Of the 1.4 billion credit card solicitations mailed in the first
quarter of this year, 80% were for cards with rewards programs,
according to Mintel, a market-research firm. Issuers are even
dangling cash bonuses to entice you to sign up or use their
cards.
What's in it for them? Cardholders tend to spend more with
rewards cards than with plain-vanilla credit cards. Upfront, that
gives issuers more revenue from the interchange fees they charge
merchants whenever you use your card. At the back end, if you don't
pay your balance in full each month, issuers reap hefty interest
charges. Rates on rewards cards have dropped slightly, to an
average of 13.9% annually, but the extra cost of paying interest
would probably offset any rewards you'd earn on your purchases.
But if you pay off your balance every month, rewards cards can
be very rewarding -- especially if the card you choose complements
your spending habits. If you are a frequent traveler, the cards we
picked make it easy to earn enough points for a free airline ticket
or hotel room. If you don't want to worry about using points to
book a plane ticket or hotel room, consider a cash-back card -- you
can choose to get a check or apply your rebate to your credit card
bill. If you have a long commute or are worried about rising gas
prices, a gas card offers a rebate to help offset the cost.
The following cards are among the best of the rewards cards. We
calculated what the rebate would be, assuming you charge $20,000 to
each card and your spending tracks patterns in the Bureau of Labor
Statistics' Consumer Expenditure Survey. Unless otherwise noted,
there's no cap on points you can earn and points do not expire.
Chase Freedom
www.chase.com
Interest rate:
0% for six months, then 11.99% to 22.99%
Annual fee:
none
Typical annual rebate:
$440
You receive a 5% rebate on spending up to $1,500 per quarter in
rotating cate�gories, and 1% on everything else. (The
categories for autumn 2011 are dining, department store purchases,
movie tickets and charitable contributions.) You'll also earn a
$100 bonus after spending $500 in the first three months after
you've received the card. You can get a credit on your statement,
have the money deposited into your Chase account, request a check,
or redeem the points for gift cards, merchandise or travel.
Blue Cash Everyday
www.americanexpress.com/bluecashcards
Interest rate:
0% for six or 12 months, then 17.24% to 21.24%
Annual fee:
none
Typical annual rebate:
$329
You earn 3% back on supermarket purchases, 2% on gas and
department store purchases, and 1% on everything else. (The
$75-per-year Blue Cash Preferred Card offers more-generous
rebates.) Rebates are earned as Reward Dollars, which can be
redeemed as a credit on your monthly statement, gift cards or
merchandise.
Bank of America Cash Rewards Visa Signature
www.bankofamerica.com
Interest rate:
0% for 12 months, then 12.99% to 20.99%
Annual fee:
none
Typical annual rebate:
$292
You earn 2% on groceries and 3% on gas purchases -- up to $1,500
a quarter -- and 1% with no limit on all other spending. Charge
$100 within 60 days and you will also collect a $50 bonus. You can
boost your rebate by 10% if you deposit it in a Bank of America
checking or savings account. Or you can take it as a statement
credit or a check, or apply it to your mortgage, no matter who
services your loan.
Capital One No Hassle Cash Rewards
www.capitalone.com
Interest rate:
0% until July 2012, then 12.9% to 20.9%
Annual fee:
none
Typical annual rebate:
$267
Earn 2% cash back on gas and groceries and 1% on everything
else. The rebate can be applied as a credit on your account or you
can request a check. You can earn an additional 15% cash back on
spending at Capital One's online Perk Central retail network. If
you use this card abroad, there is no foreign currency transaction
fee.
US Bank FlexPerks Travel Rewards Visa Signature
www.usbank.com
Interest rate:
13.99% to 23.99%
Annual fee:
$49, waived for first year
Typical annual points:
29,114
You need 20,000 points for a ticket worth $400 from one of more
than 150 airline partners. Using the card earns you one point for
each dollar spent, and you receive 17,500 bonus points after you
spend the first $2,500. You also earn double points for cell phone
charges and for the category in which you spend the most each month
(gas, groceries or airline purchases). You earn triple points when
you make charitable donations. And you collect 3,500 bonus points
each year that you spend $24,000. You can also use points for hotel
stays, cruises and car rentals, as well as merchandise or a
statement credit. Bonus: Redeem your points for an airline ticket
and you'll get a $25 allowance that you can use for baggage fees or
a snack on board. Points expire after five years.
PenFed Premium Travel Rewards American Express
www.penfed.org
Interest rate:
13.99%
Annual fee:
none
Typical annual points:
21,252
It takes 22,713 points for a round-trip ticket from New York to
San Francisco. Redeem your points on 38 airlines with no blackout
dates, or for priority seating, hotel stays, cruises, tickets to
sold-out events or merchandise. You receive five points per dollar
spent on airline tickets and one point per dollar spent on
everything else. Spend $650 in the first three months and you get
20,000 bonus points. Points expire after five years. You avoid all
foreign currency transaction fees when you use the card abroad.
Simmons First Visa Platinum Travel Rewards
www.simmonsfirst.com
Interest rate:
9.25%
Annual fee:
none
Typical annual points:
20,000
It takes 22,000 points to earn a ticket worth up to $325 on any
airline for anywhere in the contiguous 48 states, with no blackout
dates. For 50,000 points you can book a coach ticket to Europe
worth up to $1,000. You can also use points for hotels, cruises,
car rentals and gift cer�tificates. The reward structure
is simple: You earn one point for every dollar spent. Points expire
after three years.
GAS
BP Visa
www.choosebp.com
Interest rate:
15.24% or 19.24%
Annual fee:
none
Typical annual rebate:
$344
Earn 10% on purchases at BP stations, 4% on travel and dining,
and 2% on all other spending for the first 60 days. After that,
rebates are 5% on gas, 2% on travel and dining, and 1% on
everything else. Use your rebate for a BP gift card or a check, or
to make a donation to the Conservation Fund.
Citi ThankYou Preferred
www.thankyou.com
Interest rate:
0% for the first 12 months, then 12.99% to 20.99%
Annual fee:
none
Typical annual points:
20,000
You can use points you accumulate for flights, hotels, gift
certificates, merchandise and cash (in the form of statement
credits). For a minimum of 10,000 points, you can go to the Web
site to ask a "wish specialist" for something that isn't listed in
the catalog, such as a sky-diving outing. You earn one point per
dollar you spend in most years, but your first-year rebate could be
as much as 51,176 points because you earn five points for every
dollar spent at drug�stores, supermarkets and gas
stations, and you receive 10,000 points when you spend $500 in the
first three months.