One of my friends absolutely loves his Penn State-branded American Express card (I think it’s a “skinned” AMEX Blue card) because he gets to earn “points” towards various Penn State-related products and services. An example is the annual Alumni Association Annual Membership which is available for 7,100 points. Sometimes I think he gets amped up seeing Joepa on the face of the card.

It made me wonder whether these types of loyalty credit cards are worth it. The ones that most immediately come to mind are the gas station credit cards where you get higher cash back or reward points when you use it at their gas station.

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A few years ago, cash back credit cards were everywhere. Today, the offers are harder to find as company hunker down and deal with the financial crisis we’re facing. Despite the economic climate, cash back credits are still out there and you can still get a little cash back on your purchases.

How do cash back credit cards work? Each credit card company does it differently but the basic idea is the same. Every time you make a purchase with the credit card, your cash back or rewards account goes up in value. When you reach a certain threshold, you can cash out your cash back. Some companies will write you a check (Citi), while others will directly credit your account balance (Discover).

Is cash back worth the hassle? The answer is it depends. Some cards offer high cash back percentages on certain purchases and you can optimize your cash back by using several cards. I don’t recommend using more than two or three cards because the return on your time will decrease as you get more cards (you may find it helps to write down the cash back categories on the card itself).

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I was in New York a few weekends ago and saw that gas stations listed two prices for fuel, one if you paid in cash and the other if you paid in credit. The credit price was a little over 2% higher than the cash price ($2.49 vs. $2.44) and it was clear that you paid the lower price for paying cash. None of this “wink wink nudge nudge” stuff, they full out stated the price for gas with cash was lower.

Against the credit card merchant policy? Maybe.

Did we really care? No.

We paid cash… and saved 2% on the price, rather than getting 1% cashback on the backend.

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I spent the last weekend at Ocean City, MD with a few friends and one of them told me a story about how they experienced problems with their Chase Freedom card. If you don’t know about the card, it offers a unique cashback program that changes its categories to match your top three spending categories (plus a $50 bonus after your first purchase). Each billing period, it looks at your top three categories and gives you 3% cashback on it. Reader Joe also told me that if you have a Chase checking account then you get 2% back on the top five categories. Finally, if you let your cashback bonus accrue to $200, then they’ll kick in an extra $50. It’s “one of [his] favorite cards.” (here are the cards I consider the best cash back credit cards)

But, my friend this weekend told me that one day he was checking out his statement and noticed that he was not getting credited with any bonus cashback. He was getting the standard 1% on everything, but he wasn’t getting 3% on his top three categories. After a brief phone call, he was told that there was a problem with his account but that he would be getting the credit retroactively applied.

Always double check that you’re getting what you’re supposed to.

Credit cards, banks, cable companies, cell phone companies, etc. are always changing their promotions and there’s no way to confirm they coded your account correctly. There was the whole headache surrounding Verizon’s free LCD TV promotion, there are always hiccups around hot promotional offers from credit cards (Chase Freedom once had a $250 first purchase promotion!), and so it’s no surprise that companies get their paperwork mixed up and fail to credit consumers when they’re supposed to.

Unfortunately, you can’t trust a company, with all its people and its mainframes, to keep those sorts of things straight. They’re not trying to be deceptive, they just can’t keep millions of accounts straight and that’s somewhat understandable. Ultimately, it’s your money and your responsibility, so be sure to double check what a company is supposed to do.

(Photo: neoliminal)

Well well, it looks like we finally have the return of a long lost cash back favorite from a year or two ago… the coveted 5% cashback on supermarkets, drug stores and gas stations credit card in the form of the Citi Diamond Preferred Rewards card. (if that’s not your thing, here’s my list of the best cash back credit cards)

A few years ago, there were a dozen of these types of cards. In the last year, that number dropped to zero. Those that did exist only offered it on gasoline and imposed ridiculously low limits such as the Discover Open Road card (gives 5% on gasoline but only up to $5 a month!). Back in the heyday, each were vying for “share of wallet,” the industry term for how much of your spending gets put on their card. They often earn a couple percentage points per transaction so the hope is that you use the card for more than the 5% categories, which is a loss leader for them (this ignores the finance charges, fees, and other charges they impose for a variety of reasons).

