Cash Back Credit Card Review
5% Cash Rewards? Really?
If you are anything like me then you may be asking yourself, “What is the best cash back credit card?” The credit card companies are all promising 5% cash back rewards on you purchases, but they don’t give you the details you need to make a good decision.
What do you actually have to do to get these rewards and what are the stipulations attached to these cards? Click here to jump directly to the best 3 card reviews.
You Have to Read the Fine Print
I did some basic research to better understand the best cash back credit card programs. I have read the fine print on a few dozen of these cards, I have actually tried several of them, and I have provided information about the best 3 I could come up with.
Like I said, there are some stipulations, but I personally think that cash back credit cards are the best way to go if you want to maximize your reward potential.
Credit Card Risk
Be forewarned, credit cards can potentially do a lot of financial damage and many people have met their demise from their abuse. Before you sign up for one of these cards it is good to ask yourself why credit card companies are able to give you so much cash back on your purchases.
They can give you as much as 5% cash back because:
- A credit card loan is the most expensive type of loan that you can take out.
- Most people that use them carry a balance and pay massive finance charges.
- They charge merchants a fee between 3% and 5% every time you swipe your card (inflating the cost of goods).
- They expect and encourage you to spend beyond your budget.
If you carry a monthly balance and are not extremely frugal then don’t get a credit card! Pay cash or use a debit card like the one in Bank of America’s Keep the Change Program.
Just Control Your Spending
If you can be frugal and are able to control your spending, then you should probably take advantage of a cash back credit card. Why not? Over the last few years I have received at least a couple thousand dollars back in the form of cash back and free hotel stays.
Cash back cards are my favorite type of credit card because you can use the money for whatever you want. There are no stipulations and you know exactly how much money you are getting back.
Cash Back VS Air Travel Rewards
Credit cards solely for air travel are a big ripoff in my opinion. The terms are always changing, the most you can get is 2 points per dollar, and the companies are always filing for bankruptcy. I travel between the east coast and the west coast a few times per year and can usually get a flight between $250 and $400.
Lets say that you have a great airline reward card that pays you to 2 points per dollar and you need 25,000 to get a free flight. That is a spending requirement of $12,500 for a reward of $250 to $400. If you convert that reward into cash it only equals a 3.2% reward at best if you use it for a ticket valued at $400. It’s only a 2% reward if redeemed for a $250 ticket. The numbers just don’t add up to anything great.
Might As Well Pay Yourself
I use credit on everything except for fuel from the discount gas station in my neighborhood that only excepts cash or debit transactions. Everything else goes on the card and if you can stick to a budget then a cash back card can be like giving yourself free money!
So.. Who has the Best Cash Reward Card?
The following cards can provide you with at least 5% cash back rewards if used correctly. I have the American Express Blue Cash and the Chase Freedom card. I was not able to get the Discover More card because I already have 2 other cards from Discover, but I think it is a good one if you are disciplined about planning your purchases.
It would actually be a great idea to combine the American Express Blue Cash card with the Chase Freedom or Discover More card. That way you could get the higher tiered rewards in more shopping categories.
#1 AMEX Blue Cash
5% Cash Back
American Express offers a one of the best no-fee cash back cards out there and actually pays you 5% on your purchases at supermarkets, gas stations, and drugstores in addition to 1.25 % on everything else you buy.
Good for Big Spenders
This is a great card, but one thing to keep in mind is that it pays a lower cash bonus until you spend $6,500. After that the 5%/1.25% cash reward will kick in.
The beginning tier is 1% for gas, groceries, and drugstores and 0.5% for everything else. It is still probably the best cash back card around because there is no limit to the 5% rewards you earn beyond that point.
Additional Discounts
You will also get a discount on Hertz rental cars, Marriott hotel stays, and few other items. This card is the best thing out there for big spenders and has been ranked as such by Forbes magazine.
#2 Chase Freedom
0% APR for 12 months
The Chase Freedom credit cardSM is offering 2% cash back on airfare booked through their site, a 5% bonus in categories that change quarterly, and 1% on everything else. They also have a 0% balance transfer offer for 12 months; just watch out for the transfer fee associated with it.
The Chase reward was just increased from 3% to 5% as of March 2010!
Shopping Bonus
You can also get up to a 20% bonus with their online shopping offers, but they are typically less. You can save 6% at Target, 4% at Marriott, 4% at Home Depot, etc. This is a fairly significant savings and there is a good selection of merchants to choose from.
Other Ways to Get Rewards
One thing to keep in mind is that you need to enroll quarterly in order to stay eligible for the bonus category discounts. The Chase FreedomSM card offers lots of ways to earn extra rewards and 5% is the highest out there. The 2% cash back on airfare isn’t bad if you travel frequently either (see travel rewards for good travel cards).
#3 Discover More
Great Card for Planners
The Discover? MoreSM card is a great card for meticulous planners and offers a 5% bonus in several categories that change quarterly. This card can be used effectively as a supplement with other cash back cards because it pays 5% in categories not covered elsewhere. It also pays 1% on everything else.
The Discover? MoreSM card offers a 0.25% reward on your first $3,000 in non-bonus category purchases before it kicks up to a full 1%. The reward also stays at 0.25% for purchases at warehouse stores like Sam’s Club and Costco. Sam’s Club only takes Discover charge cards last I heard.
5% Reward Categories
You can get a huge 5% reward in their quarterly categories. For instance, purchases made from January to March give you a 5% reward on airfare, hotels, cruises, and car rentals so make you travel plans during that time frame. April through June gives you a reward at home and fashion stores. If you plan your purchases carefully then this card can work out quite well for you.
Bonus Rewards
Discover also has an online shopping network that gives you a 5-20% discount on products and if you redeem your reward points for gift cards you can get even “more” for your money.
A 5% reward is great, but what makes the Discover? MoreSM Card even better is the additional gift card bonus that is sponsored by 100+ merchants like Bed Bath and Beyond, Borders, and Gap!
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