In Pursuit Of The Most Rewarding Rewards Card

Best Rewards Cards To Maximize Your Cashback

Best Rewards Cards To Maximize Your Cashback

As a card wielding consumer who believes in paying off the balance in full every month, I think I’m entitled to getting back the 2% to 3% surcharge that businesses tack on to their products, as the cost of doing business via credit cards.

I call this Return on Expenses.

For those who use a credit card for convenience and not for the interest rate, it makes sense to choose a card that maximizes rewards. 5% cash back on gas? That’s more than what the markets returned last year! Claim what’s rightfully yours!

If cash paying customers were offered a better deal, I would definitely go all cash! But credit card companies prohibit price discrimination in their terms and conditions.

Is it worth it?

Is this pursuit worth it? In order to find out, follow your expenses. What are the expenses that chip away that 2% or 3%, one expense at a time?

Here are some statistics for the year 2010 for an average family.

Money spent on Gas and Motor Oil: $2,132
Money spent on Restaurants: $2,505
Money spent on Groceries: $3,624
Money spent on Clothes: $1,700
Money spent on Drugs $410
Online Holiday Shopping $658

Those are some big numbers and all are almost always paid with a card. A 3% cash back would be nice.

One Card To Rule Them All?

I’ll cut to the chase. There isn’t one. But a combination of cards can get you close enough.

What Makes The Cut

Before I reveal the results of my research, a note on the criteria chosen to evaluate the cards:

  • The card must have cash as rewards. Not points or miles.
  • No annual fees, no matter how good the rewards are.
  • No revolving categories. I can never remember them.
  • No store cards. Too restricting.
  • No expiration on the rewards. One less thing to remember.

The Cards Revealed..!

1. American Express Everyday Blue Card

Why This Card Was Chosen:

This card addresses 3 of the expense categories above – Gas, Apparel and Groceries. 3% on Supermarkets, 2% on Department stores, 2% on Gas.

And if you use this card for any other expenses, you still get 1% cash back. Not too bad! And of course no annual fees.

Other benefits:

  • Damaged your brand new iPhone? No worries! If you bought it with your Everyday Blue Card, you are covered for up to 90 days!
  • Is the salesman pressuring you to get extended warranty on that laptop? Why when you get it for free with this card?
  • Did that store just refuse a return? Once again this card comes to the rescue!
  • Some travel benefits too like theft, damage and collision coverage and travel insurance

2. Amazon Chase Visa Card

Chase Amazon Rewards Card

Why This Card Was Chosen:

This card covers some of the categories not addressed by the Amex card. 2% cash back on Restaurants and Drugstore purchases. In addition, 2% on gas and 1% on everything else, same as the Amex Blue card.

And best of all, it offers 3% cash back on purchases from Amazon! I do a lot of shopping online especially from Amazon so I might be a little biased here!

Note: This card is advertised as earning points for purchases, but you can redeem your points as cash back which is what I do.

Other benefits:

The Amazon Rewards Card I have has benefits similar to those of Amex Everyday card. But I can’t find them listed in either Chase or Amazon’s site. Please check with Chase or Amazon on additional benefits.

3. PenFed Platinum Cash Rewards Card

Why This Card Was Chosen:

PenFed Platinum Rewards card offers 5% cash back on gas which is better than the 2% offered by both Chase and Amex. There are other cards that offer 5% cash back on gas, but I chose this one since I already am a member of PenFed and the other cards don’t necessarily offer anything better than this card.

Other benefits:

  • No Foreign transaction fee. If you use your credit card abroad, most cards charge you an additional surcharge as foreign transaction fee. Very useful if you travel abroad frequently.
  • 0.25% on other purchases
  • This card is from a Credit Union!

Summary of Cash Rewards

Average spent (2010)
Amex Blue Everyday
Chase Amazon
Max Cash Back
Department Stores$1,7002%$34
Drug Stores$4102%$8.2
Online Shopping$6583%$19.74

Honorable Mentions

Not everyone may share my aversion to annual fees or revolving categories. In my research I found two cards that offered generous rewards but did not meet all of my criteria above.

