The 5 Most Rewarding Cash Back Credit Cards
October 17, 2013I recently received an email from a friend asking for a suggestion for a new cash back rewards card. Credit card debt can be a dangerous thing but as long as you pay off the balance in full each month, getting cash back is a great perk to using credit cards. I especially like cash back as a reward because of the simplicity and flexibility it offers versus miles and other types of rewards. Without further ado, here are the best ones I’ve found:
General: Fidelity Investment Rewards American Express card
Pro: It pays 2% cash back on all purchases.
Con: Rather than send you a check or a statement credit, the cash back has to be deposited into a Fidelity account. Fortunately, you can open a Fidelity account at no cost and it might even encourage you to invest rather than waste the cash back on something you don’t really need. Also, a lot of places don’t take American Express.
Gas: PenFed Platinum Cash Rewards Visa® card
Pro: It pays 5% cash back on gas purchases.
Con: You have to be a member of the credit union to get the card and you need another credit union product like a savings account to avoid an annual fee. However, it’s pretty easy to join the credit union by simply making a $15 donation to “Voices for America’s Troops.”
Groceries: American Express Blue Cash Preferred card
Pro: It pays a 6% statement credit (up to $6k per year) on grocery purchases, 3% back on gas and certain department stores, and 1% back on everything else.
Con: There is a $75 annual fee. If you don’t spend enough to justify the fee, you can avoid it with the American Express Blue Cash Everyday® card, which only plays a 3% (up to $6k per year) on grocery purchases, 2% back in gas and certain department stores, and 1% back on everything else but has no annual fee. American Express is also not accepted in a lot of places.
Target: Redcard
Pro: You get a 5% discount on Target purchases.
Con: You only get the 5% discount at Target.
Office supply stores and phone, Internet and cable bills: Chase Ink® Cash Credit Card
Pro: You get 5% cash back on $25k per year of office supply store purchases and landline, cell phone, Internet, and cable bills.
Con: It’s a business card so you need to claim some form of “business” to qualify.
The last 3 cards can be particularly rewarding because you can use them to buy gift cards at grocery or office supply stores. By using the gift cards for your other purchases, you’re essentially getting the 5-6% cash back on those expense too. For example, let’s say I use the Amex Blue Cash Preferred card to buy a $500 Amex gift card each month for $30 a month cash back. I can then use the gift card to cover my food budget each month.
(You may be wondering why cards like the popular Chase Freedom card aren’t included since they pay 5% cash back on rotating categories each month and 1% on the rest. Except for the holidays, we tend to spread our spending out throughout the year. That means for each category, you’re actually getting only 2% back on average, which you can do with the Fidelity card on all purchases not just the ones in the dedicated categories.)
What about you? Have you found a better deal out there? If so, let us know in the comments below.