Do you think cash back is the best credit card rewards currency?
Once you have decided a credit card is the best form of personal debt management for the given situation, it is important to choose a credit card with your spending patterns and repayment options in mind. If you do not intend to pay the balance in full each month, then the annual percentage rate (APR) on purchases should be of primary concern. Also, you will want to consider the (APR) on balance transfers, if there is a balance transfer fee, and if the rate is just an introductory rate. If you do plan to pay the balance in full each month, then you can consider the other incentives and rewards, such as cash back.
Though cash back cards offer between one and five percent back, depending on quarterly incentives and categories of spending, the consumer should be aware of typical, personal expenses. Cash back may not be the best currency, if a better reward percentage is available in categories where you are already spending your money, such as dining, gas, groceries, or travel.
Which cash back credit card(s) would you recommend to consumers?
After determining where you are spending your money, you must consider category cash back limits. For example, if a rewards card offers 5% back on gas for one quarter out of the year, there may be a limit in that category of $1,500 in spending. Other common limitations to consider include annual fees and membership requirements. Some credit cards require that you have an account with that company, join a credit union or association, and/or may charge an annual fee. All can limit the cash back benefits of the card. You should also consider how widely the card may be accepted, whether a Visa, American Express, etc.
As such, the recommended cash back or rewards credit card varies by consumer, credit history, income, and spending habits. As a recommendation for a general cash back card, if you qualify and plan to pay your balance in full each month, I would suggest the Citi® Double Cash Card. You will receive 1% back on all purchases and an additional 1% on payments, with no limits on cash back. The Blue Cash Preferred® Card from American Express offers 6% cash back on groceries, 3% at gas stations, but has a $95 annual fee.
Chase Freedom® has been a long-time favorite of mine, with 5% cash back in various categories each quarter and 1% on all other purchases. Chase Freedom Unlimited® also offers 1.5% cash back on every purchase. If you find yourself making purchases from Amazon each month, an Amazon Rewards Visa Signature Card will earn you 5% back at Amazon.com with an eligible Prime membership, 2% back at restaurants, gas stations, and drug stores, and 1% back on all other purchases. Specific credit unions offer great cards with rewards on travel with your membership, and some cards are targeted at individuals looking to rebuild credit.
Regardless, don’t just apply for the first credit card offer you get in the mail. Do your research, shop around, and consider what options are available given your credit history, expense categories, and typical level of spending.