Looks like they’re making a come back with the Citi Diamond Preferred Rewards card is leading the way.

Any catches? Yes, there are a few. Like all Citi cards, the cashback now comes in the form of ThankYou Network points rather than straight up cash. Those with student loans can convert the points into “cash,” making it a truly 5% cashback card. If you don’t have student loans, you’ll have to take it in the form of gift cards to get a full percentage value. You can always sell the gift cards and still get close to 5% cashback in the worst case.

Another catch is that the 5% promotion is for the first 12 months. I normally don’t like promotional offers (with the exception of when the Citi CashReturns had 5% cashback on everything) but right now this is the only card that offers 5% on the “everyday shopping” category (which includes supermarket, drug stores and gas stations). There are a couple alternatives if you’re looking for a gas cashback credit card, but none exist (to my knowledge) for supermarkets.

Finally, the only limit on cashback is an annual limit of 75,000 ThankYou points – it’s unlikely you will reach that limit ($15,000 in spending in the 5% categories!).

Some other features that may be of interest: 12 month 0% APY balance transfer, no annual fee, 1% cash back on everything else. The 12 month 0% APY balance transfer is nice but it has a balance transfer fee of 3% with no limit, I’d pass on that. The no annual fee is standard and the 1% cashback on everything else is also pretty standard.

Overall, I think this card is a good option if you’re looking for a way to shave 5% off your supermarket and gas bills.

Update: Other 5% Cashback Cards

Since writing the post, I’ve received numerous emails about two other credit cards that offer cash back in this category: Blue Cash from American Express and the Chase Freedom card.

Blue Cash from American Express. The Blue Cash from American Express offers 5% cashback at supermarkets, drugstores and gas stations with no limit whatsoever. The card also offers a 0% balance transfer for 12 months with a 3% transfer fee capped at $99.

Chase Freedom. The Chase Freedom card is a slightly different type of cashback card in that it gives you 3% cashback in your top three spending categories (which can change based on your spending each month). It’s not a 5% card, despite what some people claim, but I mention it because it’s better than 1% and they offer $50 cashback after your first purchase.

With the price of food and gas where it is, everyone’s looking for an edge and for more and more people, myself included, that edge is in maximizing what you can get out of credit card cash back reward programs. Credit card companies charge vendors a hefty percentage to process credit card transactions (AMEX and Discover charge the most, that’s why they often have the best cashback programs), so doesn’t it make sense that they pass along some of that to you? Of course it does!

So here are eight tips I use to ensure I get the most cash back out of credit cards, hopefully you will find them useful as well.

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Getting a good gas cashback credit card is the easiest way to save on gas, bar none. With gasoline prices increasing every single day, everyone is looking for ways to save on driving. Since you probably can’t sell your car and get one of these highest mileage cars, the next easiest thing is to get a credit card that gives you a little extra cashback on gasoline purchases. At the moment, besides specific gas station branded credit cards, I think the two best options out there is an American Express card and a Discover card.

The best option right now has to be the American Express Blue Cash Card because it offers up to 5% on everyday purchases, including at gas stations, supermarkets, and drugstores. General purchases have the opportunity to earn up to 1.5% cashback. It was named by Kiplinger’s Personal Finance as the “best cash-rebate card” and plenty of people look to it as the best card in their wallet.

Other salient details of the card are that there is no annual fee (I won’t recommend a card with an annual fee unless there is a compelling reason) and they have a 0% introductory APR on purchases for up to 12 months.

