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All Contents © 2019The Kiplinger Washington Editors
By Lisa Gerstner, Contributing Editor
| June 7, 2016
If you’ve been carrying the same rewards credit card in your wallet for several years, there’s a good chance you could get a better deal. Card issuers are competing hard for your business by promising rebates on everyday purchases, with the potential to earn as much as 5% or 6% on staples such as groceries and gas, and up to 2% on everything else you buy. Many issuers are also dangling heaps of extra points or cash back—worth $500 or more, in some cases—if you spend a few thousand dollars in the first three months after opening the account. If your rewards card is earning just 1% on all purchases, “it’s time to shop around,” says Curtis Arnold, founder of CardRatings.com and BestPrepaidDebitCards.com.
Using a rewards card usually makes sense only if you pay off your balance monthly; otherwise, interest payments will eat into earnings. Cards with annual fees can provide the most bountiful rewards, but you’ll have to do the math to decide whether your spending patterns will make the fee worth paying. To qualify for many of these cards, you must have good or excellent credit, with a minimum credit score of about 700 to 750. Take a look.
Typical annual rebates listed here are based on average spending figures from the Bureau of Labor Statistics and assume $22,000 a year in charges on the card. (Rebates don’t reflect annual fees waived the first year or sign-up bonuses.) Except where noted, rewards earnings don’t have caps or expiration dates. And none of the travel-focused cards charge foreign-transaction fees.
Citi Double Cash pays an industry-leading 2% on all purchases, and it keeps the gimmick factor pretty low: You get 1% back when you make a purchase and an additional 1% when you pay the bill. After you collect at least $25 in cash back, you can redeem it as a check, statement credit or gift card, or you can deposit it into a Citi bank account (or any checking account from which you’ve paid your credit card bill at least twice). Your rewards balance will expire if you don’t make purchases or payments for 12 months.
Honorable mentions: A host of other straightforward cash-back cards are worth a look, too. The Fidelity Rewards Visa signature card (14.24% interest rate) pays back 2% if you funnel the rewards into a Fidelity brokerage, retirement, college savings or checking account. You can even deposit the cash into someone else’s account—say, a grandchild’s. Capital One Quicksilver (0% until January 2017, then 13.24% to 23.24%) offers 1.5% back on all purchases and levies no foreign-transaction fee, making it a fine choice for travelers who want a basic cash-back card. Chase Freedom Unlimited (0% for 15 months, then 14.24% to 23.24%) also pays 1.5% on all purchases.
Each quarter, get 5% back on up to $1,500 of spending in a new category. For 2016, gas station purchases earned 5% in the first quarter, groceries took over in the second quarter, restaurants get a turn in the third quarter, and holiday shopping rounds out the year. All other purchases earn an unlimited 1%. You must activate the 5% rebate each quarter through the Chase Freedom mobile app, at Chase.com, at Chase bank branches and ATMs, or by calling customer service; it’s a good idea to make sure you’re signed up for text-message or e-mail reminders from Chase. Rewards are tracked as points: Once you accrue 2,000 points ($20 value), you can choose a statement credit or make a deposit into your bank account. Or use points for gift cards, travel, Amazon.com purchases and other redemptions.
Honorable mention: The Discover It card (0% for 12 months, then 11.24% to 23.24%) also pays 5% cash back on up to $1,500 of spending each quarter in specified categories, including purchases at gas stations, restaurants and Amazon.com in 2016 (and 1% on everything else). After your first year of account membership, Discover will match the rewards you’ve earned, doubling your cash back for that year.
