This month, in our Best Credit Cards In America series, we look at the best cash rewards cards.
Cash-back rewards have many advantages over receiving points or miles. Unlike airline miles and hotel points, cash rewards are easy to redeem and can be used to pay any expense. In addition, all the points and miles that you save can be devalued by the companies that operate these programs, as we saw recently with several hotel programs. And finally, using a cash-back rewards card makes it easier to quantify the value of the rewards received and choose the best product.
So what should you look for in a cash rewards card? First, it needs to provide outstanding rates of return. In general, most products should produce 1% cash back on all purchases, so the best cards need to exceed that. But in addition, most of the top cash-back rewards cards will offer additional bonuses for spending within certain merchant categories.
Cardholders should estimate how much they spend in those categories each year in order to determine which card is ideal for their household’s spending patterns. And finally, credit card users should always scrutinize each card’s terms and conditions to identify what the fees will be. Some cards with the highest cash-back rates tend to have an annual fee, but this fee will be worth it for those who spend enough money on qualifying purchases.
In contrast, those who use cash-back cards should be paying little attention to interest rates, cash advance fees, and late payment fees as these cards should only be used by those who are paying their balances in full and on time each month. Those who pay interest should look for a card with the lowest interest rates, which generally will not offer cash back. And as always, it is never a good idea to receive a cash advance from a credit card as customers will incur both high fees and high interest rates.
[Related Article: The First Thing to Do Before Applying for a Credit Card]
The Winner: The Fidelity Rewards American Express cards
Why it won: This group of similar cards offers an industry leading 2% cash back on all purchases. Depending on the card you chose, the rewards are deposited in an investment, retirement or college savings account. Therefore, this card is also a vehicle for increasing your savings.
What this card offers: Cardholders receive 2% cash back on all purchases with no limits. Cardholders must have a qualifying cash management account, brokerage account, 529 account, or retirement account with Fidelity, and rewards are automatically deposited in the linked account.
Other Features: Cardholders have access to retail purchase protection and a travel and emergency assistance hotline. Rental car loss and damage insurance is included as well.
The Cost: There is no annual fee for this card, but there is a foreign transaction fee of only 1%. While not as good as other cards that waive this fee, cardholders still come out ahead on these transactions.
1st Runner-Up: American Express Blue Cash Preferred
Why it won: This card features bonus categories of spending that allow card holders to earn elevated levels of cash back on many of their most frequent expenses.
What this card offers: Cardholders earn an outstanding 6% cash back on up to $6,000 spent each year at grocery stores. 3% cash back is earned at stand alone gas stations and at select major department stores, while 1% cash back is earned on all other purchases.
Other Features: New applicants earn a $150 statement credit after spending $1,000 within the first three months of becoming a card member. Purchase protection and travel accident policies are also included.
The Cost: This card has a $75 annual fee and a 2.7% foreign transaction fee.
[Related Article: How to Pick a Cash Rewards Credit Card]
2nd Runner-Up: Capital One Cash Rewards
Why it won: 1.5% cash back on all purchases.
What this card offers: Cardholders earn 1% cash back each month, and another .5% back on all their purchases once a year. Capital One currently offers a one-time sign-up bonus of $100 when new cardholders spend $500 within the first three months of opening an account.
Other Features: As a Visa Signature card, holders are eligible to receive a telephone concierge service, shopping discounts, and complimentary upgrades and savings at hotels. An extended warranty program and travel accident insurance are also included.
The Cost: There is no annual fee for this card, and like all Capital One products, there are never any foreign transaction fees.
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