What Are The Best Credit Card Rewards Programs?

by Millie Kay G. on 2009-07-2115

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 Visa – $100 Bonus Cash Back Up to 5% cash back, No annual fee, $100 Cash Back Bonus
Chase Freedom MasterCard – $100 Bonus Cash Back 5% cash back, No annual fee, $100 Cash Back Bonus
Citi Dividend Platinum Select Visa Card – $100 Cash Back Cash Back Up to 5% cash back, No annual fee
Citi Dividend Platinum Select Card for College Students Cash Back Up to 5% cash back, No annual fee
American Express Blue Cash Everyday Cash Back Up to 3% cash back, No annual fee
Discover More Card Cash Back Up to 5% cash back bonus, No annual fee
Discover More Card – $100 Bonus Cash Back Up to 5% cash back bonus, No annual fee, $100 Cash Back Bonus
Discover More Card – Black 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
Bank of America Upromise World Card Cash Back, College Savings Up to 10% college savings, No annual fee, $25 cash bonus
Visa Black Card Cash Back Exclusive rewards plus 1% cash back, $495 annual fee

Discover More offers a $100 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 is a popular specialty gas card that rewards you up to 20% for shopping at special retailers through Discover.com, 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 credit 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 credit 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: 10,000 points after $500 spent in the first 3 months. Redeemable for a $100 reward, No annual fee
Citi Forward Card Point Rewards Rewards card, No annual fee
Citi Forward Student Point Rewards Rewards card, No annual fee
Citi mtvU Platinum Select Visa Card Point Rewards Rewards card, No annual fee (Not available at this time.)
Citi ThankYou Preferred Card – $150 in gift cards Point Rewards Rewards card, No annual fee
Citi ThankYou Premier Card Point Rewards Rewards card, $125 annual fee/waived for first 12 months
Citi PremierPass Elite Level Point Rewards Earn points for every purchase, $75 annual fee
American Express Zync Card Point Rewards Bonus: 10,000 points after 1st purchase, $25 annual fee
American Express Gold Card 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 for College Students and the Citi Forward Visa card (which is a personal favorite) are good no annual fee credit cards.

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
American Express Blue Sky Travel Rewards No limits, no expiration dates, no annual fee
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
Citi Platinum Select / AAdvantage World MasterCard Airline Rewards 30,000 American Airlines AAdvantage bonus miles, First Year Free, then $85
Starwood Preferred Guest Credit Card Best Hotel Rewards Up to 6 free nights, No annual fee for first year, $65 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 $65 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 World 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. 

Copyright © 2009 The Digerati Life. All Rights Reserved.

{ 15 comments… read them below or add one }

Silicon Valley Blogger July 21, 2009 at 5:31 pm

Disclaimer: The material here has not been commissioned by American Express. This material has not been endorsed by American Express. This site may be compensated through AmEx’s Affiliate Program.

Erica Douglass July 21, 2009 at 11:43 pm

Why no mention of Schwab and PenFed? I have the Schwab 2% cash back card. It deposits into your Schwab investment account, so with a single outbound transfer you could use it to pay off mortgage, or a few clicks on their website to invest it. Great card overall.

PenFed also has some deals, though they are designed for folks with “real jobs” (as a self-employed person, I couldn’t get one since they required 2 pay stubs, which I don’t have.)

-Erica

Jason July 22, 2009 at 6:24 am

Not sure if you were familiar with EdwardJones credit card, but it is similar to Schwab card that gives you 2%, which is deposited into your investment account. With EdwardJones card you can also have the funds deposited into your Roth IRA…

Silicon Valley Blogger July 22, 2009 at 7:16 am

Thanks for the suggestions here! I have heard of Schwab but have not explored the others (I’d love to have added more to the post but it would have gotten “crazy long”). Ideally, I’d love to use this venue as a way to find out more about what’s out there for rewards cards, so I can check them out!

For instance, I’ve always been intrigued about those mortgage pay down cards. Those and the cash back cards are my favored cards since I don’t necessarily want to redeem points for “stuff”. The cash and straight savings cards are the most flexible and they go directly to addressing the bottom line. So if you’ve got recommendations, please share… If I get enough material, I’d love to cover the others (your suggestions) in another article in more detail.

Julio July 22, 2009 at 8:31 am

PenFed (Visa Platinum Cashback Rewards)
* Earn 2% cash back on supermarket purchases
* Earn 5% cash back from gas purchases
* Earn 1.25% cash back from all other purchases
* No Annual Fee
* Cash Rewards credited each month
* No special restrictions to earn your cash rewards
* Limited Time- 5% cash back on your first $4000 of airfare purchases per month.

