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Top 15 Reward Credit Cards

Liz Pulliam Weston of MSN Money asked five credit card industry experts (basically representatives of companies that run credit card websites) and a frequent flier guru for their favorite cards in one of three categories: travel programs, cash-back programs, and savings programs. Travel programs are those cards that offer miles and upgrades and perfect for those with a lot of travel each year. The cash-back programs are, as you would expect, those cards that offer the best cash-back rebate. Finally, the savings programs are those cards that give you savings towards something, instead of straight cash, such as for a house, a car, or even directly into a brokerage account.

One trend you’ll see is that all of the winning cards are American Express! Is this some kind of conspiracy? Hardly. American Express is less widely accepted because they have higher merchant fees. The higher fees means that they’re able to offer higher reward earn rates because their profits are better. So, in each category you’ll see an American Express card winning out.

Travel Reward Cards

The winner of this category was the Starwood American Express card [3], a card on my list of $100 credit card signup deals [4] (you get 10,000 points after your first purchase). Number two was the Diners Club MasterCard followed by American Airlines AAdvantage┬« MasterCard, United Mileage Plus Visa, and Citi PremierPass Elite MasterCard [5] as honorable mentions. It’s tops because of its flexible points program and it’s higher than average earn rate; which is around 1.25% if you convert things the right way. You earn a point for each dollar spent and you get 5,000 bonus points for every 20,000 points you spend, which is how you get to the 1.25% earn rate (.25% over the competition). The article lists two very important drawbacks: United, in an attempt to force you to use their card, charges twice as many points as its competitors, and, the typical limitation of AMEX card acceptance in general (less widely accepted because of their higher fees).

Cash-Back Reward Cards

The winner of this category was the American Express Blue Cash with Chase Freedom® Visa taking second and the Citi Professional Cash MasterCard and Discover Motiva [6] earning honorable mentions. AMEX Blue took top honors because of it offers 5% cash-back on everyday purchases and 1.5% everywhere else (on its highest tier). It also does not have an annual cap on rewards. This makes it good for high spenders but they recommend trying out the Chase Freedom(SM) Visa.

Savings Reward Cards

I thought this category was a little forced but a Fidelity Investments 529 College Rewards American Express wins out followed second by the Citi UPromise MasterCard. Citi Home Rebate Platinum Select MasterCard, GM Flexible Earnings MasterCard, and the NestEggz Visa received honorable mentions. So, why the Fidelity card? It offers 1.5% rebates and can supplement a 529 plan automatically every 50 points you earn. I’m not entirely sure why I wouldn’t get a cash-back card instead, but I suppose it “forces” some 529 saving (in the same way that throwing loose change in a jar is saving).

Personally, I think that you want to always go the route of cash-back. Getting rewards and points and everything is nice, but that just means it’s harder for that money to come back to you. With points, you have to spend it on something in the catalog at the exchange rate they dictate. With cash, you do whatever you want. Also, I think having multiple cards (a max of three) is the best way to go because some cards offer better cashback on different categories. For example, I use a Citi mtvU card [7] whenever I eat in restaurants because it offers 5% cash-back and then I use an American Express Costco TrueEarnings [8] on travel and everything else (3% and 1%). Lastly, we use a Citi CashReturns card to float the purchases for our wedding [9] because it’s offering 5% cashback on everything for three months! Using different cards offers you different earn rates so you can match up the peaks.