What is the best cash back/points credit card out there?
I would also consider best credit cards for airlines, hotels, etc.
If you only want to use one card, I think the best two options are:
1. PenFed Visa Platinum Cashback Rewards card. It's rewards are 1.25% on everything, 5% on gas, and 2% on groceries, and the rewards are credited to your account every statement. You can become a PenFed member by joining the NMFA and opening a savings account with $5, pretty easy all told.
2. Schwab Invest First Visa card which is 2% on everything (or the Fidelity Visa at 1.5%, or Fidelity Amex also at 2%). This is the best 'everything else' card rate, although you can do better on specialized categories if you're willing to separate your spending. They all require that you reach a certain number of points in order to cash in.
Also worthwhile:
Amazon Visa: 3% on all Amazon purchases, 2% on gas / restaurants / drugstores, 1% on everything else. Worthwhile for the Amazon and restaurants portion to me. Rewards are Amazon gift certificates at 2500 points or cash at 5000 points.
Worthless cards:
Chase Freedom - formerly a great rewards card, the new rewards scheme is complete crap and I haven't used mine a single time since they completely screwed me by changing the scheme with no notice literally right before I was about to cash in (after around 1.5 years of accrual). Typical Chase.
Discover - their Open Road card was formerly a great gas card, but the monthly cap makes it useless. The level to redeem rewards continues to rise, the benefits continue to change in stupid ways, and I particularly dislike their use of the 2 cycle interest calculation method. You can conceivably get some decent cash back if you purchase the right things in the right month, but that's more work than I'm willing to put into it.
Amex Blue Cash - often referred to in the past as the best rewards card because it can go up to 5% (groceries / drugstores / gas) and 1.25% on everything else. You only hit those numbers after spending $6000 and the reward is only dispensed once a year. I don't think it's worth it given the rates you can receive from day one on other cards.
Citi ThankYou rewards cards - Citi had a few reasonable rewards cards, but they have continually increased the number of points required to receive cash or cash equivalent items from their store. The cards advertised as 5 points per dollar wind up very far from 5% back. Their non-ThankYou cards are fairly lame as well.
Any card with a 1% cashback rate - 1% should be considered the bare minimum rate, since there are a million cards out there that offer it. You can pretty easily do better.
7 Answers
There are two cards that give you 2% cashback on all purchases. One is the Fidelity Investment Rewards Amex, and the other is the Charles Schwab Visa. Both offer 2% on all purchases, deposited into an account with either Fidelity or Schwab.
The Chase Freedom card offers 1% on all purchases and 3% on select categories that are changed every few months. I use this as a backup to my Fidelity Amex, since not all merchants take Amex.
I agree with Eric, the Schwab Visa is pretty awesome at a 2% universal return, however as for Amex, I prefer the Costco TrueEarnings card.
With TrueEarnings, you receive 3% for gas and eating out!! 2% for travel, and 1% everywhere else, including Costco. If you have a Costco Executive membership, you can add an additional 1% to Costco gas and store purchases.
The only downside is that you will be charged for the Costco membership $50 for the regular and $100 for the executive per year... but I have been a member for 4+ years now and my rebate checks have never come in below $200.
If you like traveling I'd recommend looking at CapitalOne's offerings. If you have excellent credit they have a No Hassle Miles for Professionals that gives 2 miles for every $1 you spend. The No Hassles part is really good since there are no blackout dates or weird restrictions. It's as simple as buying your ticket (from any vendor you want) and then they just reimburse you. Simple.
But where it really gets good... CapitalOne is the ONLY card that I know of that doesn't charge you an international transaction fee on purchases made outside of the US. Every other card I've seen charges a 2-3% transaction fee for international purchases. So for travelers, CapitalOne is by far the best card in my book.
The one downside is they are very stingy with credit lines and credit line increases so it can be a challenge to build up points unless you vigilant about paying off the balance ASAP.
Schwab Invest First Visa card - 2% cashback on everything.
There's a good read in this NYTimes article about the true cost of rewards cards:
http://www.nytimes.com/2010/01/09/your-money/credit-and-debit-cards/09money.html
And they link to this neat calculator that tells you how much more merchants pay based on you using a particular card with them:
http://truecostofcredit.com/calculators/tax_calculator_reports/new
If you only want to use one card, I think the best two options are:
1. PenFed Visa Platinum Cashback Rewards card. It's rewards are 1.25% on everything, 5% on gas, and 2% on groceries, and the rewards are credited to your account every statement. You can become a PenFed member by joining the NMFA and opening a savings account with $5, pretty easy all told.
2. Schwab Invest First Visa card which is 2% on everything (or the Fidelity Visa at 1.5%, or Fidelity Amex also at 2%). This is the best 'everything else' card rate, although you can do better on specialized categories if you're willing to separate your spending. They all require that you reach a certain number of points in order to cash in.
Also worthwhile:
Amazon Visa: 3% on all Amazon purchases, 2% on gas / restaurants / drugstores, 1% on everything else. Worthwhile for the Amazon and restaurants portion to me. Rewards are Amazon gift certificates at 2500 points or cash at 5000 points.
Worthless cards:
Chase Freedom - formerly a great rewards card, the new rewards scheme is complete crap and I haven't used mine a single time since they completely screwed me by changing the scheme with no notice literally right before I was about to cash in (after around 1.5 years of accrual). Typical Chase.
Discover - their Open Road card was formerly a great gas card, but the monthly cap makes it useless. The level to redeem rewards continues to rise, the benefits continue to change in stupid ways, and I particularly dislike their use of the 2 cycle interest calculation method. You can conceivably get some decent cash back if you purchase the right things in the right month, but that's more work than I'm willing to put into it.
Amex Blue Cash - often referred to in the past as the best rewards card because it can go up to 5% (groceries / drugstores / gas) and 1.25% on everything else. You only hit those numbers after spending $6000 and the reward is only dispensed once a year. I don't think it's worth it given the rates you can receive from day one on other cards.
Citi ThankYou rewards cards - Citi had a few reasonable rewards cards, but they have continually increased the number of points required to receive cash or cash equivalent items from their store. The cards advertised as 5 points per dollar wind up very far from 5% back. Their non-ThankYou cards are fairly lame as well.
Any card with a 1% cashback rate - 1% should be considered the bare minimum rate, since there are a million cards out there that offer it. You can pretty easily do better.
This depends on what you want to redeem the points for. I don't know much about cash back cards because I honestly would prefer points, but Chase has 2 great points cards.
For travel, their Chase Sapphire card is amazing. You get 1 point for every dollar that you spend with the card and a bonus of 15,000 points after you spend $1000 in the first 3 months. They also have a travel booking site for the points that causes your points to be worth an additional 25% if you use it to book your travel. In addition they give you a 7% annual dividend on all new points. There is an $85 annual fee for this card, but it's waived your first year.
For all around rewards points, their Freedom card is great. If you have a checking account with Chase, you get bonuses to your rewards earning power of 10% extra points per dollar spent, plus 10 bonus points on every single purchase. This is in addition to the 1 point per dollar that you earn. You also get 1000 bonus points after your first purchase with the card. There is no annual fee.