8/20/2012 2:15 PM ET|
The best rewards cards now
Not all rewards cards are created equal. We check in with 4 experts who give us their top picks for travel, savings and cash-back rewards programs.
Rewards cards are hot again.
After dialing back their offerings during the credit crunch and financial crisis, credit card issuers are once again in hot pursuit of customers -- mostly low-risk applicants with high FICO scores.
If you're one of the favored, you've had some eye-popping deals from which to choose. Chase, for example, offered a limited-time incentive of 100,000 miles for those who signed up for its British Airways card. Not to be outdone, Capital One used "30 Rock" actor Alec Baldwin to promote a "Match My Miles Challenge" on its Venture Card, promising to match up to 100,000 miles that cardholders had earned with other airline credit card programs (the British Airways card was excluded, alas).
"Rewards cards have really become hot," said Bill Hardekopf of LowCards.com, a credit card comparison site. "The major issuers are becoming more aggressive in securing new credit card customers, especially those with good to excellent credit scores."
The offers also have improved for those with less-than-sterling credit scores, which these days can be anything less than a 740 FICO. But don't expect to be dazzled, credit card experts warn.
"There are still plenty of offers out there with average or even sub-average credit scores," said Tim Chen of NerdWallet, "but we don't see these issuers pushing rewards and signing bonuses."
Keeping up with these ever-changing deals isn't easy, so I asked four industry experts -- Hardekopf, Chen, Curtis Arnold of CardRatings.com and Ben Woolsey of CreditCards.com -- to nominate their favorite plastic in three rewards categories:
- Travel. These cards generally offer the richest returns but only if you get the right card and know how to use it. If you're an infrequent traveler or not looking for upgrades, a different card might be a better fit.
- Savings. This category encompasses a variety of cards that help you put aside money in an investment plan, pay down your mortgage or get discounts on major purchases such as cars.
- Cash back. These cards are a good, simple choice for many, kicking back up to 5% of certain purchases.
The cards noted below as winners were nominated by at least two of the four experts, although a couple of cards won unanimous praise. Honorable mention cards were singled out by one of the experts as worthy of consideration.
Before we proceed further, understand that rewards cards are best used by people who don't carry credit card balances, because these cards typically come with high interest rates. If you're not able to pay your balance in full every month, check the sites above for a low-interest rate card instead.
Now, on to the results:
A clear winner emerged this year: Capital One's Venture Rewards, nominated by all four experts. Three of the experts liked the Citi Hilton HHonors Visa Signature card, and two of our experts cited the Citi Gold/AAdvantage World MasterCard. Last year's winner, the Starwood Preferred Guest Card from American Express, wasn't nominated this year.
"While the Starwood AmEx gets the most press for being the favorite in this category, I would rather have the Capital One Venture Rewards card," said NerdWallet's Chen. "The Starwood card does have one of the highest rewards payouts of any card we track -- around 2.3%, by our estimates -- but these points are primarily useful for 'travel hackers' and people who stay in luxury hotels."
The experts praised the Venture Rewards card for its simple, flexible structure. Every purchase earns a 2% reward, which can be redeemed for travel expenses on any airline, hotel or rental car, with no blackout dates and no exceptions. The card also charges no foreign transaction fees; most cards tack on a 2% to 3% charge for these, so international travelers can really save. The $59 annual fee is waived for the first year.
"There are no caps on points or spending thresholds, you can redeem for any travel expense and you earn double points on all purchases," CardRatings' Arnold said. "Those features make this a good card for a much broader group of consumers than most travel cards. You don't necessarily have to be a big spender or travel often to get your money's worth out of this card."
Plus, "it's a Visa, and will be more widely accepted around the world than an AmEx card," Chen noted.
The Citi Hilton HHonors Visa Signature Card has a good sign-up bonus, the experts noted. Users can earn 40,000 Hilton HHonors bonus points after spending $1,000 within four months of the account's opening. Plus, they earn:
- Six bonus points for each $1 spent at a participating hotel within the Hilton Worldwide portfolio.
- Three bonus points for each $1 spent on purchases at supermarkets, drugstores and gas stations.
- Two bonus points for each $1 spent on all other purchases.
And there's no annual fee.
"I like this card because of the great sign-up bonus offer and the ability to rack up points fast," Arnold said. "It's nice that the card allows you to earn bonus points in non-travel categories as well as double points on all purchases. Not having an annual fee also sets this card apart, since most travel cards with a robust rewards program currently have an annual fee."
The Citi Gold/AAdvantage World MasterCard is another card with a better-than-average sign-up bonus: 30,000 American Airlines AAdvantage bonus miles after $750 in purchases within the first four months. Users earn one AAdvantage mile for every $1 spent, and the $50 annual fee is waived for the first 12 months.
