Which Credit Cards Are the Most Rewarding?
December 04, 2014One of my favorite things this time of year is being able to use credit card reward points to cover most or even all of my holiday shopping. While it obviously doesn’t make sense to buy things just to earn rewards (especially if you can’t pay the card off in full), why not get as much as you can from purchases you’re going to make anyway? In deciding which cards to use, there are a few rules of thumb I like to follow:
1) Don’t limit yourself. I avoid credit cards that only give bonus rewards with particular vendors. I’m just not that loyal to any particular companies.
2) Be wary of fees. Yes, it’s possible to earn enough in rewards to justify paying an annual fee but I find that’s rarely the case, especially if you’re on the more frugal side.
3) Think long term. It’s easy to be tempted to apply for a credit card because of upfront rewards but then you’ll be either stuck with a sub-par card afterwards or end up wrecking your credit by constantly opening new cards.
So with those ground rules in place, here are the best rewards credit cards that I’ve found:
General Purpose
Citi Double Cash Mastercard: 1% cash back on every purchase and then another 1% cash back when you pay it off for a total of 2% cash back on all purchases.
Bank of America Travel Rewards Visa card: 1.5 points for every dollar spent and 3 points for every dollar of travel booked through the Bank of America portal. You can also earn bonus points for having money in Bank of America or Merrill Edge that can push the reward rate as high as 2.625% on everything and 5.25% on travel through the portal. This card is particularly beneficial if you have at least $25k in Bank of America or $50k in Merrill Edge since that will get you 2.25% on everything and 4.5% through the portal. Otherwise, the Citi Double Cash will pay you more on non-portal expenses.
Special Categories (if you spend enough in these areas to make it worth another card)
Chase Ink Cash Mastercard: 5% cash back on the first $25k per year you spend on office supply stores, cellular and landline phone service, and Internet and cable TV services, 2% cash back on $25k per year spent on gas stations and restaurants, and 1% cash back on everything else. Unlike most credit cards, rental car coverage is primary if used for business purposes. This is technically a business card but their definition of business is pretty broad.
Sallie Mae Mastercard: 5% cash back on gas (first $250 per month), groceries (first $250 per month), and bookstores (first $750 per month including Amazon, even if you buy something other than a book) and 1% cash back on everything else.
American Express Blue Cash Preferred card: 6% cash back on groceries (up to $6,000 per year), 3% cash back on gas and select department stores, and 1% cash back on everything else. This card has a $75 annual fee but it would be worth it if you spend more than about $325 a month on groceries vs the Sallie Mae card.
PenFed Premium Travel Rewards American Express card: 5 points per dollar on airfare purchases and 1 point per dollar on everything else. Be aware that you may have to pay a one-time $15 fee to join an association if you’re not otherwise eligible to join the Pentagon Federal Credit Union.
Consumers Credit Union Visa Signature Cash Rebate card: 3% cash back on grocery stores, 2% on gas, and 1% on everything else. That doesn’t sound that great but if you make 12 transactions in a month, you can get a 4.09% interest rate on up to $20k in the credit union’s rewards checking account and spending $1k on the card will get you another 1% in interest on up to $20k. That higher interest rate can easily dwarf other cards’ rewards, especially if you’re more of a saver than a spender. You can join the credit union simply by paying a one-time $5 fee to the Consumers Cooperative Association.
Rotating Categories (if you’re willing to keep track)
The Chase Freedom Visa and Discover it cards: 5% cash back on rotating categories and 1% cash back on everything else. Keep in mind that the categories rotate every 3 months and you need to sign up online with each change. The Discover card also gives you your FICO score for free.
Am I missing anything? Do you know of a particularly rewarding credit card that follows my ground rules and isn’t on this list? If so, let us know about it in the comments section below.