Which Rewards Card is Right For You?
With credit card offers coming nearly daily in the mail and a bombardment of TV commercials and online ads touting the mega-rewards of this card or that card, it’s enough to make your head spin. How can you figure out what the best reward card is for you?
It depends on how you spend your money, says Odysseas Papadimitriou from Card
Hub.com. As reported on CBS’s MoneyWatch, she says:
“To be truly effective, a rewards card must complement the cardholder’s spending habits… That means the best credit card for people who want rewards is likely to vary from person to person.”
Best to get familiar with your budget, experts say, which means understanding how much you regularly spend in different categories such as your monthly grocery bill, travel, and gas. Utilize your online banking options for this or even outside tools like Mint.com, which can help keep track of your weekly or monthly expenditures. Then try NextAdvisor’s cash-back calculator, which gives you a better picture of how much any given rewards card will pay out and more importantly, can help you determine if your expected rewards will more than cover the card’s annual fee.
So whether you already earn rewards with a credit card, are in the market for one, or perhaps the thought of choosing one is simply exhausting — here’s a review of some of the best rewards cards out there and the types of spending habits they’d be best suited for:
If you want to keep it simple…
Capital One Cash is one favorite among experts for the reason that it’s easy to understand, and it comes with minimal fees. You get 1% cash back on every purchase along with a 50% bonus at the end of the year (effectively a 1.5 percent cash back on every dollar you spend) with no annual fee, and you pay zero interest in the first year. After that 12-month period, you’ll pay between 12.9 percent and 20.9 percent for any balances.
If you spend a lot at the grocery store…
The Blue Cash Preferred from American Express is another front-runner, as this card offers the best rewards on the market for everyday purchases including 6 percent cash back at supermarkets; 3 percent at gas stations and 1 percent everywhere else. This card charges an annual fee of $75, but it promises a $150 bonus for new cardholders (which essentially pays the annual fee for the first two years).
If you’re a commuter and burn tons of gas…
PenFed Platinum Rewards provides the absolute best gas rewards, with 5 points per dollar spent on gasoline at any station. There’s no annual fee, and there’s a $250 sign-up bonus of $250. The catch: you have to join the Pentagon Federal Credit Union, which costs a one-time fee of $15.
If you’re about to make a big purchase…
Chase Sapphire Preferred is noteworthy for its generous bonus for cardholders who charge at least $3,000 during the first three months. The reward is 40,000 bonus points, which are worth $500 in travel accommodations, or $400 in cash. Not bad! This card is also good for travelers as these points can be transferred to any airline’s frequent flier program. Plus, you get two points for each dollar spent on travel and dining, with a once-a-year, 7 percent “dividend” bonus. The catch: there’s an annual fee of $95, but it’s waived for the first year.
If you’re a Costco junkie…
Costco’s True Earnings card from American Express is a great option for Costco shoppers. It’s the only credit card you can use when shopping at Costco and there’s no fee for members. It gives you an annual reward check that amounts to 3 percent of your spending on gas and restaurants, 2 percent on travel, and 1 percent at Costco (and everywhere else).
If you like to travel…
Capital One’s Venture and Venture One are great choices for those who like to travel, but don’t want to be locked in to one particular airline or hotel chain. The Venture card charges a $59 annual fee, but provides two points per dollar spent anywhere. Similarly, the Venture One card provides 1.25 points per dollar, without the annual fee (otherwise the cards are identical). While these are called “points,” each point is worth a penny and to claim travel rewards, the charge will simply be subtracted from your bill. Which one is right for you? Consider whether you’ll spend at least $10,000 a year on the card (this much usage will earn you $200 in rewards on Venture, vs. $125 with Venture One). If yes, the more generous reward card will more than make up for the annual fee — otherwise, go for the no-fee card.
If you LOVE to travel (or must)…
If your relationship to jet-setting is less casual and more of a way of life a la Ryan Bingham from “Up in the Air”– then you’re the perfect candidate for a travel-specific rewards card. Many charge an annual fee, but frequent travelers swear they’re worth the cost. Not only can you earn extra miles for pleasure trips on your most frequently-used airlines, rewards cards can provide first-class upgrades and other perks, which can be even more valuable than earning airfare.
Case in point: Delta’s American Express Reserve credit card. Though expensive — a whopping $450 annually — benefits like a free checked bag on each flight (a savings of $50 per roundtrip), one free first-class companion ticket every year, and access to Delta’s airport lounges (regularly-priced at $450, so the annual fee pays for itself with this one perk alone) are enough to win over frequent travelers. If you’re interested in a charge card — where you pay your balance down every month instead of carrying a balance — than the American Express Platinum Card, priced similarly, has even more perks including a 24/7 travel concierge, Priority Pass access to over 600 VIP airport lounges around the world, and upgrades at partner hotels. To compare the two cards, see this article on NerdWallet.com.
If you’re an airline or hotel loyalist…
However, if you fly primarily on a specific airline like American, United or Southwest, or only ever stay in hotel chains like the Starwood or Hilton – all offer their own attractive reward cards that will rival the perks offered by Delta and American Express. Each are very competitive and company-specific, so check out individual vendors for details.
If you’re going to transfer a balance…
Experts seem to agree that for those who will be carrying a balance, and/or want to transferr their current balance, the Chase Slate card is one of the best options as it offers free balance transfers, while most other credit card companies charge 3% to 5%. You also get zero percent interest on transferred balances for 15 months.
If you’re young or have poor credit…
Credit card options for the young and credit-challenged are far less appealing than for those with excellent credit. But your best bet are the BankAmericard for Students which offers no annual fee and 0% APR for the first 15 months or the Journey Student Rewards from Capital One, which pays 1.25% cash back on every purchase, as long as you pay your bill on time. This is one of the few cards great for students studying abroad, as it doesn’t charge foreign transaction fees.
If your credit isn’t great, try the Capital One Platium MasterCard, which has a high APR (24.9%) but a low, annual fee ($19) which makes it a good option for those with average to so-so credit, as long as you’re able to pay the balance each month. Of course, if you have truly terrible credit, the only way to go is a secured card. Try the Capital One Secured MasterCard –the annual fee is relatively low ($29) and the security deposit is modest.
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