Some people warn against the risks of using credit cards, but if you use them in the right way, you can see a lot more rewards than losses. This guide is designed for savvy credit card users who want to get the greatest number of points back on their spending.
Finding the best rewards credit card depends on your habits and what kind of points are most useful for your lifestyle. Read on to find the best credit card rewards for your unique spending profile.
Choosing the Best Rewards Credit Card: Where to Start
When choosing the best rewards card, are you motivated to get every last cent possible, or would you rather go for simplicity? To figure out your answer, first, ask yourself a couple of questions.
Are you okay thinking about which card is best to use every time you make a purchase? Are you fine with spending time tinkering with airline mile redemption charts every time you want to make use of your rewards?
Most people answer no to these questions. They don’t want to think about strategy whenever they make a purchase on their credit card. If your answer is no, as well, then you should look for a simple, universal rewards card.
If you’ve used credit cards for a while and want to take a more hands-on approach, then you might be interested in a more complex rewards card. These complex cards put some of the work in your hands to maximize your rewards.
Read on for to compare credit cards with the best rewards, starting with the simple ones that give you rewards back on all your purchases across the board.
Best Rewards Credit Cards: 3 Simple Options
Simple rewards credit cards give you points or cash back on every purchase, no matter what store you use or what time of year you shop. When looking for a simple card, you should make sure you can spend the rewards anywhere.
You might get rewards in the form of cash, a credit statement, or gift cards that you can use at any store or online vendor. The best rewards credit cards earn at least 2% back on purchases.
Here are my suggestions for the best rewards credit cards with a flat rate.
- Citi Double Cash Back: The Citi card has a flat rate of 2% cash back on all purchases and no annual fee.
- Fidelity Rewards Visa Signature: Like the Citi card, Fidelity gives you 2% back on everything and has no annual fee. You can use rewards with a minimum redemption of $50.
- Blispay Visa: 2% cash back on all purchases and no minimum redemption requirement or annual fee. The Blispay card also offers 6-month interest free financing on purchases over $199.
2% cash back is a competitive rate for the best cash back credit cards today. Do you know where that cash is coming from? Credit card companies charge an “interchange fee” to merchants. If you spend $100 at CVS on a Visa card, then CVS only gets about $98, and Visa takes $2. If you get cash back, then you’ll get some of that interchange fee back yourself.
While a simple rewards card is the best choice for a lot of people, some would rather get strategic about specific types of rewards and spend categories. If you feel comfortable with conditions that are a little more complicated than these flat-rate cards, then you might want to apply for a complex rewards card.
Read on to learn what you need to know about complex rewards credit cards, following by a credit card comparison.
Complex Rewards Cards: What You Need to Know
Some rewards credit cards give you bonuses for spending in particular categories or reward points for types of purchases, like travel. You should look for a card that rewards your spending habits and gives you the type of points most useful to your lifestyle.
If your card gives bonus points for spending in certain categories, then this bonus should exceed 2%. For instance, Chase Ink is a good card for business owners, because it offers 5% back on all office supply spending. Other common categories with bonus rewards include restaurants, gas, and travel.
Some cards change their bonus categories quarterly or give rewards for shopping at specific stores. To be honest, I don’t know anyone who’s benefited much from these changing categories. Since most people’s spending habits stay relatively consistent, it’s generally best to avoid cards with rotating bonus categories.
Some of the most popular complex rewards cards have to do with travel. You might get double points for every dollar you spend on travel, or your points could be worth more if you spend them on certain airlines, hotels, or via a credit card’s own search engine, as with the Chase Sapphire card. If you often fly a specific airline, then a card that gives points toward that airline could be most useful.
Other travel cards let you use points on any travel across the board, like the Barclays Arrival Plus card. You don’t get a point boost for booking in a specific way, as with Chase Sapphire, but you do have the freedom to redeem your points toward any travel purchase you make, regardless of the airline or hotel.
Since there are a lot of complex rewards credit card offers, how do you figure out which credit card deals are most beneficial for you? Read on for my tips on how to choose your best rewards credit card.
Key Tips for Choosing a Complex Rewards Card
To figure out the best rewards card for you, you should take a look at your spending in the past year. Does any category, like gas, restaurants, office supplies, or travel, constitute more than 20% of your total spending? Where do you put most of your money? Which categories barely represent a blip on your budget radar?
Once you’ve identified your biggest spend category, you should seek a card that gives bonuses in that category. If you prefer certain airlines or hotels, then you should look to get points for those companies. If you’d rather search around for the best travel deals, then look for a card with points that you can use on any travel-related purchase.
There’s no single best rewards card for everyone. Rather, the best card depends on where you spend your money and where you’d reap the best rewards.
