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The credit card landscape is more competitive than ever before, and that’s great for consumers. Credit card companies make money through a combination of three revenue streams:
- Merchant fees for each transaction
- Card annual fees
- Interest payments for those who choose to finance charges over time
The good news is that as consumers we’re getting more from our credit cards than before. Much of the annual fees and merchant fees are being given back to us in the form of rewards, so for credit card companies our transactions are (mostly) lower margin than before, though they hope to make up for it with volume, as credit card usage keeps increasing.
Credit cards that are extremely generous
Many credit card benefits seem too good to be true, and even some credit cards offer a return that seems almost too generous. For example, here are a few cards that have specially lucrative bonus categories:
- The Chase Sapphire Reserve℠ offers 3x points on dining and travel, and those points can be redeemed for 1.5 cents each towards the cost of travel, meaning you’re getting a return of 4.5%
- The Platinum Card® from American Express offers 5x points on airfare, which I value at a return of 8.5%
- The Amex EveryDay® Preferred Credit Card offers 3x Membership Rewards points at U.S. supermarkets (on up to $6,000 of spend per year), 2x points at U.S. gas stations, plus a 50% points bonus when you use your card at least 30 times during a billing cycle
Nonetheless I see these offerings as being sustainable and logical enough. These cards have annual fees, and they count on the spend in the above categories to only compromise a small portion of the overall spend. The idea is that they want to gain wallet share, and they know that bonus categories are the way to accomplish that.
Similarly, there are some cards with specific perks that seem especially generous. For example, the Citi® / AAdvantage® Executive World Elite™ Mastercard® has a $450 annual fee and comes with Admirals Club membership, but the killer perk is that you can add up to 10 authorized users at no extra cost, and they get Admirals Club access as well.
Credit cards that are… too generous?
In this post I wanted to share the two credit cards that I consider to be (almost?) too generous. These are cards that are so rewarding for just about anyone that I’m surprised they’re around in their current form. While there are other cards that can be super generous if you maximize them in a certain way, the above don’t require any effort to maximize.
So, which cards are they?
This card has no annual fee and offers 2x Membership Rewards points on the first $50,000 spent card annually. This is the single card that offers the best return on everyday spend, and best of all, it doesn’t even have an annual fee. I value Membership Rewards points at ~1.7 cents each, so that’s like a return of ~3.4%.
It’s amazing to see that kind of a return, especially given that The Business Platinum® Card from American Express OPEN, which has a $450 annual fee, offers one point per dollar on base spend.
This is the only hotel credit card that offers an uncapped annual free night certificate every year. The card has just a $49 annual fee, which is even waived the first year. For that you receive an annual free night certificate, Platinum status with IHG for as long as you have the card, and a 10% refund on redeemed points, for up to 100,000 refunded points per year.
This isn’t the only credit card that offers an annual free night certificate:
- Marriott’s co-branded credit card has an $85 annual fee, and offers a certificate that can be redeemed at Category 1-5 properties
- Hyatt’s co-branded credit card has a $75 annual fee, and offers a certificate that can be redeemed at Category 1-4 properties
So what makes IHG’s card better?As you can see, IHG’s card has the lowest annual fee and also has the fewest restrictions on what properties you can redeem at. You’re essentially paying $49 per year for an annual free night certificate, which is an absolute no brainer.
I’m sure some will say “don’t give the credit card companies any ideas.” We know surveys have been sent out about the benefits of the IHG Card for a while, so I wouldn’t be surprised to eventually see changes there. Meanwhile I haven’t heard such rumblings about the Blue Business Plus Card, which is still new.
While there are other cards that are useful, especially under specific circumstances, the two cards are the ones that I consider to be the all around most generous.
Are there any credit cards that you guys consider to be “too” generous all around?