With banks instituting fees for debit cards I am considering getting a credit card and using that instead of my debit. I normally only spend $300-500/month on my debit card, with about half of that on gasoline and most of the rest for grocery and online purchases.
I don’t need a low APR since I would pay it off in full each month and wouldn’t carry a revolving balance. I am just looking for a card with good rewards and no annual fee since I am currently using a debit card with no rewards that may start instituting annual fees.
I have been to websites like bankrate and creditcardguide to look around. The Chase Freedom card seems like the best bet.
Is 5% cashback about as high as cashback goes on credit cards? What is a good card if you spend $150/month on gasoline? Do any cards offer special rewards for buying on amazon?
There is no card that gives 5% cash back on all purchases. The best you can find will give 5% cash back on SOME types of purchases. I believe the highest consistent cashback rewards you’ll find are in the 1.5-2% range.
I have a Discover More card, which gives 1% cash back on all purchases, and 5% cash back on some types of purchases. The 5% bonus is applied to different groups of things depending on the particular promotion going on. Sometimes, 5% cashback will be for travel expenses, like hotels or airfare. Other times, it will be for grocery stores, or restaurants, or gas. It’s always something useful, and applies to a pretty wide range of expenses.
Another thing to watch for is cards that have “limited” cash back. You might get 5% back on all purchases, but it only counts the first 300 (for example) you spend each month, or the first 2,000 you spend quarterly. The discover card I mentioned has unlimited cash back, which is nice. I use it the way you propose to use yours, basically to replace a debit card and pay off the balance in full each month.
I like my REI Visa card. 1% dividend on all purchases, and about 10% on non-sale REI purchases. My REI membership cost ten bucks for life (I think it’s $15 now). Dividends are paid annually, usually in February. By using my REI Visa I’ve gotten two pair of Vasque hiking boots, two or three pairs of shoes, a Yakima rack system for my Jeep, two or three Pendleton blankets, an assortment of clothing, loads of socks, a couple of jackets, camping gear and other stuff REI sells, Christmas presents for friends and family, and cash. My current dividend balance is about $300. I thought about cashing it out, but I need a new backpack.
The nice thing about an annual dividend is that I get it all at once instead of having a small amount that I wouldn’t notice if I got it monthly. Since I shop at REI anyway, it’s it’s useful to me. I use my REI car for most purchases (gas goes on my airline cards, but most everything else is on the REI card) so the balance builds up nicely.
The REI sounds cool but I don’t buy a lot of outdoor equipment, plus I read the stores that sell REI products with the 10% cash back are mostly located on the west coast. But it is a cool idea, a specialty card that saves you on certain kinds of purchases. But most of my debit card purchases are at the gas station, grocery or amazon.
I have an American Express Blue Cash Preferred card that pays 6% at grocery stores. The trick is to buy gift cards from the grocery store (if your preferred store sells them) to use for your other non-grocery purchases. Where I usually shop has the added benefit of the gift card purchase price going towards my fuel rewards points to use at affiliated gas stations to save on fill-ups. The draw back to this card is the $75 annual fee, but I made up for that in short order with Amazon and Home Depot gift card purchases.
Nearly all of my purchases are not at REI. I use the card there, of course; but I use it for everything else. That one percent adds up over the course of a year.
I think the idea is to use a card whose rewards are useful to you. I use my dividend at REI, but I can also get cash. If you’re into traveling, then airline miles might be useful. If Amazon has a card and you shop there, that might be a good one to have. I collect Alaska Airline miles, and have enough ‘miles’ on it to take two or four trips. (I don’t keep track.) Unfortunately I mostly flew Alaska Airlines between L.A. and Washington. Now that I live in Washington I don’t have anywhere to go. Maybe I’ll take a trip to Hawaii to burn off the miles, and then I can cancel the card and stop paying the $75 annual fee.
Oh, about Amazon: Coin Star gives Amazon gift certificates that avoid the Coin Star fee. And I have a bucket of change lying about…
I use the Chase Freedom Rewards Card. 1% cash back on every purchase, and quarterly specials that pay 5% cash back on different categories. For example, one quarter might give you 5% on gas, hotels, and airlines. Next quarter might be groceries and restaurants.
There is a $1500 total limit per quarter on 5% rewards (still the regular 1% after that), but for purchases like groceries that you make anyways, that’s a free $75 in your pocket after 3 months.
If you have the discipline to pay it off in full each month, it makes more financial sense than using cash.
I use the Discover More, too. I used to be very conservative about using my credit card, as I hate being in debt, but my sister made me see the light. I pay my card off weekly so that it’s more like writing a check, and I don’t get a huge bill at the end of the month. I never carry a balance. But I put everything I can on the Discover, and when I need cash, I get it at the grocery store and use my credit card for that, too, as I get the cash back bonus on it. It adds up. This year, my bonus has paid for airfare back to Chicago and will pay for all my Christmas purchases. Every little bit helps.