Honorable mentions:Escape by Discover Card, Blue Sky from American Express, the Continental Airlines OnePass Plus Card from Chase, the United Mileage Plus Card from Chase and Chase's Sapphire Preferred card.
Once again, the experts had unanimous praise for the Fidelity-branded cards from American Express. The Wells Fargo Home Rebate Card and two flavors of a General Motors rewards card also drew praise from two of the experts.
Two percent of your purchases on the Fidelity cards will be deposited into the brokerage firm's accounts, with no limits and no annual fees. There are three versions: Fidelity Investment Rewards (rebates are deposited into Fidelity cash or brokerage accounts), Fidelity Retirement Rewards (deposits are made to Fidelity individual retirement accounts) and Fidelity Investments 529 College Rewards (deposits into a Fidelity-run 529 account). Plus, family members can link their Fidelity 529 cards to your Fidelity-managed 529 account, which is "great for grandparents," noted CreditCard.com's Woolsey.
The Wells Fargo Home Rebate Card has no annual fee and applies your 1% rebate on all purchases toward paying off the principal on eligible Wells Fargo mortgages. There's no limit to the rewards you can earn. "Granted, you have to have your mortgage with Wells Fargo for this to be useful, but it's the only card I know of that offers this benefit," said NerdWallet's Chen.
Chen and Woolsey also liked GM rebate cards, which have no annual fees, but picked different versions. Woolsey liked the GM MasterCard, which offers a 5% rebate on all purchases good toward the purchase of a new GM car. Chen's pick, the GM Flexible Earnings Card from HSBC, pays 1% cash back on all purchases, but those rewards are worth 3% if redeemed toward the purchase of a new GM car.
"There are limits on how much you can redeem for specific cars," Chen said, "but you may be able to save anywhere from $1,000 to $3,000 if you're in the market for a new Corvette or a minivan."
Honorable mention: The UPromise World MasterCard with Dining & Grocery Rewards.
No card won universal acclaim, but three experts singled out Chase Freedom Visa, while the PenFed Visa Platinum CashBack Rewards card, two new American Express Blue Cash cards and the Costco TrueEarnings American Express card each received two nominations.
Chase Freedom Visa has no annual fee and pays 1% cash back on all purchases and 5% cash back on categories that change every three months (the current categories are home improvement, furniture, and lawn and garden), with a $1,500 cap. Chase is currently promoting the card with bonuses up to $150 after $500 in purchases in the first three months.
"Though we find the rewards program to be a bit overly complicated, savvy rewards card users can use it for substantial cash-back rewards," Chen said.
PenFed Visa Platinum Cashback Rewards Card is offered by a credit union that serves Pentagon employees, but "it is fairly easy for anyone to join this credit union by joining one of the associations llisted that is open to civilians," Arnold said. The card earns 5% cash back from gas purchases and 1% back from all other purchases, up to a $50,000 limit.
"I don't know of any other card that offers a full 5% cash back on gas all year long," Arnold said. "That's a great deal for those that spend a lot of time on the road -- especially with the high gas prices we are seeing now. There are also no caps or spending thresholds."
AmEx said it has simplified the rewards programs for the cards, which no longer require you to spend $6,500 before you get full rewards. (The old Blue Cash card limited you to 1% of grocery, gas and drugstore purchases and 0.5% on everything else until you exceeded that spending level.)
The Blue Cash Everyday version has no annual fee and offers:
- 3% cash back at supermarkets
- 2% at gas stations and department stores
- 1% on everything else
The Blue Cash Preferred card has a $75 annual fee but a richer reward structure, including:
- 6% back at supermarkets
- 3% at gas stations and department stores
- 1% on everything else
- A $100 cash-back bonus if you spend $500 in the first 60 days.
"I wouldn't normally recommend a cash-back card with an annual fee," Arnold said, "but if you use your card for groceries on regular basis, it is well worth the fee."
The Costco TrueEarnings American Express card has no annual fee for Costco members and pays 3% back on gas purchases of up to $3,000 a year. "The best part about this card is that you can use it to buy gas at Costco and get the 3% back on already-discounted gas," Chen said. "No other rewards cards pay bonuses on warehouse store purchases."
Honorable mentions: The Citi Dividend Platinum Select MasterCard (currently offering a $100 cash-back bonus), the BankAmericard Cash Rewards Visa Signature Card ($100 bonus), Capital One No Hassle Cash Rewards Credit Card, the Discover Open Road Card ($50 bonus), the Discover More $100 cash-back card and Chase's BP Credit Card.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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