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UPDATE: The offers and terms of the Barclaycard Arrival & Arrival Plus have changed. You can find the best current offers here.
There’s no denying that frequent flyer programs are becoming considerably less generous. And there’s also no denying that they’re generally trying to head in the direction of being more revenue based than not.
Now, for those earning miles primarily through flying, that might not impact consumer behavior all that much. You’ve gotta go where you’ve gotta go, regardless of how many miles you earn. And if you’re a business traveler, chances are the primary consideration factoring into your airline choice isn’t how valuable the miles you earn are (though it can certainly be a tiebreaker).
The same can’t be said for people earning miles primarily through credit card spend. If you’re earning miles primarily through credit card spend:
- Your primary motivation should be which card offers you the highest return on everyday spend
- At the same time, the airlines are to some degree assuming you’re not an educated consumer
For example, Southwest has long had a revenue based frequent flyer program. Last year they devalued redemption rates, and as of last month they made the pricing of their revenue based program dynamic (which is a rather alarming precedent for revenue based programs).
The point is, as consumers we don’t have to take it. And it makes more sense than ever before to consider a cash back credit card. Why?
- There are several cards out there which offer a return of at least 2%, many of them without an annual fee
- For non-bonused spend, that’s a return that’s tough to beat
- While the dollar isn’t the most stable currency in the universe, it’s certainly more stable than the SkyMile 😉
- There’s no learning curve to redeeming cash — if you can redeem miles optimally you can get an amazing return, but the average consumer doesn’t have the time/willpower to do that.
With that in mind, what are the best, most straightforward cash back credit cards out there? I’ll focus on just three, for the purposes of this post. These are cards which don’t have category bonuses, but instead offer the best, flat return on everyday spend:
This is a no annual fee credit card that offers 1% cash back on every purchase, and then an additional 1% cash back when you pay for those purchases. There are no limits to the amount of cash back you can earn. For a card with no annual fee, that’s a return which is tough to beat.
This card offers 2% cash back on purchases without an annual fee, so is very similar to the Citi® Double Cash Card. The one consideration on this card is that the cash back goes into a Fidelity account, so you do have to open an account with them to use the card.
If you plan on traveling anywhere at all, ever, then this is the best option, in my opinion.
A lot of people would say actual cash back is more valuable than cash back towards travel. For me that’s not the case, and I am guessing for most people reading this blog, that’s not the case either. Unless you spend less on travel than you’d earn in rewards, it’s the same thing. And that’s simply to say that the same amount of cash back would be equally valuable to me regardless of which form it came in.
With the Barclaycard Arrival Plus™ you’re essentially earning ~2.22% cash back towards travel — you earn two miles per dollar spent, plus a 10% refund on redemptions. Each point can be redeemed for one cent towards a travel purchase.
The card has an $89 annual fee which is waived the first year. So why could it be worth paying an annual fee, when the above 2% cards don’t have an annual fee?
- The card offers a great sign-up bonus of 40,000 miles, which basically gets you $440 towards a travel purchase
- You’re earning a return of ~0.22% better than the above cards — here’s the math on that
- The card has no foreign transaction fees, if you do travel internationally
- The card has Chip + PIN technology, so can be used at many kiosks in Europe
While a lot of people like to put the words “free” and “miles” in the same sentence (in other words, miles are “free,” so who cares if award charts are devalued), there’s a direct opportunity cost to every mile you earn.
And as the airlines keep making miles less valuable, using their co-branded cards also becomes more valuable. For the average consumer it’s tough to beat a straight 2% cash back card like the Citi® Double Cash Card.
Meanwhile if you do any amount of travel, something like the Barclaycard Arrival Plus™ World Elite MasterCard® is tough to beat, given the nice sign-up bonus, waived foreign transaction fees, and Chip + PIN technology.
With all the changes frequent flyer programs are making, who’s thinking of earning cash back for their everyday spend?