The Best Cash Back Credit Card
Criteria for a top credit card
As part of my program to get financially fit I've been researching credit cards to find the best credit card. Over the last several years, I've rarely used a credit card for personal use, instead opting to pay cash or use a debit card. Paying cash has certain advantages for people that operate on a budget like our family does. The cash method basically means not to buy anything unless there is cash in hand to cover the expense. Credit cards require more discipline since the payment comes after the expense has been incurred and there has to be sufficient cash to pay the entire bill off at the end of the period. If fiscal discipline is lacking, cut up the existing credit cards and stop reading. The financially fit thing to do is to get off of credit. For people that are disciplined it makes sense to get as much benefit as possible from a credit card.
After looking at dozens of credit cards, here is my criteria for a great credit card.
- No annual fee
- Pays cash back
- Low interest rate for in a pinch situation
- Widely accepted
List of the best reward cards
Card Name
| Cash Back
| Interest Rate
| Annual Fee
| Card Type
|
|---|---|---|---|---|
Penfed Platinum Cash Rewards Card
| 5% on gas 1% everything else
| 13.99%
| no
| Visa
|
Costco Amex
| 3% gas, 2% restaurants, 2% travel, 1% everything else
| 15.24%
| no
| American Express
|
Blue Cash Everyday Credit Card
| 3% grocery store, 2% gas, 1% everything else
| 17.24
| no
| American Express
|
Chase Freedom Card
| 5% in rotating categories, 1% everything else
| 11.99%
| no
| Visa
|
Blue Cash Preferred
| 6% grocery store, 3% gas, 1% all else
| 17.24
| $75
| American Express
|
Fidelity Rewards American Express
| 2% cash back on everything
| 13.99%
| no
| American Express
|
The top reward cash back credit cards
The Best Way to Use Cash Back Credit Cards is to Use a few of them
For people that don't want to carry around a ton of different credit cards, here are the best cash back cards for gas, groceries, and all other purchases.
- The best cash back credit card for gas is 5% from Penfed. Gas is really expensive now. Over $4 a gallon. To optimize credit cards, the 5% cash back on gasoline from Penfed is the way to go. Use that cash back card for gas purchases.
- The best cash back credit card for groceries is 3% from the Blue Cash Everyday card or 6% from the Blue Cash Preferred. The Blue Cash Preferred card pays 6% back on groceries, but has an annual fee. If you spend about $100 a month on groceries, you'll cover the fee. For families, the Blue Cash Preferred is likely the better card to go with. *Grocery stores often sell gift cards to places like Amazon, Nordstrom and other retailers. By purchasing gift cards from the grocery, you'll receive cash back on things from clothes to electronics which will amount to large savings.
- The best cash rewards for everyday purchases is the Fidelity Rewards American Express. It pays 2% cash back.
It's possible that you can't get these three cards, so you may want to substitute one of these or if you're really on top of things, you can do a little better by optimizing by category.
- The best cash back credit card for restaurants is 2% back from the Costco Amex or the Fidelity Amex.
- 5% rotating categories. The Chase Freedom card has a rotating category that pays 5% cash back in different categories each quarter. Use this in the specialized categories for the current quarter.
The All Around Best Cash Back Card
If optimizing spending across multiple cards is too much of a hassle, I think the Costco Amex or Fidelity Amex may be the best all around cash back card for an individual, but the Blue Cash Back Preferred, even though it has an annual fee may be the best card to go with for a family. The Penfed Visa may be the best cash back Visa card.
Using a card with the most cash back is a good step at becoming more financially efficient and will lead to thousands of dollars saved over a life time. Remember it's a good idea to use the best checking account for saving and earning money as well.
Comments
I looked for the 2% cash back visa from Charles Schwab and called them. It's no longer available and sounds like they will cancel the outstanding cards. Too bad.
Nice Hub Paul. I recently read a book on the history of the credit card industry. It was called "A Piece of the Action" by Joe Nocera. I highly recommend it.
The blue cash with the $75 yearly fee that pays 6% for groceries, 3% gas, and 1% for everything else is almost certainly a better deal for you. The fee is covered with about $200 a
month in groceries.
Excellent info; the way things are going I might need one for the holidays! Thanks Paul for the well researched hub
LORD
I didn't realize there were credit cards like this. We have always alternated between using an airline or hotel rewards credit card and we have gotten quite a few free flights and hotel stays over the years. I wonder if I would come out more ahead with a cash back credit card though. Hhhmmm - I'll have to do the math. Thanks for piquing my interest.
I already use the Costco Amex as a first choice, but a bank Visa for other expenses. I'll look into the PenFed card. Useful information.
The card pauldeeds mentioned is actually the Blue Cash Preferred card that I've added to the list. For folks that spend quite a bit on groceries, this is likely the better card.
There is a Fidelity Amex that gives 2% back on all purchases.
Excellent info, Paul. Now I don't have to do the research; you've done it for me! Thank you, Susieq42
@nilesh The 2% cash back from Fidelity is a great all purpose card. I added it to the list.
Forgot about the fidelity visa. 1.5% back on everything and 2% back once you cross 15k.
Those are all great cards. I really would like an airlines mile card as well.
Thanks, Paul, for your analysis. I have always been careful with credit cards, and was even taught a fear of and respect for them by my parents. . . sort of like I tried to teach my children about alcohol.
Thanks Paul for the information. I'm glad that you pointed out that if you aren't going to pay in full at the end of every month then you should cut up your credit cards. You are a brillant young man!
Hi Paul
I see you have a Chase card in your list. Just for everybody's information, Chase is not a reputable credit card company. Back in the mid-2000's, they offered their customers balance transfers with a 2.99% interest rate for the life of the loan as long as you didn't ever make a late payment. After the economy tanked, they wanted to call back all these low interest loans, but they couldn't legally change the terms. Instead, they changed the minimum payment. With only one month's notice, many customer's cards tripled in the monthly payments. When customers called customer service, they were very unsympathetic. They did not offer an opt-out or try to work with their customers. I am sure many customers across America had to file bankruptcy or default on their payments because of the huge increase in their credit card payment. At present, they are under a class-action lawsuit for their actions.
livelonger 8 months ago
Really useful, thanks. Our Schwab Visa used to give us 2% cash back on everything, but has since switched to 3% on gas, 2% on groceries, and 1% on everything else, now that it's a Bank of America card. I also prefer Visa over Amex for the universal acceptance issue you bring up, but after googling around, it looks like Schwab was the last 2% cash-back Visa.