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While I think most consumers prefer cash back credit cards over points earning credit cards (at least in theory), I’ve always preferred the latter. Most consumers aren’t able to extract the maximum value out of points given how complicated the systems can be, while those of us that know how they work can get some spectacular value for our points.
I value most of the better mileage/points currencies at 1.5-2.0 cents per point, while I’ve found most consumers value points closer to a cent each, since they consider redeeming points for gift cards to be about the best value out there.
That being said, there are some cash back credit cards that are tempting even for someone like me, which I’ve added to the “Best Credit Card Offers” page of the blog. They’re as follows:
Blue Cash Preferred® Card from American Express Application
This is probably the most tempting card of all if it matches your spend patterns. The card offers cash back at U.S. stand-alone supermarkets (up to $6,000, and 1% thereafter), 3% cash back on gasoline at U.S. stand-alone gas stations and select major department stores; 1% cash back on other purchases. Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit. Cash back is earned only on eligible purchases. The card offers 150 Reward Dollars, redeemable for a $150 statement credit, after you make $1,000 in purchases in the first three months, and comes with a $95 annual fee ($75 if your application is received by 8/3/16).
The part that I’m personally interested in is the 6% cash back at supermarkets, the 3% cash back at department stores, and possibly the 3% cash back at gas stations. The 6% at supermarkets is a no brainer, as is the 3% at department stores, as I don’t have a card that would otherwise accrue bonus points for department store spend. For gas I’d otherwise use my American Express Premier Rewards Gold card, which offers two Membership Rewards points per dollar spent on gas. Ultimately I value Membership Rewards points at slightly above 1.5 cents each so I’d probably still use the Premier Rewards Gold card, but others might value them differently.
With 6% cash back you have to spend $1,250 per year at supermarkets to break even (not factoring in the $150 sign-up bonus, which essentially pays your annual fee for the first two years). Of course I’m trying to think creatively in regards to purchasing gift cards at supermarkets to accrue the 6% cash back, though the T&Cs read (in part) as follows:
Each eligible purchase shall qualify for a reward of 6, 3, or 1% of the purchase amount as follows: 6% for eligible purchases at supermarkets (excluding superstores and warehouse clubs), 3% for eligible purchases at department stores and for automobile gasoline purchased at stand-alone gas stations, and 1% for all other eligible purchases posted to your account. Eligible Purchases means purchases for goods and services minus returns and other credits. Eligible purchases do NOT include fees or interest charges, balance transfers, cash advances, purchases of American Express Travelers Cheques, purchases or reloading of American Express prepaid cards or purchases of other cash equivalents. Additional terms and conditions apply.
I don’t really have much experience with gift cards, though does anyone know if the above is standard AmEx language, or whether in practice you could actually earn cash back on gift card purchases (restaurant, gas, etc.)? It’s not something I’ve ever done, though I’d think that if you buy a gift card along with groceries they wouldn’t really have a way of breaking up the bill, right? It would certainly be tough to beat 6% cash back on gift cards for places you’d otherwise spend money at anyway.
Anyway, if you’re going for a cash back card, this one is pretty compelling in the above categories.
This is the most basic version of the above card, given that it has no annual fee. The card offers 100 Reward Dollars, redeemable for a $100 statement credit, after you make $1,000 in purchases with your new card in the first three months, and offers 3% cash back at U.S. stand-alone supermarkets (up to $6,000, and 1% thereafter), 2% cash back on gasoline at U.S. stand-alone gas stations and select major department stores; 1% cash back on other purchases. Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit. Cash back is earned only on eligible purchases.
None of those bonuses are tempting enough to make me stop using a mileage earning credit card, though for those of you that want a cash back card, that’s a pretty compelling offering with no annual fee, in my opinion.
For those of you that have a Costco membership and value cash back, the Costco American Express is great as well, as it has no annual fee and offers 3% cash back on gas (on up to $3,000 spend), 2% cash back on dining and travel, and 1% cash back on everything else. Again, none of those amounts are enough to get me to switch spend to the card, though it’s another really solid cash back card for those of you in that camp.
(Tip of the hat to Frugal Travel Guy)