How Rewarding Are Your Rewards?

May 27, 2011

Money-Guy 05-27-2011

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!

FILED UNDER: Featured, Podcasts



Most Recent Episodes

Financial Advisors React to Money Advice from ChatGPT

Will ChatGPT be your new financial advisor? In this react episode, we’ll break down some money advice from ChatGPT and compare it to our own thoughts and opinions. Enjoy the Show? Sign up for the Financial Order of Operation (FOO) Online Course! Sign up for our Know...

Financial Planning 101 (By Age) 2023 Edition

Throughout every decade, there are different areas of your financial life that come in and out of focus. In this episode, we'll discuss what you need to focus on by age, pitfalls to watch out for, and how to know you're doing it right. In this episode, you'll learn:...

Is the 2023 Housing Crash Around the Corner?

Housing prices skyrocketed after the pandemic to all-time highs, and mortgage rates have more than doubled since 2020. Homes are harder to purchase for more Americans, which means it’s more important than ever to make sure you are ready to buy before purchasing. In...

Watch This Before Rebalancing Your Investment Portfolio!

85% of Americans don’t rebalance their 401(k). Are they making a huge mistake? In this episode, we’ll discuss the “why” behind rebalancing, how to do it, and the data on whether or not rebalancing can increase your return. In this episode, you’ll learn: What...

Don’t Make This HUGE 401(k) Mistake!

Americans are making a HUGE mistake in their 401(k) that could cost them thousands by retirement. We’ll talk about why this is happening and how you can avoid making the same mistake in this Q&A episode! For more information on how to make the most out of every...

Alex Hormozi’s Top Money Advice! (Financial Advisors React)

In this episode, we react to Alex Hormozi's financial advice. Enjoy the Show? Sign up for the Financial Order of Operation (FOO) Online Course! Sign up for our Know Your Number Course! Check out our Net Worth Tool! Get FREE downloads full of financial advice from...

Everything You Need to Know About Finances in Your 20s

In this episode, we discuss everything you need to know about finances in your twenties. In this episode, you’ll learn: The top financial advice for your twenties How to start building wealth and the steps you should take Enjoy the Show? Sign up for the Financial...

The Most Valuable Asset in Building Wealth!

This episode will show you how to maximize the most valuable resource you have - starting right at this moment. What is it, you may ask? It’s TIME. If you give your money time to grow, you’ll be amazed at how much your dollars can become - it’s incredible! How wild is...