As you search, you should also keep an eye out for a couple of potential drawbacks. Read on for some key warnings you should heed as you apply for a rewards credit card.
Choosing a Complex Rewards Card: A Few Warnings
When you’re searching around for the best card, keep a critical eye on what the credit card deals offer. Often, credit card companies exaggerate the value per points, or they introduce a lot of complicated steps that dictate when and how you can redeem points.
You should also be skeptical of the value of rotating categories. Unless you’re prepared to change up your spending on a quarterly basis, then you probably won’t get very much from this policy. You should get a card that matches up with your historical spending profile, rather than change your habits to match a card.
To give one example, you can use 100,000 points on Singapore Airlines to fly to Singapore in a suite that normally costs $10,000. If you assume that these points are worth a lot on Singapore Airlines, then you’re ignoring a key fact: you probably wouldn’t have paid for that $10,000 flight to begin with! Points are only worth as much as what you would have paid for a flight anyway.
With these considerations in mind, what are the best complex rewards credit cards? Remember that these are the top credit cards in their categories, not necessarily the best for you. You have to take a look at your spending habits to determine that.
Best Complex Rewards Credit Cards for 2016
These are some of the best credit cards with complex rewards that give bonus points or rewards in specific categories, like travel, gas, and restaurants. Consider where you spend your money, compare credit cards, and choose the one that would give you rewards for the spending profile that you already have.
- Amex Blue Cash Preferred: gives you 6% back on groceries (capped at $6,000 a year), 3% on gas and department stores, and 1% on everything else. It offers a $150 sign-up bonus and has a $75 annual fee.
- Chase Sapphire Preferred: gives you 2X points on restaurants and travel and a point for each dollar that you spend on everything else. You’ll also earn 50,000 bonus points if you spend $4,000 in the first three months. You can redeem points as cash back or use them to book through the Chase search engine. If you use the Chase search tool, then your points will be worth 25% more. The downside of this card is that it charges a $95 annual fee after the first year.
- Capital One Venture Rewards: gives you 2x miles per dollar on every purchase, and you can redeem travel points on any airline or hotel. There’s an annual fee of $59 after the first year. If you spend $3,000 in the first three months, then you get a bonus of 40,000 miles.
- Citi Thank You Card: this card is good for those who love to eat out. You’ll earn 2X points on every dollar you spend at restaurants. You’ll also get a bonus of 20,000 points if you spend $1,500 in the first three months of opening. The Citi Thank You Card has no annual fee.
Travel credit cards, gas credit cards, and other rewards cards can give you great benefits if you use them responsibly. If you miss a payment, though, then you run the risk of falling into the pit of credit card debt. Below is my advice for anyone looking to use a rewards credit card.
Advice for All Rewards Cards Users
Rewards cards are, as the name implies, best for getting rewards. They’re not necessarily the best cards in terms of other options, like interest rates.
However, unless absolutely necessary, you should never carry a balance on a credit card. Credit cards have high interest rates and fees, so you should do everything that you can to stay within your budget and always pay off the full balance on your credit card from month to month. Not only will your debt grow exponentially if you don’t, but you’ll also probably lose any rewards you may have gained in the process.
A good rule of thumb is this: if you’ve carried a balance for more than two months in the last two years, then rewards cards are out. Don’t touch a rewards credit card if you have problems paying off your full balance.
You should also look for hidden limits on rewards. Some cards give you 5% on categories, but only up to the first $500 you spend. That means you could get a grand total of $25 back and no more. Look for rewards cards where the reward spend limit is at least $10,000 per year, or at least higher than your usual spending.
Finally, you should also be cautious about cards that offer great rewards up front but then have poor terms after a few months. While that initial payoff is great, the card itself may not do much for you over time. You don’t want to open and close too many credit cards, either, as that kind of behavior can hurt your credit score.
While rewards cards can be a great way to earn money back on the spending that you already do, you also want to explore your options and make an informed decision to choose the best rewards credit card for you. In closing, let’s go over the key points you should remember about applying for and using a rewards credit card.
Using a Rewards Credit Card: Final Thoughts
When getting a rewards credit card, the guiding principle is simple: don’t bite off more than you can chew. As long as you know what you’re getting into, you can reap great benefits and earn money at the same time as you’re spending it.
If you’re new to a rewards card or simply prefer a flat-rate reward, then you should get a general card, like the Citi Double Cash Back, that gives you at least 2% back on any and all of your purchases. If you want to get more strategic or have experience redeeming travel points, then you can look for a card that rewards you for spending in certain categories. Frequent travelers, for instance, can gain a lot from a travel rewards credit card.
As you gear up to apply for a new card, take some time to reflect on your personal spending habits and research different policies. With a little time and thought, you can find the rewards credit card that will give you cash or points back on the money that you’re already spending in your day-to-day life.