Credit cards that raise the bar on rewards
It pays to use reward credit cards — but only if you pay the credit card bill in full each month. Credit: iStock
If you pay your credit card bill in full each month, it makes sense to use a card that provides you with the most rewards. Below are credit cards that provide excellent cash returns. I have included only cards without an annual fee — with one exception, because of its higher benefits. Again, these recommendations are based on the assumption that you don't carry a balance. If you do, these cards may not have the lowest interest rates.
CITI DOUBLE CASH CARD (MASTERCARD) You receive back 2 percent for every purchase you make. You receive 1 percent credit when you make the initial purchase, and 1 percent when you pay your bill. There are no annual limits regarding rewards. As soon as you have earned $25, you can request a check or receive a statement credit. There are cards that pay a higher percentage for groceries and a few other categories; however, for other purchases it's hard to beat the 2 percent cash back.
BANKAMERICARD CASH REWARDS CREDIT CARD (VISA) If you spend $500 in the first three months, you receive a $100 sign-up bonus. You will receive 3 percent cash back on gas, 2 percent on groceries, and 1 percent on everything else (cash back for gas and groceries is limited to combined purchases of $1,500 per quarter). In addition, you can transfer balances from another card and pay no interest for a year; moreover, you will pay no interest for a year on new card purchases.
AMERICAN EXPRESS BLUE CASH PREFERRED Annual fee of $75. I have included this card because of the high returns and the sign-up bonus. If you spend $1,000 in the first three months, you receive a $150 bonus. You receive 6 percent on groceries up to $6,000; 3 percent on gas and selected department stores; and 1 percent on all other purchases. This card makes the most sense if your grocery bill is substantial.
U.S. BANK CASH PLUS (VISA) Allows you to select two categories of purchases each quarter from a list (currently of 11) for which you would receive 5 percent back. For example, you might choose department stores (now on the list, which changes quarterly) and restaurants. The upper limit for combined purchases is $2,000 per quarter. You will receive 2 percent back on your choice of gas or groceries; you receive 1 percent on all other purchases. You receive a $25 bonus when you redeem $100 or more. If you do not make a selection from the 5 percent list for the next quarter, you would only receive 1 percent on your purchases.
CHASE FREEDOM (VISA) If you spend $500 in the first three months, you receive a $100 sign-up bonus. Every three months, Chase rotates the categories for which you receive a 5 percent bonus. Fortunately, some of the bonus categories are generic, such as gas stations or restaurants. All other purchases outside the bonus categories earn 1 percent cash back. There is a purchase limit of $300 a year for the 5 percent categories. This card makes sense only when the 5 percent category is one you use regularly.
Most of these cards have annual upper limits on the purchases that qualify for rewards. However, couples can generally double the amount of rewards for the household by applying for each card separately. For example, assume you would receive a significant sign-up bonus for spending a specific amount within three months. Sign up for a card in your name, and include your spouse on the account. After three months, your spouse can initiate an account in his/her name, and include you on the account as well. In this way, you receive two sign-up bonuses — and double the cash amount you can receive in a year.
As long as you pay your balance in full each month, there is no reason not to use reward credit cards for your purchases. The minimum reward you will receive is 1 percent. If you sign up for a card that changes rewards quarterly, make sure you are aware of the new categories that provide the highest rewards. In addition to the rewards, you will have federal consumer credit laws to protect you if you have a problem with the quality of the product or services you purchase.
Elliot Raphaelson is a financial columnist for Tribune Content Agency.
