01 December 2009

Best Cash Back Credit Card offers (and why other blogs won't share all of them!)

Some people should not have any credit cards at all - reflect on your financial situation personal spending issues before continuing.

If you don't carry a balance on your credit card and can avoid the temptation to overspend because you have a credit card, you should take advantage of a cash back credit card. 1% back is standard, you can probably do better with a card on the list below. My list doesn't account interest rates (which don't matter because we're not carrying a balance, right?) or the quality of customer service or anything other nationally available cash back cards that for general purpose spending.

It's worth repeating - the first step is not to carry a balance. Any cash back (or miles or points) are completely negated by carrying a balance because the interest rates are more than usually absurd with cash back and other rewards cards. If you carry a balance, ignore my list and instead check out Get Rich Slowly instead.

Cash back is generally better than miles or points - some disagree, but they're wrong.

So, which card or cards should you get? It depends. Some cards offer more rewards (American Express and Discover) because they charge merchants higher fees. But, these cards are accepted by fewer merchants. Others are more widely accepted (Visa and MasterCard) because they charge merchants lower fees; however, the result is that they usually offer lower rewards.

A common strategy is to carry more than one card: for example, your Costco Business Card is from American Express, it offers 4% back on gas and 3% on dining out/travel. Your Charles Schwab Card is from Visa, it's accepted in more places but offers a lower reward. So, use the AmEx Costco card for gas and restaurants which take it and the Charles Schwab Card everywhere else. But don't get carried away: a card for every type of merchant or even for every individual merchant reaches a point of diminishing returns very quickly! My suggestion: more than 3 credit cards in your wallet is probably a waste of time.

Applying for credit cards can be bad for your credit score. Applications result in a "hard pull". Too many (or any) hard pulls will lower your credit score. Curious for an estimate of your credit score? Check out CreditKarma.com

(A) The Best Cash Back Credit Cards

Pentagon Federal Visa [fatwallet discussion and application link]
1.25% on everything 5% on gas
Need to join an organization to get the card - costs about $15. Excellent all around and widely accepted card especially if you buy lots of gas or cannot qualify for the Charles Schwab card above.

Fidelity Rewards American Express [fatwallet discussion and application link]
1.5 to 2% cash back everywhere - you can put the cash back into any Fidelity account including non-retirement accounts like a Fidelity brokerage account, MySmartCash account, etc.
Serviced by through FIA Card Services (BoA - so applying for it it might affect your other B0A or FIA credit cards like the Charles Schwab card mentioned above).
NOT as good as the Schwab Card above because it's not as widely accepted, but another option.

Citi FORWARD - Visa [fatwallet discussion and application link]
"ThankYou" points (about 3% cash) on books, movies, music and restaurants, 1% points on everything else.
Points are not the same as cash, here 160 points can be turned in for $1 of cash reward. (There are some extra points you can earn when you first sign up for the card, pay on time, or agree to paperless statements.
The Citi MTVU card is a similar alternative to the Forward card, but it is targeted at college students and offers a higher interest rate (but you're not carrying a balance, right!?)
Both Forward and MTVU cards offer 100 points for $1 in rewards applied to student loan, so that's better than getting cash back (which takes 100 points for $0.625).

TrueEarnings Business Card from Costco - American Express
% cash back on gas and restaurant purchases,
3% back on restaurants,
2% back for travel
1% everywhere else (including Costco - where you cannot use any other card)
Free with Costco membership.
They send a check, no points or other accounts or other bullshit.
Many people say they get the business card by simply using their name as their business name, thus getting better rewards from the same card.

Runners up:
(1) Your current card:
If you currently have a card that seems better, it may not be recommended above because it may not be available anymore (e.g., the OLD Chase Freedom card which offered 3% on your top 3 spending categories and have an extra $50 back when you reached $200 in rewards. There is still a Chase Freedom card, but it now has "rotating" 3% categories, no $50 bonus, and an annual fee for many people). If you have the Schwab 2% card then stick with it, no longer available.

(2) AmEx Blue - 1% back on everything until you spend $6,500 ... then it's 5% back on everything. Annual fee. This is a deal for some people, but not for most. Also, it's an AmEx card so it's not accepted in many places, which makes it harder to get to that $6,500.

Why don't other blogs or websites mention all of these cards?

Some people write blogs to make money. That's fine. They can make money several ways:
(1) Ads on their site: on the website they can agree to post ads, usually by Google AdSense. People click the ads, Google pays the blogger.
(2) Sell themselves: they are selling a separate service and their blog draws people's attention and contacts.
(3) Sell their content: they can give positive reviews or only review products which pay them for doing so ... only review a computer program if they give you money, only mention a credit card if they offer you money for referrals.

Credit cards are a great example because they can be fit into any of the above options:

The third option is the most dangerous for credit cards or other products: if the blogger says upfront "I don't mention some cards because they don't offer to pay me" then at least the reader knows it's not an unbiased review, it's limited.

But what about the trusted blogger who, without warning or notice, only reviews and links to credit cards which offer them money in exchange? Some credit cards offer "affiliate programs" - you click a link, they get money. You sign up for a credit card, they get more money.

But what if there's a better credit card they're leaving out because they won't get paid if you sign up for it?
It seems the only way to react is to discredit the blogger. But they depend on the blog to provide for their family, right? Well, yes. All the more reason not to provide a disservice to their readers who will not trust them as a result of bad advice.

Removed because no longer available as of May 2010:
Charles Schwab - Visa [links to the fatwallet discussion indicating "deal is dead"]
Excellent all around and widely accepted card, highly recommended, some initial setup time required.
2% cash back on everything, BUT you need to have a Schwab Brokerage Account which is only free if you have a Schwab Checking Account which is only free if you sign up for "e-correspondence" (no snail mail).

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