Best Rewards Credit Cards, 2011
Which rewards cards are most rewarding? We found nine great deals.
Of the 1.4 billion credit card solicitations mailed in the first quarter of this year, 80% were for cards with rewards programs, according to Mintel, a market-research firm. Issuers are even dangling cash bonuses to entice you to sign up or use their cards.
What’s in it for them? Cardholders tend to spend more with rewards cards than with plain-vanilla credit cards. Upfront, that gives issuers more revenue from the interchange fees they charge merchants whenever you use your card. At the back end, if you don’t pay your balance in full each month, issuers reap hefty interest charges. Rates on rewards cards have dropped slightly, to an average of 13.9% annually, but the extra cost of paying interest would probably offset any rewards you’d earn on your purchases.
But if you pay off your balance every month, rewards cards can be very rewarding -- especially if the card you choose complements your spending habits. If you are a frequent traveler, the cards we picked make it easy to earn enough points for a free airline ticket or hotel room. If you don’t want to worry about using points to book a plane ticket or hotel room, consider a cash-back card -- you can choose to get a check or apply your rebate to your credit card bill. If you have a long commute or are worried about rising gas prices, a gas card offers a rebate to help offset the cost.
The following cards are among the best of the rewards cards. We calculated what the rebate would be, assuming you charge $20,000 to each card and your spending tracks patterns in the Bureau of Labor Statistics’ Consumer Expenditure Survey. Unless otherwise noted, there’s no cap on points you can earn and points do not expire.
Chase Freedomwww.chase.comInterest rate: 0% for six months, then 11.99% to 22.99%Annual fee: noneTypical annual rebate: $440
You receive a 5% rebate on spending up to $1,500 per quarter in rotating categories, and 1% on everything else. (The categories for autumn 2011 are dining, department store purchases, movie tickets and charitable contributions.) You’ll also earn a $100 bonus after spending $500 in the first three months after you’ve received the card. You can get a credit on your statement, have the money deposited into your Chase account, request a check, or redeem the points for gift cards, merchandise or travel.
Blue Cash Everydaywww.americanexpress.com/bluecashcardsInterest rate: 0% for six or 12 months, then 17.24% to 21.24%Annual fee: noneTypical annual rebate: $329
You earn 3% back on supermarket purchases, 2% on gas and department store purchases, and 1% on everything else. (The $75-per-year Blue Cash Preferred Card offers more-generous rebates.) Rebates are earned as Reward Dollars, which can be redeemed as a credit on your monthly statement, gift cards or merchandise.
Bank of America Cash Rewards Visa Signaturewww.bankofamerica.comInterest rate: 0% for 12 months, then 12.99% to 20.99%Annual fee: noneTypical annual rebate: $292
You earn 2% on groceries and 3% on gas purchases -- up to $1,500 a quarter -- and 1% with no limit on all other spending. Charge $100 within 60 days and you will also collect a $50 bonus. You can boost your rebate by 10% if you deposit it in a Bank of America checking or savings account. Or you can take it as a statement credit or a check, or apply it to your mortgage, no matter who services your loan.
Capital One No Hassle Cash Rewardswww.capitalone.comInterest rate: 0% until July 2012, then 12.9% to 20.9%Annual fee: noneTypical annual rebate: $267
Earn 2% cash back on gas and groceries and 1% on everything else. The rebate can be applied as a credit on your account or you can request a check. You can earn an additional 15% cash back on spending at Capital One’s online Perk Central retail network. If you use this card abroad, there is no foreign currency transaction fee.
US Bank FlexPerks Travel Rewards Visa Signaturewww.usbank.comInterest rate: 13.99% to 23.99%Annual fee: $49, waived for first yearTypical annual points: 29,114
You need 20,000 points for a ticket worth $400 from one of more than 150 airline partners. Using the card earns you one point for each dollar spent, and you receive 17,500 bonus points after you spend the first $2,500. You also earn double points for cell phone charges and for the category in which you spend the most each month (gas, groceries or airline purchases). You earn triple points when you make charitable donations. And you collect 3,500 bonus points each year that you spend $24,000. You can also use points for hotel stays, cruises and car rentals, as well as merchandise or a statement credit. Bonus: Redeem your points for an airline ticket and you’ll get a $25 allowance that you can use for baggage fees or a snack on board. Points expire after five years.
PenFed Premium Travel Rewards American Expresswww.penfed.orgInterest rate: 13.99%Annual fee: noneTypical annual points: 21,252
It takes 22,713 points for a round-trip ticket from New York to San Francisco. Redeem your points on 38 airlines with no blackout dates, or for priority seating, hotel stays, cruises, tickets to sold-out events or merchandise. You receive five points per dollar spent on airline tickets and one point per dollar spent on everything else. Spend $650 in the first three months and you get 20,000 bonus points. Points expire after five years. You avoid all foreign currency transaction fees when you use the card abroad.
Simmons First Visa Platinum Travel Rewardswww.simmonsfirst.comInterest rate: 9.25%Annual fee: noneTypical annual points: 20,000
It takes 22,000 points to earn a ticket worth up to $325 on any airline for anywhere in the contiguous 48 states, with no blackout dates. For 50,000 points you can book a coach ticket to Europe worth up to $1,000. You can also use points for hotels, cruises, car rentals and gift certificates. The reward structure is simple: You earn one point for every dollar spent. Points expire after three years.
BP Visawww.choosebp.comInterest rate: 15.24% or 19.24%Annual fee: noneTypical annual rebate: $344
Earn 10% on purchases at BP stations, 4% on travel and dining, and 2% on all other spending for the first 60 days. After that, rebates are 5% on gas, 2% on travel and dining, and 1% on everything else. Use your rebate for a BP gift card or a check, or to make a donation to the Conservation Fund.
ANY WAY YOU CHOOSE
Citi ThankYou Preferredwww.thankyou.comInterest rate: 0% for the first 12 months, then 12.99% to 20.99%Annual fee: noneTypical annual points: 20,000
You can use points you accumulate for flights, hotels, gift certificates, merchandise and cash (in the form of statement credits). For a minimum of 10,000 points, you can go to the Web site to ask a “wish specialist” for something that isn’t listed in the catalog, such as a sky-diving outing. You earn one point per dollar you spend in most years, but your first-year rebate could be as much as 51,176 points because you earn five points for every dollar spent at drugstores, supermarkets and gas stations, and you receive 10,000 points when you spend $500 in the first three months.