards as of my last count, but once you understand how inquiries work, you’ll find the power to make good decisions with your inquiries whether you have 1 credit card or 5 credit cards.

How Inquiries Impact Your Score

Inquiries are not black and white. They are part of the mathematical formula that determines your credit risk.

Impact on Score. Credit scores are routinely modeled to weight around 10% of a score model to inquiries. However, 70% of the score is made up from payment history, utilization and balances. A late payment or delinquency on your credit report will drag your score down much more than an inquiry. If you are focusing on maintaining a stellar credit score, you should focus first on the areas of the score that are weighted most heavily.

Inquiry Maximums. Many models of credit scores use tiers to weight the inquiry portion of your credit score. For example, some tiers max out at 4 inquiries. If you have 4, 5, or 20 inquiries, it’s going to have the same impact on your score. Many models I have seen also diminish the impact of inquiries both over time and on the weight of the impact with each added inquiry.

You Don’t Need Perfection. I get it. The A-type personality in me agrees with all of you who think achieving a perfect credit score is something great. But let’s think school for a moment. In school, a 93% got you an A, and the A was just as good as a 100%. As long as your credit score is good enough to qualify for the best rates, perfection isn’t going to reward you any more. In fact, what if I told you that you can sell the other 7% for cash? (More about that below.)

Yes, inquiries do impact your credit score. But like most things in life, moderation is the key.

Tips to Manage Inquiries

In an effort to keep our credit score strong, here are some of the tips that we use when it comes to managing inquiries.

Rotate Spouses. Since the impact of inquiries fades after about six months, I often apply only for cards in my name for six months, then switch to my husband for six months. That way, during any part of the year we usually have one credit score that isn’t being used and is available for any unplanned needs. In addition, for companies that routinely check your credit score, like insurance, they’ll often use only one score, so it comes in handy to have one spouse with excellent credit if the other spouse doesn’t.

Rotate Credit Bureaus. Many companies still only check one credit bureau during an application. When I used to monitory my score more closely, I’d keep a log of which companies used each credit bureau. Then, when I wanted to apply for another set of cards, I’d spread the inquiries out.

Bunching Inquiries. I’m still a fan of the old App-o-rama from years ago when we would apply for about 2 dozen new credit cards in one sitting. The credit bureaus didn’t update as quickly and often didn’t see any inquiries made that day. While the reporting is quicker now, I still notice that many inquiries don’t show up for at least another day, so I still bunch a handful of applications into the same day. An added bonus, is that the impact of all the inquiries often falls off the report at the same time giving you a fresh slate to work with.

Price Your Inquiry. If you calculate the value of an inquiry, you can determine which offers are worth pursuing. For example, I’m almost always willing to sell an inquiry on my credit report for $500, but for $10, not so much (unless it’s a product I want to try out for readers). A lot of times the threshold moves depending on what is coming up in the future; if I know our insurance will be renewing soon, or we plan to refinance, the value will move up. If I have no use for my credit in the next few months, the threshold will drop, and I’ll apply for anything that I get a sign up bonus for. However, if you avoid inquiries altogether, you must realize it’s also a lost opportunity, since you’ll never get that time back on your credit report.

Using Adverse Action. I use two different methodologies to manage inquiries. For my own credit score, I keep pushing the envelope to see how many cards I can get before I get turned down. If I get a denial, I just cool it for 3-6 months before turning it on again. In my mind a letter of denial is a great tool to measure data points. For my husband, who believes that if he were turned down it would be a bad reflection on him (as opposed to just who he is married to), I often take some time to review his credit report in advance and make sure that his score is excellent before applying for a bunch of new cards.

When It Matters Most

There are a few times when I don’t screw around with my credit score and add a bunch of inquiries.

Mortgages. One is when I know we will be purchasing a new house. Obviously, a $50 sign up bonus would not be worth it in the long run if you have to pay an extra .125% on a mortgage over 30 years. Excessive inquiries can contribute to lowering your score to the point of getting adverse action when applying for a mortgage. And since your mortgage will likely be your largest expense, it’s not worth it!

For the record, even when we are planning a house purchase, I don’t put a complete moratorium on new inquiries. A new must have card that pays 6% cash back is almost always worth an inquiry for me! I would not, however, purposely put more than 1-2 new inquiries on my credit report before planning a mortgage application.

Beginners and Young Adults. The other time I reign it in is when I’m working with beginners. My young in-laws will get a very different message: one of very careful credit management and avoiding applying for a credit card just for a sign up bonus (or a free t-shirt on campus). In other words, do as I say, not as I do! Only after they learn to manage credit wisely (and for some of them, that time may never come) do we start talking about sign up bonuses.

Inquiry Action Plan

The bottom line is that, yes, if you sign up for new credit cards, it will impact your score. That however, should not scare you. Rather, it should be used as an informational tool. If you understand the impact that inquiries have on your credit score in relation to the other (much larger) components, and you understand the goals you have in the future (if you will be applying for a mortgage soon), you can use your credit score as a tool to improve your wealth.

And since I know you’ll ask, the current sales price for an inquiry on my credit report: $250. On my husbands: $500.

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