Wouldn’t it be nice if choosing a credit card were as simple as doing some research, making an informed decision, and never thinking about it again? Unfortunately, changing rates, terms, and rewards mean that you have to stay on your toes in the evolving credit card market if you want to make sure your rewards are actually rewarding your good behavior.
Last week, I personally received a message from Chase regarding some “updated new benefits” to my rewards program. As I read the letter, I quickly realized that the so-called new benefits were actually negative adjustments to my rewards program in disguise. Chase made it seem like I should be excited about the changes when they were actually limiting my rewards, adding maximums, and requiring activation for rotating categories each quarter.
Perhaps Consumer Reports sensed my frustration about my current credit card situation, because they coincidentally released an article in the June 2011 Money Adviser issue, titled Credit Cards That Pay You. Some things to consider:
- Up-Front Bonuses – Many cards offer cash bonuses just for signing up, typically tied to a certain level of spending. Additionally, many banks and airlines promote “free round-trip tickets” to attract cardholders. Just beware that mileage deals typically come with many restrictions. I typically prefer cash rewards, which allow flexibility to schedule trips at your convenience.
- Annual Fees For Added Perks – Many rewards cards now offer two versions of the same card: one with an annual fee and more rewards, and one with no fee but less rewards. The idea is that the annual fee will be offset by the added rewards, such as free baggage checking, travel insurance, trip-delay coverage, rental-car insurance, and occasionally no foreign-transaction fees. The annual fee option is only worth it if you can benefit from the additional rewards offered by a specific card.
- Maximizing Your Rewards – Make sure to read all terms and conditions in order to maximize the rewards you can receive from your card. Many cards use rotating seasonal categories, so make sure you know what items are earning you the most rewards at all times. Also, watch out for spending tiers that only allow rewards “up to” a certain amount.
- Shrinking Rewards For Gas – Gas cards are not as rewarding as they used to be. Be sure to check the fine print since many cards offer a high percentage back on gas, but only after you’ve spent a certain amount. Up to that amount, you may only be receiving 1 percent cash back on gas.
Additionally, the article included a list of the best rewards cards and some of their greatest features:
- Amazon.com Rewards Visa: $30 back after first purchase. 3 points per $1 spent on Amazon; 2 points per $1 at gas stations, restaurants, drugstores, office-supply stores; 1 point per $1 elsewhere. Points are unlimited and never expire. Once $25 is earned, it can be spent on Amazon; $50 can be converted to cash.
- American Express Blue Cash: Until $6,500 in annual spending, 1% cash back at supermarkets, drugstores, and gas stations; 0.5% elsewhere. After $6,500 in spending, rewards bump to 5% and 1.25%, respectively.
- American Express Blue Sky Preferred: 7,500-point sign-up bonus equal to $100 credit on statement. 2 points per $1 spent on dining, hotels, car rentals; 1 point per $1 elsewhere. $100 per year allowance for checked baggage, in-flight meals, drinks, entertainment, Wi-Fi, and legroom upgrades. $75 annual fee.
- American Express Costco True Earnings: 3% cash back on gas (1% after $3000 is spent) and dining; 2% on travel; 1% elsewhere. No annual fee with Costco membership.
- Capital One No Hassle Cash Rewards: 2% cash back on gas and groceries at major supermarkets; 1% on everything else. Rewards never expire and can be redeemed at any time. No balance-transfer fee.
- Capital One Venture: 2 miles per $1 spent. 10,000 bonus miles after spending $1000 in first 3 months. $59 annual fee waived first year. No foreign-transaction fee. Venture One version has no annual fee; it pays 1.25 miles per $1 spent.
- Chase Freedom: $100 cash sign-up bonus; 5% cash back in rotating categories like airfare, gas, groceries, and home improvement; 1% on everything else. Cash-back never expires.
- Fidelity Rewards American Express: 2 points for every $1 spent. Points can be redeemed for merchandise or converted to cash and deposited in a linked brokerage account.
- PenFed Premium Travel Rewards AmEx: 20,000-point sign-up offer. 5 points per $1 spent on airfare; 3 points per $1 on dining and hotels for one year; 1 point per $1 elsewhere. No foreign-transaction fee. Good balance-transfer offer. $50 annual fee waived for first year.
- PenFed Visa Platinum Cashback Rewards: 5% cash back on gas. 2% at supermarkets; 1% elsewhere. Good balance-transfer offer.
A couple of notes…
Always make sure your credit is in solid standing before applying for any new cards. Also, be diligent and responsible with paying everything off on a monthly basis.
Pay attention and maximize the rewards and benefits you receive from your credit card. There are some incredible opportunities out there to help you stretch your money as far as possible!
Brian,
Loved the podcast. I always get excited when I see the “Credit Card Rewards” show title. You do a great job breaking down the pros and cons of each one out there. As you’re already aware, I geek out over this stuff too and even though I’m an avid Dave Ramsey fan, I enjoy gaming the system and just can’t say no to the free money the credit card companies are willing to give me.
I was a little disappointed you failed to mention the Fidelity Rewards card also has a VISA version (which is what I currently use). Similar to the American Express Blue Cash card it has an initial spending requirement before you get kicked into that upper level for the rewards, but it’s not bad at all. For the Fidelity Rewards VISA you get 1.5% back on all purchases until you spend $15,000 in the calendar year. Then it increases to the same 2% on everything like the American Express version. But why would anyone choose the VISA version over the AMEX version? Because VISA is accepted almost everywhere. And that’s the problem I ran into while I was using the AMEX Blue Cash card. Lots of merchants I visited wouldn’t accept it. So I did some simple math and by using the Fidelity Rewards VISA instead of the AMEX, I come out ahead because I go to so many places that don’t accept AMEX. If you do the math, the difference between the two cards is $75. $15,000 X 0.02 = $300 and $15,000 X 0.015 = $225, $300 – $225 = $75.
I’m willing to forego $75 because within a year I earn more than $75 worth of rewards from non-AMEX accepting merchants. I hope this all makes sense.
I just thought it might be worthwhile to mention to your audience that the card you and Bo use does come in a non-AMEX form with a slightly less reward program. As far as which one to use comes down to the merchant’s the individual frequents.
Keep up the great work!
Josh
Brian,
Great show………However, I think you may have missed the boat on 1 great card which I’ve switched over to………The True Earnings AX Business Card. The only limit is on gas purchases ($6000 max, so $240 back), otherwise it’s uncapped. The other great thing is since you use this card at Costco and I’m an Executive Member, Costco kicks in an extra 1%. So 2% back on all Costco purchases effectively. 3% back on all restaurants is a big deal too.
I know the business card isn’t for everyone, but it’s a fairly easy process to apply and switch from the standard true earnings card.
Here’s the details:
Earn cash back on virtually all your expenses.
Earn 4% cash back for annual gasoline purchases up to $6,000, and 1% thereafter. You will also earn 3% cash back at restaurants, 2% for travel, and 1% everywhere else, including Costco.
Enjoy the show………..Mike/Colorado
Brian, great podcast. Just wanted to throw out there that there is also a upromise credit card. They offer a $50 bonus for signing up on your first transaction (it took me a few months to actually get the bonus in my upromise account, but I did get it), 1% cash into your linked upromise account for all purchases and up to 10% bonuses on purchases of qualifying groceries and at qualifying restaurants (ie. so if the regular upromise benefit is 8% for a specific restaurant you could get 18% total). So it’s definitely worth signing up for even if you just use it at qualifying upromise restaurants.