What Are The Best Credit Card Rewards Programs?

We cover the basics of credit card rewards programs.

Rewards credit cards are a great invention: you’re able to receive cash back, earn points and even pay down your mortgage by simply paying for the things you already do on a daily basis. If you use these cards in the way they are intended, they can prove to be very beneficial to your bottom line. I’d like to review the different credit card rewards programs that are available out there and maybe we can start a discussion on which ones are worth checking out.

What Are The Best Credit Card Rewards Programs?

According to Yahoo! Finance, about 40% to 45% of credit cards are linked to rewards programs and a quick search at Bankrate shows us that there are plenty of card issuers with different programs of this sort. Here’s a cursory look at some of them:

Cash Back Rewards

For cash back, there are some recognizable names that deliver reasonable rewards:

Credit Card Rewards Type Notes Chase Freedom Card Cash Back Up to 3% cash back, No annual fee, $50 cash bonus Discover More Card Cash Back Up to 5% cash back bonus, No annual fee Discover Student Card Cash Back Up to 5% cash back bonus, No annual fee Discover Motiva Credit Card Cash Back Up to 1% cash back rebate, No annual fee American Express True Earnings Card Cash Back Up to 3% cash back, No annual fee, $25 cash bonus Visa Black Card Cash Back Exclusive rewards plus 1% cash back, $495 annual fee

Discover More offers a $50 cash back bonus once you sign up and meet some basic spending requirements. The cash back rewards reach 5% for typical spending categories like gas, restaurants and travel. Discover also has other cash back cards, like the Discover Open Road card, which rewards you with a hefty 5% in cash back for gas and other purchases, and the Motiva card, which I don’t find as attractive since you only earn up to 1% cash back at best (once you spend over $3,000). Motiva does have what’s called a “pay on time” bonus though. For more thoughts on Discover, check out this post on Discover credit card rewards and the Discover More card.

American Express also has a few cards that give you cash back, including the True Earnings card and Blue Cash. For more on these, check out this discussion on American Express rewards and the American Express Blue cash card. There’s also Bank of America’s Accelerated Cash Rewards American Express Card which offers you the chance to earn 1.25% cash back on every dollar you spend.

A few more cards are outlined in this post on the cash back cards. For many of these programs, you can get the cash rewards via check or statement credit, or you can opt to deposit the amount to your checking or savings account.  You may also want to ask a few questions:

• Can you redeem your rewards in increments?
• Is there a limit to the amount you earn?
• Will you automatically receive cash back or do you have to redeem your rewards?
• When will your rewards expire?
• Does the card have an annual fee?

Points Rewards For “Stuff”

Other than cash, most other programs allow you to earn points which you can redeem for things like merchandise, gift cards, groceries, events, travel perks and so forth. Here are some of the more popular credit cards in this category:

Credit Card Rewards Type Notes Chase Sapphire Credit Card Point Rewards Unlimited points, Bonus: $100 cash or 10,000 points, No annual fee Citi Forward Card Point Rewards Balance transfer card, No annual fee Citi Forward Student Point Rewards Balance transfer card, No annual fee Citi® mtvU™ Platinum Select® Visa® Card Point Rewards Balance transfer card, No annual fee Citi PremierPass Elite Level Point Rewards Earn points for every purchase, $75 annual fee American Express Preferred Rewards Gold Point Rewards Earn points for every purchase, $125 annual fee Visa Black Card Point Rewards Exclusive rewards, $495 annual fee

The Citi ThankYou Points network is a familiar one, which is the program linked to Citibank’s cards: the Citi mtvU Platinum Select Visa card and the Citi Forward Visa card (which is a personal favorite) are also both good balance transfer credit cards with no annual fee.

There’s also Capital One with its heavily advertised No Hassle Points Rewards card. Using it, you could earn 1 point per $1 spent on regular purchases, and 5 points per $1 spent at gas stations, major grocery stores, and drugstores. Your points don’t expire and aren’t capped as long as you have the account, but did they drop the $29 annual fee? The rates for this card also jump up significantly after a short 0% APR intro period, so you’ll want to think about this.

Travel Rewards: Miles and More Miles

For frequent travelers, getting rewarded with air miles is just as desirable.  Some noteworthy travel credit cards:

Credit Card Rewards Type Notes Discover Miles Credit Card Travel Rewards 12,000 bonus miles, No annual fee Escape By Discover Card Travel Rewards Unlimited double miles, $60 annual fee Citi PremierPass Elite Level Travel Rewards Top pick by Kiplinger’s, $75 annual fee Platinum Delta SkyMiles Airline Rewards 20,000 bonus miles, $150 annual fee Delta Reserve Credit Card Airline Rewards Bonus miles, $450 annual fee Starwood Preferred Guest Credit Card Best Hotel Rewards Up to 6 free nights, No annual fee for first year, $45 thereafter

Citibank has the Citi PremierPass Elite Level, which earns you double the points on special categories for gas, drugstores, commuter transportation, parking and supermarkets, and regular points for all else. But you also get points for miles flown.

Discover has a couple of travel rewards cards such as Discover Miles and Escape by Discover. The difference I’m seeing is that Escape may be more attractive to more active travelers because the rewards are more generous (you get miles upon miles on every turn: 25,000 bonus miles earned across 25 months and unlimited double miles for all purchases), while Miles offers 12,000 bonus miles earned throughout the year. Also, Escape has a $60 annual charge so you’ll need to travel a lot to make it worth it, while Miles has NO annual fee. Both also serve as balance transfer credit cards (0% APR for 6 months).

American Express also has its airline cards including Platinum Delta SkyMiles and the Delta Reserve credit card. Both have fat annual fees (with the “premiere” Delta Reserve requiring a hefty $450 annual fee per year!), but if you love Delta, you get top treatment with these cards. AmEx also has a card that yields points for hotel and airline use: Starwood Preferred Guest card, but with its annual fee of $45 after the first year, your mileage may vary.

Mortgage Pay Down

I can appreciate a card that can help me pay off my mortgage. Now why aren’t there more of these around? Wells Fargo has the Home Rebate Card but you’d have to have a mortgage with them for you to get rewards.  With it, you could earn 1% back on your net purchases to help pay down your mortgage.  When your rebate reaches $2500, it’s automatically applied to the principal. The introductory rate can be as low as 0% for 6 months, too. Not all Wells Fargo mortgages are eligible, though, so you’d have to double-check before applying.  Unfortunately, not many lenders offer a mortgage pay down card, but it seems like a beneficial product.

College Fund Rewards

Another favorite rewards program of mine is the one by Upromise. If you want to save (or are already saving) for your kids’ college education through a 529 savings program, the Bank of America Upromise card (it used to be offered through Citi) allows you to earn dollars which are then directly applied to your 529 account.

Final Thoughts

In general, you’ll need to gauge which rewards programs will provide you the most value and which are going to fit your spending patterns the best. And they’re also only worth applying for if you pay off your balance in full each month, because using rewards cards is generally more expensive than using other cards that may have more attractive rates.

Aside from the cards and programs I’ve mentioned, there are lots of other rewards programs out there.  Before you sign up for any of them, do read the fine print and double check the annual percentage rates for purchases and cash advances. 

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• Earn top returns: FNBO Direct [1.90%], HSBC Direct [1.65%], WTDirect [1.76%], E*Trade Bank [0.95%], ING Direct [.25% to 1.65%]
• Cash bonus: Discover More [$50], American Express [$25], Lending Club [$25]

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Categorized under: Credit, Debt & Loans