Another benefit: If you use one card for all of your monthly purchases, you can look over the bill and figure out how in God’s name you spent $6500 on stuff. Then it leaps out at you how much those morning lattes and lunches out are costing you.
That happened to me, with the daily energy-drink from the office vending machine (which accepts credit cards). I’ve been energy-drink free for awhile now.
I actually have the card, and for us it’s worth it. The rewards aren’t limited to Amazon points any more, actually, which is sort of nice (nowadays you can even apply them to your card balance). The ability to directly make purchases on Amazon with your points balance is somewhat new, as well - you used to have to get your monthly certificates in the mail, then apply them like gift certificates. Now you can just use them at purchase time.
Anyway - the best rewards card is one that you’ll use ONLY for purchases you can pay off at the end of the month, obviously - otherwise the interest charges more than make up for the benefits.
If you want to go overboard on collecting something of value through signing up for credit cards, I think it is still hard to beat the sign-up bonuses for travel credit cards.
The best single current promotion I can think of is a set of two AAdvantage cards with a bonus of 75,000 miles/card that you can apply for simultaneously and net 150,000 AAdvantage points in a few months without paying annual fees for the first year. That 150,000 points can get you a first class ticket to Tokyo that might retail for $10,000, although obviously you probably wouldn’t go out and buy that ticket on your own for that price so it’s somewhat of a debate for to fairly value such awards. This game does require a small amount of sophistication; in addition to paying off the balance in full every month as you have already alluded to, you need to stay on top of things like making the spending bonuses (usually not overly onerous), cancelling the cards before they reach annual fees, etc.
All of my knowledge on this topic comes from the FlyerTalk boards. Are we still not allowed to directly link to other boards? Either way, with Google, it’s trivial to locate.
I use the Amazon rewards card but I spend a lot of money at Amazon, and very little of my monthly use goes to gas or even groceries.
One tip on the credit card - if you are going for maximum rewards, use your credit card! Nothing wrong with getting your 1% back and paying off the bill at the end of the month instead of paying cash on the spot. Pocket the cash and get the rewards!
I use the Discover one that pays cash back. I earn about $200 a year and pay non annual fee. I apply all $200 to my balance. I never accrue interest, so Discover pays me $200 a year for nothing.
Another fan of the USBank REI card here. I got mine when MBNA got bought out by BofA and the service went to shit. Mostly it means free shoes. REI is one of the few stores that stock size 14 shoes, so that is where I would buy shoes anyway.
Aside from avoiding annual fees, you could decide the fee is worth it depending on your usage. We did pay a frequent-flier card annual fee for several years, because we were saving up miles for a specific trip. The miles we had through flying, plus the ones from having the card, added up to enough to take us + 3 kids to California - first class. We probably spent 200 dollars during the time we held the card, which was obviously a lot less than even a single coach seat would have been, so we found the 200 bucks to be well-spent. YMMV of course.
I looked into this maybe a year ago and the best I could find (excluding initial promotions, “gaming” the system by buying gift cards, etc):
Fidelity Retirement Rewards American Express - Flat 2% cash back on all purchases, all the time. But the catch is it goes directly into a retirement account with fidelity - so you get the highest rewards because they are trading profit on the card for profit on your investments. Also offers a Visa at 1.5% back. Fidelity Rewards Visa Signature Card | Credit Card | Fidelity
Amazon.com/Chase Freedom, and a few others are consistent 1.0% with higher rewards on certain categories - you have to match with your usage. Watch Chase Freedom in that you only get more than 1% on the categories if you remember to register each quarter. Chase Freedom used to be a better card with fixed categories, no registering, and cash directly back to your statement instead of save up points for a check, but that changed.
The next best group of cards were cash back/discounts for particular stores, and you had to match to what you use. For example Target card at 5% back, Menards card, Old Navy card, were the best cards to use at their particular stores.
At least when I looked at no point were airline/miles cards competitive at all (except if you jumped from one to another to get the initial bonuses) - they mostly had annual fees and even where they didn’t the best cash cards resulted in more $ for tickets to buy outright than the “miles” would get you.
Another Discover fan here. You need to go to their website every so often to sign up for the latest monthly deal, but they make doing so just a single click. We save our cashback and pay off a huge chunk of our Christmas bill with it. We did a massive home improvement project the month they were giving 5% back on hardware store purchases.
We have some other rewards cards, but several of them send you gift cards for your money, which we can use at the grocery store but which is more of a pain than Discover. We’ve found the “gifts” on these cards to be relatively overpriced, and lots of store credit rewards don’t give full value. We don’t do enough shopping any one place to make a card like the Amazon card worth it.