Blue Cash Preferred Card from American Express

For a $75 annual fee, you get 6% cash back at supermarkets, 3% cash back at gas stations and department stores, and 1% everywhere else. Depending upon your annual expenses, this might be worth considering. In addition, you get all the benefits of the American Express Blue Cash Everyday card mentioned above.

Chase Freedom Visa

If you have the discipline to remember revolving categories, you should consider this card! You’ll earn 5% cash back on up to $1,500 spent each quarter. From April-June, you’ll earn 5% on Grocery stores and Movie theaters, from July-September, you’ll earn 5% on Gas stations and Restaurants and from October-December, you’ll earn 5% on Hotels, Airlines, Best Buy and Kohl’s purchases.

You’ll also receive $100 bonus if you sign up for this card. To qualify and receive your bonus, you must make purchases totaling $500 or more during the first 3 months from account opening.

My Thoughts

A combination of these three cards will help maximize your rewards on your purchases. A 2% return on expenses is not too shabby. Limiting the number of credit cards you use also means less worries on id theft and curtails your temptation to sign up for more.

Finally, what if you do carry a balance? In that case, your best reward is to pay off your balance. None of these rewards match up to the 17% or 18% you pay every time you carry a balance.

What is your favorite rewards card?
PenFed Visa® Platinum Cash Rewards Card

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36 thoughts on “In Pursuit Of The Most Rewarding Rewards Card

  1. You guys in the USA have a lot more options when it comes to reward cards. For us here in Canada there are only so many to choose from. I have found the Aeroplan visa to be pretty decent.

  2. Great research! I’m lazy on this and have just used a Discover card. I’m forwarding this to my research department aka my wife.

  3. Great research. I use two of these cards already (feeling smug….). Just to add to your brilliant piece: I did some research for a client on the AMEX insurance extended warranty…people have had some problems collecting on their claims in this area. If you’re worried about extended warranties, I’d read the fine print first.

  4. I loved my Schwab Invest First card. It was 2%, cash, deposited into my schwab account every month. Alas, it’s been discontinued so I’m stuck with my B card :(

  5. I used to have three cards and I cut the two after realizing that I am acquiring too much credit. Since we do not travel often, we decided to get rid of the card with the miles points first. Now, we only have one Visa card that gives us cash back rewards.

  6. I love this article. I agree with you that I prefer cash over credit, but getting rewarded for your purchases is a smart idea as well. Don’t rule miles out MC. I went to India with my wife few years ago in first class Delta from Atlanta back and forth paid by American Express Delta skymiles card. :) That was worth well over 5K.

    • If you travel a lot (or have long travels!), miles do make sense. We are trying to be nice to fellow passengers and not take a 3 year old on a plane right now! :)

  7. I’m surprised my card didn’t make the cut. I love the Fidelity cards that offer 1.5% cash back on everything. I love cash each month!

  8. I only have Chase Freedom and probably need to get a few more cards.

  9. Great website! I really like this article. I am obviously agree with you and getting rewarded for your purchases is a great idea also. Thanks for sharing your thought.

  10. If you get a card with high cash back at say grocery stores, don’t forget, you can buy gift cards to places you want to go (like restaurants, home depot etc), get the higher % cash back AND get bigger fuel discounts if offered. But, it does complicate things a bit more…

    Since travel is important to us, we complicate our lives with multiple travel credit cards always coming in and out. It’s fun for us! Otherwise, our ol’ faithful is the AMEX blue cash.

  11. Wow those are good rewards. I’m currently using reward points credit cards but your post makes me think I should switch to a cash back card. I’ve gotten a lot of good rewards through my rewards points on mine now though and have been able to convert them into hundreds of dollars in gift cards and debit cards over the last few years which has been a huge help in sending money to my parents. -Sydney

  12. My 2 favorite cards at this moment are the AMEX SPG and the Chase Sapphire Preferred. Both charge an annual fee (waived for first year), but the rewards I’ve gotten more than made up for the fee.

  13. I don’t use cards, but the Case Visa looks pretty cool to my. Mainly for the Kohl’s 5% around December. In the past, I have done the majority of my Christmas shopping at Kohls — great perk!