This card keeps it simple: Everything you buy earns a healthy two miles per dollar. You can exchange miles for statement credits on a broad range of travel purchases, including plane tickets, stays at hotels and campgrounds, car rentals, and fares for buses, trains and taxis (most Uber transactions qualify). Each time you redeem miles for travel, you’ll get a 5% bonus on the miles spent. Turn in 20,000 miles, for example, and you’ll earn 1,000 extra miles toward your next redemption. That’s half the 10% bonus that Barclaycard offered in the past, but it’s still a standout perk. You have to rack up a minimum of 10,000 miles ($100 value) to redeem them for travel. When you’ve earned 5,000 miles, you can claim statement credits on nontravel purchases or receive gift cards, but miles that you use for those perks have only half the value.
Honorable mention: The Capital One Venture card (13.24% to 23.24%; $59 annual fee, waived the first year) pays 2 miles per dollar spent — redeemable at a rate of 100 points per dollar for statement credits on travel purchases or 100 points for 50 cents in credits toward other purchases—and offers an initial bonus of 40,000 miles if you spend $3,000 in the first three months.
Not sure that you’ll spend enough to warrant an annual fee? The BankAmericard Travel Rewards card is a safe bet. You’ll earn 1.5 points per dollar on most purchases and three points per dollar when you book travel through the Bank of America Travel Center shopping portal. Plus, get a 10% bonus on points if you have a Bank of America checking or savings account (the bonus increases to 25% to 75% for the bank’s Preferred Rewards clients). You’ll get $1 in statement credits on travel purchases for every 100 points (you can redeem credits starting at 2,500 points) or 60 cents per 100 points in cash back; the redemption value for gift cards varies.
Honorable mention: The Discover It Miles card (0% for 12 months, then 11.24% to 23.24%) pays out 1.5 miles per dollar spent, and you can redeem them at a value of 100 miles per dollar for travel statement credits or cash. Discover will match the miles you’ve earned after the first year of account membership, doubling your rewards for that year.
You’ll capture two points per dollar on dining and travel purchases and one point on everything else. Frequent travelers will appreciate the ability to transfer points at a 1:1 ratio to several partner loyalty programs, including Southwest Airlines Rapid Rewards, United MileagePlus and Marriott Rewards (Amtrak Guest Rewards was recently dropped from the list). Points are extra valuable when you book travel through the Chase Ultimate Rewards shopping portal: Each 100 points is worth $1.25, with no minimum point balance required to make purchases. You can even pool points you earned with other eligible Chase cards—including Freedom and Freedom Unlimited—and get the discounted rate on travel bookings. Otherwise, 100 points are worth $1 for cash back, gift cards and shopping at Amazon.com, among other options.
Honorable mention: If you visit Starwood hotels regularly, the Starwood Preferred Guest from American Express card (15.49% to 19.49%; $95 annual fee, waived the first year) is appealing. You earn up to five Starpoints per dollar spent at participating Starwood hotels—including the Sheraton, St. Regis and Westin brands—and one point on everything else. Redeem points for hotel stays or transfer them to a long list of partner loyalty programs, including frequent-flier programs from major airlines as well as Amtrak Guest Rewards. Each transfer of 20,000 points to frequent-flier miles earns you a 5,000-point bonus. Points expire if your SPG account is inactive for a year.
Jet-setters may be able to squeeze enough value from exclusive benefits to justify cards with annual fees that stretch into the hundreds of dollars. “The real perk is free access to airport lounges,” says Jill Gonzalez, an analyst for personal finance site WalletHub.com. Often, a single visit to an airport lounge costs about $50 to $60, and annual lounge passes may run a few hundred dollars or more.
Amex Platinum ($450 annual fee) cardholders get free entry to Delta Sky Club, AirSpace and Centurion lounges; Citi Prestige ($450) holders enjoy complimentary access to American Airlines Admirals Club lounges; and holders of both cards can visit Priority Pass Select lounges without charge. Premium airline-specific credit cards such as United MileagePlus Club ($450), Citi/AAdvantage Executive ($450) and Delta Reserve ($450) provide free lounge entry, too.