Only caveat is that you have to join the credit union to apply for the card. There are 7 ways to qualify and the last method allows you to join by becoming a NMFA member (one time $20 fee), so anyone can qualify. I took the last option, paid my $20 and made it back on my first statement, so it was well worth it.

You can find out more about PenFed cards here.

Jim July 22, 2009 at 12:13 pm

That Wells Fargo card pays when $2500 in purchases are hit, not $2500 in rebates. $2500 in rebates would take a LONG time to hit at 1%.

Ali August 5, 2009 at 3:35 am

Great post! the best way of using credit cards is to clear the balance at the end of each month, and if they offer cash back on spending, even better for you, as its something for nothing. Don’t get in the debt trap unless you have your escape route planned.

Kevin September 17, 2009 at 3:37 pm

Really liked the post. You’ve called out some good credit card rewards programs, but I think your Final Thought about carrying a balance might be the most important part. A 1%, 3% or even a 5% earning rate vanishes immediately if you don’t pay off your balance each month, since the interest rate you’re paying will most likely be many, many times more than what you’re earning. It’s also important to factor in any annual fees that might be charged, as that dilutes the earn rate as well.

I noticed you didn’t talk about debit card rewards programs. When you use a debit card, you’re spending the money you have and avoiding debt and if that card offers great rewards it’s a double win.

While it’s true that historically debit card rewards have paled in comparison to credit card rewards, that’s about to change: I work for PerkStreet Financial and we’re introducing an online checking account with a debit card that offers rewards on par with a credit card. Our card offers 1% cash back, free music or free coffee – without an annual fee and with no minimum balance requirement. If you want to avoid credit card debt but want great rewards, it might be worth considering.

Kaye Swain September 26, 2009 at 3:42 pm

Thanks for an interesting article. I love my CapitalOne miles cards. It’s reasonably easy to use and I only use it to cash in miles – seems to be the best use of the points. They are also very “on the ball” at protecting your credit by calling over anything suspicious. As tired as I occasionally get of their checking everytime I use one blog-related purchase, I was VERY grateful when they caught that I had lost my credit card at a gas station and it was immediately picked up and used! They put a quick stop on it and it only got used two times! Great work!

I was very interested in the Schwab card as well. I’ll have to check into it.

Thanks again :)

michael golding February 3, 2010 at 8:43 pm

The Amex Gold card reward program is terrible value. I checked out today, you need 65100 points to get a Kindle, that represents $65,100 you’ve spent to get a 0.43% reward for a Kindle priced at $280.

Who are they kidding??

Dan March 25, 2010 at 8:38 pm

The programs change so rapidly its hard to say what’s any good. Overall however, if you have good credit, you always get the best choice.

WP Bonds July 30, 2010 at 2:53 pm

The rewards programs on credit cards can be great but only if you use the credit card properly. Out of everyone that has a credit card, how many of them do you think really use them right? Most people just end up burying themselves in debt.

dek November 7, 2010 at 8:13 pm

Assuming you would want a card with miles or points for travel rewards. Has anyone done an analysis as to how many points or miles are necessary with the various cards for a similar travel award, to see which card offers a greater value?

Ptolemy December 22, 2011 at 7:25 am

Discover, the card I use [and the stock of whose issuing parent, Discover Financial Services, I recommend you consider for purchase] offers 1% cash bonus on just about everything. I put our Travelers flood Insurance, car maintenance, employer paid seminar travel and attendance, charitable donations…everything I can onto this card. Of course, I carry zero balance; we don’t buy what we cannot afford to purchase for cash.

Of course, cash-back bonus notwithstanding, there is absolutely no future whatever in spending money but a rather splendid one in saving and investing it. Buy stocks, not junk at malls; don’t run up bar room and restaurant tabs. Let others do that while you buy the stocks of the companies that sell them the things they really don’t need but buy anyway. You can get rich doing just what I have told you and you can have the money to live very, very comfortably without worrying. You’ll get to the Royal Hawaiian Hotel, but not on credit and what’s great is that the rest of society will pay the bill. Good Luck.

sumiya18 March 7, 2012 at 6:10 am

Discover offers a $100 cash back bonus if you’ve spent on some categories or meet spending requirements. I was given a 5% rebate on purchasing gas, on spending at restaurants and travel. Really it is one of the greatest credit cards among the leading cards. This card will help us save money in the era of price hikes.

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