Home > Chase, Credit Cards > Saving Money and Earning More Miles: A Gift Card Win-Win

Saving Money and Earning More Miles: A Gift Card Win-Win

Like I’ve said before, I really try to use credit cards for everything. Every time I use cash, I feel like I’m leaving miles and points on the table, especially if the cost of using cash and the cost of using credit card is the same.

With the huge increase in oil prices, a lot of people have seen their gas budgets grow heavily. Since credit card companies take a portion of each sale, gas stations are beginning to offer both “cash prices” and “credit prices” to offer lower rates for transactions where they’ll keep all the money. I always try to go for the lowest price in my neighborhood, and seeing a duality in price makes me guesstimate if using a rewards credit card makes sense (i.e., if I am paying for points, am I paying less than the bare minimum value I will extract from those points?).

In this example, 2x points on an AmEx Premier Rewards Gold or Business Gold card would earn 8 Membership Rewards points per gallon, costing 7¢ per gallon. I would probably use a credit card, since an MR point is worth at minimum 1¢, so I come out ahead by 1¢/gallon. With last quarter's Chase Freedom 5x, you'd pay 7¢ per gallon for >20.4 Ultimate Rewards points, worth at minimum 25¢, per gallon (a great value).

To make things more complex, in California we have ARCO Gas (owned by BP). ARCO is infamous for not accepting credit cards at all. They do accept debit cards, but they charge 35¢ for each transaction, and debit card rewards cards are quickly disappearing (thanks to the new credit card laws). My current US Airways Bank of America Debit Card earns 1 mile per $2, so if I valued US Airways miles at 1.4¢ each (which I do), I’d need to spend $50 on gas just to break even. Not worth it in my opinion.

Because ARCO does not accept credit cards, their overall price tends to be lower — much lower. Just last week, I saw gas at Arco for 28¢/gallon cheaper than the credit card-accepting station across the street. To put that in perspective, at $4.30/gallon, a Chase Freedom during a 5x gas quarter earns about 22 Ultimate Rewards points per gallon, worth at minimum 27¢ per gallon. This means that I would lose money chasing miles and points.

So how do I solve this? Easy. This is what I saw the last time I was at ARCO last month (filling up $5 worth to make it to another gas station which was only 14¢ more expensive, thus making “buying” Ultimate Rewards points worth it at 5x):

On the left - gift cards!

I don’t know why it didn’t hit me earlier, but on April 3rd, I headed straight to the gift card rack at my local grocery store. Why? Because in Q2 2012, Chase Freedom earns 5x at grocery stores. Just to try it out, I took 4 $25 gift cards and purchased them (along with a stick of gum that I sorely needed) with my Chase Freedom. Because it showed up as a grocery transaction, I earned 520 UR points, or 5.2 points/$, since the card I used is tied to a Chase Checking account where I earn 10% points of base spend (10 pts) and another 10 points/transaction.

I then passed by an ARCO station on the way home – the price was $4.159 per gallon, much lower than the gas station across the street at $4.349. One gift card got me just over 6 gallons, so not only did one $25 gift card earn me over 125 Chase UR points (transferable to United, British Airways, and Hyatt), but I also saved $1.14, or 4.5% on gas, compared to the street across the station. NOT BAD!

Not only that, but my grocery store offers double rewards points on gift card purchases, so $100 of gift cards earned me 200 points. Pretty cool.

One Chase Freedom is allowed to spend up to $1500 per quarter on 5x spending, but since my family has multiple cards, we can spend more. Once the end of this quarter is near, I’ll analyze how much spending we have left until we hit the cap, then build a stash of these gift cards.

Next time you’re at your local grocery store, check out the gift card rack. Pushing forward some of your spending can really help you earn miles and possibly save money.

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Categories: Chase, Credit Cards
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