A close #2 is the card my wife and I use, the Discover® Open Road(SM) Card. The Discover Open Road card is a consumer card, so you don’t have to play business owner, and it offers 5% cashback on both gas and auto maintenance purchases. Whereas the AMEX card only gave you 5% on gas (and other business-like services), this one includes auto maintenance. Unfortunately, the 5% cashback bonus is only on the first $100 of gas and auto maintenance purchases a month! (Thanks Joe!). This makes the AMEX card a much better card. However, one additional perk of Discover is that you can get anywhere from 5% to 20% cashback bonus when you redeem your cashback in the form of a gift card from one of their retail partners. I used to get double cashback when I sold stuff on eBay because I’d convert my cashback for gift cheques to various stores I frequented. This card also has no annual fee and does offer a promotional 0% APY balance transfer until June 2009. This the card my wife and I currently use for gasoline purchases, but given the new limitation we’ll probably look for another one.

Update: How could I forget the awesomeness that is the Costco TrueEarnings card? If you get the Costco TrueEarnings regular card, you get 3% cashback on already cheap gas prices. You also get 3% back at restaurants and 1% back on everything else. The only downside is that there’s an “annual fee” in the sense that you have to be a Costco member ($50 annual membership).

Beyond that, you have a few cards that give gimmicky 12 month promotional cashback offers or are specific to a particular gas station company. I am never a fan of the limited time promotions unless the offer is especially juicy and I don’t want to be tied to a particular gas station, I like freedom.

What gasoline card do you use?

This promotion has ended, you can look at this list of the best credit card offers to find additional sign up bonuses.

Discover Business is running a promotion where you can get $100 bonus cashback after $1000 in purchases within the first three months. Discover Business was the card I decided was the best business card because it offered a 0% APY on balance transfers and purchases for 12 months, had no annual fee (rare in a business credit card), and now with this $100 cashback promotion offer… it’s certainly worth considering if you run a business.

Some other notable features of the card:

• 0% introductory APR on purchases and balance transfers,
• 5% cashback bonus on office supplies,
• 2% cashback bonus on gas purchases,
• 1% cashback on everything else.

So, who can apply for a business card? Anyone can apply, simply enter your social security number as the TIN. The beautiful thing about the United States is that anyone can be a business as a sole proprietorship and there are no additional tax implications or forms to fill out for the sole proprietorship business entity. This means that anyone can take advantage of this business card offer even if you don’t have a business.

If this card isn’t your thing but you are still interested in the best cash back credit cards, I invite you to click that link and check out the hottest offers available.

I used to play a lot of blackjack and poker online back in college, before the Port Security Bill in 2006 made it illegal for banks to conduct business with known casino sites, and made some decent cash too. Back then, and even today, casinos would give you 100% matching bonuses on your deposit as long as you put into play six times the bonus amount (nowadays it’s like 20 times). I would put in a hundred bucks, get a hundred bucks, put into play six hundred bucks and walk away with, on average, two or three hundred dollars of profit. I had a spreadsheet and everything, if I only I also had the First Ausus Chance Card from First Ausus Bank, a bank headquartered in Bermuda.

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That’s right, we recently received a $1,075.98 check from Citi to go with our $532.45 check last month, all part of the greatest cashback plan in the world. Okay okay, I’m only kidding, it’s probably not the greatest cashback plan in the world but the Citi CashReturns card but it certainly softened the blow of paying for a wedding and honeymoon. Citi recently cut the promotion on this card so it fell off my list of the best cash back credit cards but it was hot while it lasted!

For those of you keeping score at home, and motivated enough to divide 1608.43 by .05, the cash back rebate included not only our wedding and honeymoon but almost all the spending of the last three months as well… but weddings are pricey.

So, how do you leverage a 3 month 5% cashback program as best as possible? Don’t apply for it unless you know you have a large capital expenditure in the next three months! This is perfect for big family vacations, weddings, home improvement projects, or anything else that’s expensive. I think that if you’re thinking about spending $10,000 or more ($500 cashback), then applying for this card is a smart move. If you don’t have anything on that scale, don’t apply! You want to save it for when you will have a big expenditure.

One other great thing about this card is that they automatically send you the rebate check, you don’t have to request it. I think it’s ridiculous that all cards don’t do this.