  14. Great post MC! I love using my credit card to make money. :) Of course, only using it to buy things I would normally buy.

  15. Cool stuff!

    I already use the Chase Freedom card and the AMEX Blue Cash card for daily purchases and, of course, pay them off before the end of the billing cycle. I do pay attention to the revolving categories on the Chase card and just bought groceries earlier today with that card. I don’t spend much money, but every little dollar back helps!

    Best wishes.

  16. I have your top pick and an honorable mention, we are one income family with a commute of 5 mins hence no gas card, and not a heavy shopper at Amazon. AMEX and Freedom are my two top picks, I like the way you calculated max return. I learned it now.

  17. Those are really good choices, MC! We’ve stuck with Discover Card, but these are making me take notice. Your point about getting 2% or 5% back is a valid one. You can’t get that kind of interest on savings. Of course I’d just use these cards on spending I’d do anyway & we always pay our cards in full at the end of the monthly billing cycle. Thanks for these great suggestions, MC!

  18. This is a very helpful post! I’m in the process of finding a card with rewards that I’d benefit the most from (mainly cash back on groceries & gas). I keep hearing about Chase Freedom, but this post helped me learn about other cards.

  19. I just can’t do it. I simply cannot. I understand that there are rewards to be had, and you really do a GREAT job with the break down, but I refuse to play the game for so many different reasons, none of which is more important than on the principle alone. Still, excellent post.

  20. I researched some of the reward cards myself. But I have to admit that I chose the one with a low rate and no rewards. Somehow reward cards always tend to have a higher interest rate AND you have to spend A LOT to achieve even the lowest rewards level.

  21. Can you make a recommendation for someone who only wants to use one card? I am simply too lazy for that (similar to how you eschew the quarterly bonus categories). What’s the best one can do with one, single card?

    • To answer my own question:
      I looked at the bls data to make a guess at which other expenses might be payable by credit card. The big expenses – housing, transportation costs other than gas (which I assumed to be car loan/depreciation), and medical costs other than drugs (I assumed that was health insurance; I didn’t tease out co-payments etc). That left me with “Entertainment” and “All Other Expenditures” minus the online shopping number you listed. That left $5225 in other spending that would not be covered by any bonus category. (And $31,855 in costs that probably can’t be paid with a credit card.)

      Then, I multiplied each category times it’s reward for each card, and summed the results per card. I also summed up the Max column, with an additional amount assuming the $5225 in non-bonus spending would be paid with one of the 1% cards.

      The totals are:
      Max Cash Back strategy (juggling three cards): $379.61
      Amex Blue Everyday: 273.34
      Fidelity 1.5% Visa (assuming you can still get access): $243.81
      Chase Amazon: 226.17
      Generic 1% cash back card: $162.54
      PenFed: $141.91

      So if want to stick to just one card, the Amex one is probably the best choice. (Probably because it depends on how many places you frequent don’t accept it.) You get 72% of the benefit for 33% of the effort – the Pareto Principle at work.

  22. Awesome and thorough breakdown as usual MC! I have a Costco Amex card. Rates look similar, but I get 3% back on gas. Way to maximize returns by using three cards, but I may use Steve’s idea of selecting the best and sticking with one. Great post!

  23. I use my Discover card religiously, and am careful to really focus on what the quarterly or monthly category is. I have a friend who swears by that PenFed card you mentioned, especially because it’s so friendly for international travelers.

  24. “Return on Expenses” – ha! I love that one. Never heard that phrase before, but it’s apt in this situation. I also prefer the Amex blue since we spend a ton on groceries. My wife does all that shopping and she likes the fancy stuff, organic, whatever. Our family of 5 spends an embarrassingly high amount of money each month in that category, so it pays off having the right card!

  25. Perkstreet is another very useful card.
    -1% unlimited cash back
    -2% cash back on online purchases
    -2% cash back in store
    -2% unlimited cash back when you and a friend use the card at the same establishment
    -5% cash back on special categories on merchants recommended via twitter.
    There are a variety of options to choose from. Great post!

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