And the Best Cash Back Credit Card is…

Credit Cards… You didn’t think I’d make it that easy, did you? 

I would if I could. The truth is, I can’t claim that any one card is absolutely best for everyone.

I love rewards credit cards. Getting paid hundreds of dollars a year to use a credit card to buy things I would buy anyway is, well, rewarding.

I use three different cards as part of my strategy. One of those is the Discover More card, which has traditionally been a solid choice for an all-around great rewards card. I recently learned that Discover is shifting its strategy and will now market only one card, known as Discover it. Don’t ask me why “it” is lowercase.

This new card is much more customer-friendly than their previous cards. In the past, there was an initial tier that only gave you 0.25% cash back on the first $3,000 in purchases, and 1% after that. You now get 1% from the start. There’s also no fee for going over your limit or your first late payment. Other benefits include US-based customer service and the ability to choose your due date.

Discover cardholders have the option of converting to the new card or remaining with their old one (I chose to convert).

With these improved terms from Discover, how can you compare their card with the multitude of others out there?

Take a look at your spending patterns. Do you travel a lot? Are you a college student? Maybe the bulk of your spending is groceries and gas. For each of these situations, there are several cards that could potentially work for you.

Before I discuss how to find the best rewards cards, I should mention that if you carry a balance — no matter how large or small — rewards cards aren’t for you. They typically charge higher-than-average interest rates, so any rewards you might get are negated by fees and interest charges. In this case go with a low-interest card, perhaps from a credit union.

My favorite site for comparing rewards cards is CreditCardTuneUp.com. This site lets you input your average monthly spending in 15 categories such as restaurants, department stores and hotels. To get your monthly spending figures, I recommend looking at your credit card statements from the last 12 months.

Based on the information you provide, you get a list of the cards that best match your spending pattern. It’ll tell you what your first year rewards total would be, minus any annual fee.

Another great resource is NerdWallet.com. The idea is the same, but this site also lets you input your credit score and preferred network (Visa, MasterCard, etc.) You have a choice of either a customized list of your best matches or their list of the best credit cards of 2013. On this list they divide cards by category (rewards, no interest, college, etc.) and tell you why they love the card.

More credit card companies are offering a cash or gift card bonus to entice new members. I’ve seen offers worth as much as $625, but more typical offers range from $100-$200. These sign-up bonuses are definitely worth a look as you search for your best card.

There are other things to consider as well. If you frequently travel outside the country, look for cards with no foreign transaction fee such as Capital One and the Discover it. If you fly a lot, be aware of blackout dates and mileage redemption rates. If the card has an annual fee, make sure you’ll spend at least enough to offset the fee.

The key to finding the best rewards card is to look at your spending patterns. Then, use one or both of these websites to compare offers and find the best card for your lifestyle.

Photo by blog.chargesmart.com

3 thoughts on “And the Best Cash Back Credit Card is…

    • I have the Chase Freedom too. It’s very similar to the Discover card, with rotating 5% categories. Until now that’s been my go-to card for most purchases, but I’ll have to reevaluate when I get the it card.

      That’s great you’ve managed to get travel deals from Amex. I use one of their cards too, but only for Costco. I don’t travel enough to make that side of it worthwhile.

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