Plus, elite cards may reimburse or waive airline-related expenses. Citi Prestige pays up to $250 annually in airfare and other fees on any airline you use throughout the year, and Amex Platinum reimburses up to $200 a year for incidental airline fees, such as for checked baggage (but not plane tickets), with one airline of choice. Both cards tout hotel benefits, too, including a free fourth night at any hotel when you book four consecutive nights through Citi Prestige’s concierge service. Citi/AAdvantage Executive, Citi Prestige and Amex Platinum all reimburse the $100 fee charged if you sign up for Global Entry, a government program that allows for expedited clearance on international travel.
The most suitable card for you may depend on which airlines and hotels you use often and lounge availability at the airports where you frequently spend time. But for its overall package of perks and rebates on everyday spending—plus a 50,000-point bonus if you spend $3,000 in the first three months after opening the account—Citi Prestige is the best overall deal.
This card is a perennial champion, thanks to an appetizing 6% cash back on up to $6,000 in grocery purchases per year (except at superstores that sell groceries, such as Target and Walmart), 3% on gas and select department store purchases, and 1% on everything else. You redeem cash back as statement credits in $25 increments.
Honorable mention: The Consumers Credit Union (Illinois) Visa Signature Cash Rebate card (12.24% to 23.24%) offers 3% cash back on up to $6,000 spent annually on grocery purchases, 2% on gas and 1% on all other purchases, with no annual fee. (To join the credit union, you must pay a onetime $5 fee to the Consumers Cooperative Association.) Unlike Amex Blue Cash Preferred, CCU doesn’t bar cardholders from earning the maximum rebate on groceries at superstores. But whether purchases qualify for 3% rewards varies from store to store, depending on how the merchant codes the transactions. The maximum you can earn in cash back is $6,000 a year, and rewards expire after five years.
Shoppers earn three points per dollar spent at Amazon.com, plus two points at gas stations, restaurants, drugstores and office-supply stores, and one point on all other purchases. Use your points at Amazon.com (no minimum required; 100 points are worth $1), or exchange at least 2,000 points for cash back or gift cards. Subscribers to Amazon Prime ($99 a year), which provides free two-day shipping and other benefits, are eligible for the Amazon Prime Store Card (26.29%); it’s usable at Amazon.com and other online merchants that use the Pay With Amazon transaction service, and you get 5% back.
Honorable mentions: Some wholesale clubs have attractive credit cards that members can use to earn cash back on a variety of purchases anywhere. The Sam’s Club MasterCard (15.15% to 23.15%) pays back 5% on up to $6,000 annually in gas purchases, 3% on dining and travel, and 1% on everything else. (Rewards earnings from the Sam’s Club card can’t exceed $5,000 per year.) The new Costco Anywhere Visa Card by Citi (interest rate unavailable) pays 4% on up to $7,000 annually in gas purchases, 3% on dining and travel, 2% at Costco and Costco.com, and 1% on everything else. Both cards provide the previous year’s rewards as a check each February, redeemable for purchases at the club; Costco’s rewards expire the following December, and Sam’s Club rewards expire 180 days from the check issue date.
This under-the-radar card provides an impressive 5% cash back on gas purchases; you’ll earn 1% back on everything else. Cash-back rewards show up as a credit on your monthly statement. Bonus: Under a recent promotion, you could transfer your balance from another credit card and take advantage of a 0% rate for 12 months, with no balance-transfer fee. You can join the credit union by paying a onetime $15 fee (or $5 yearly) to become a member of the American Consumer Council.
Honorable mention: The PenFed Platinum Cash Rewards Plus card (10.24% to 17.99%) also offers 5% cash back on gas purchases—but you won’t get rewards for anything else you buy, so this card is best used only at the pump. To be eligible for the Plus card, which has no annual fee, you must have a qualifying account with Pentagon Federal Credit Union, such as a checking account, money market account or mortgage. To become a PenFed member, make a onetime donation of $14 to Voices for America’s Troops or $15 to the National Military Family Association.