Best Cash-Back Rewards Credit Card
Find the Best Rewards Cards
In the right hands a frugal and disciplined shopper can use rewards credit cards to save on every purchase. Finding the best cash-back or rewards credit card for your shopping habits can be tricky, though. Each card comes with slightly different rules, unique rewards programs, and fees that can reach several hundred dollars a year. Luckily, consumers can turn to several resources to find the right card.
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Sites like BankRate.com and NerdWallet.com offer filters that narrow the hundreds of credit card options to the few that best fit your situation. Your credit score is one factor that affects which cards or interest rates are available to you, a fact that CreditCards.com takes into account when helping you find the best cash-back or rewards credit card. By supplying your name, address, and Social Security number, the site returns a list of cards you qualify for. If you want the card with the most benefits and lowest fees, any of these sites can help.
Regardless which card you choose, you should be earning something back on every purchase. The first decision to make regarding a new card is what type of rewards program you want. Rewards programs generally fall into three categories: cash back, miles for air travel, and points for hotels and consumer products. In each case you receive up to five percent of the amount spent using the card in the form of a reward. Cash back is clearly the most versatile option (you choose how to spend the money) but the miles and points programs often return greater value.
One of the better deals is Chase's Ultimate Rewards program, which covers consumers holding a variety of cards. Shoppers with the no-fee Chase Freedom card earn one percent cash back on every purchase, plus an additional four percent (up to $1,500 a quarter) on select categories, such as movie theaters and groceries, which rotate throughout the year. The percentage back is stored as points that can be redeemed for cash, gift cards, or consumer products. Chase Sapphire Preferred card holders (a rewards credit card with a $95 annual fee) earn points (two points for each dollar spent on dining and travel) that can be transferred to airline, hotel, or rental car programs in addition to a 20 discount (i.e., in required points) on travel booked through the Chase travel portal.
Similarly flexible programs are offered by American Express, Citibank, and Capital One. Barclays recently introduced several new cards and is slowly growing its credit card rewards program, which currently lets users apply earned points towards credit card payments.
Another type of rewards card is the store-specific credit card; think JC Penney, Macy's, Target and other brand-name credit cards. Some of these cards come with benefits at the associated stores, such as coupons, free shipping, or extended return periods. Several store cards also offer generous rewards programs. Frequent shoppers at Target get five percent off all Target purchases when using the company's REDcard, for example. Ace Hardware, Sony, and REI reward cardholders with one percent cash back on all purchases and a five percent cash reward for items purchased at the associated store.
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For consumers who prefer a credit card with a low annual percentage rate (APR), rewards cards are not the best choice. Rewards credit cards often charge high interest rates, so it's costly to maintain a balance. If you happen to find yourself in debt to a credit card with a high APR, consider transferring the balance to a new card. Chase's Slate card has no annual fee, offers free balance transfers for the first 60 days the account is open, and a zero percent APR for 15 months. Heads up here: The interest rate can climb to 21.99 percent after that, so take advantage of the interest-free period and pay down your balance.
Savvy spenders use credit cards to earn thousands of dollars worth of rewards every year and know how to work around paying fees. But not everyone has the time or interest to track down all the information and execute the plays. If you're looking for a way to navigate the fine print, CompareWallet.com posts a credit card screener that lets you see the fees attached to which cards.
With any reward or cash-back credit card -- even the best -- avoid the temptation to spend what you don't have. Clearly there's a strong incentive to buy because you'll get as much as five percent back, but if you don't or can't pay the full bill on time you'll end up paying an extra 15 percent or more.