Keep things simple with a cash back credit card
Cathleen McCarthy is a journalist whose articles on travel, commerce and consumer topics have appeared in dozens of publications. She writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com
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Dear Cashing In,
have yet to get a rewards card, primarily because they seem so complicated. I
like to keep things simple. Are there rewards cards out there that are geared
toward people like me -- who don't want to spend a lot of time keeping track of
spending and points and one where the rewards are easy to redeem? -- Kelly
Some rewards programs are more
convoluted than others, especially when it comes to redeeming those rewards.
Honestly, the simplest reward is
probably cash back. Spend X amount of dollars, get X amount of cash
automatically credited to your account. Because it's cash, you can spend it
wherever you want and don't have to wait for miles to pile up, translate points
into currency or limit your reward redemption to the program's catalogue.
Of course, you are limited by the card's
pay-per-dollar proposition. Most cash-back cards offer 1 percent on whatever
you spend. The Capital One Cash Rewards card, for example, comes with no annual
fee and an annual 50 percent bonus on the cash rewards earned.
Cash-back is not a very glamorous
reward system, but if ease-of-use is your primary goal, it's probably the way
to go. Some would argue the standard 1 percent per dollar card ends up
delivering more value than many points- or miles-based programs, especially if
you never end up with enough points to book your travel.
If you're trying to keep things simple,
avoid cards that offer promotions you have to register for, such as the Citi
ThankYou card, or revolving rewards categories, such as Discover More. Revolving
categories can look great on paper (how can you beat 5 percent back on everyday
purchases such as gas and groceries?), but they change every three months. Just
as you're getting used to the gas rewards, the payoff switches to restaurants
and movies, which may or may not fit your agenda.
On top of that, you have to remember to
register for the new rewards category every quarter. Those 5 percent rewards
don't just start automatically accruing. It can be kind of annoying to drop $150
at a restaurant and realize you forgot to register for the restaurant rewards.
For people who love the idea of getting a deal and are good at scheduling
tasks, it can become a kind of game to keep up with this. But if you're looking
to simplify? Not the best option.
If you're looking to get extra points
for gas and groceries, it might make more sense to get a card that rewards
those purchases on an ongoing (rather than revolving) basis. The Barlaycard
Rewards MasterCard offers 2 points per dollar spent on gas, grocery and utility
purchases, on top of the standard 1 point per dollar on everything else. You
can use the points like cash on almost any purchase with no blackout dates,
limits or redemption fees.
Beware of cards labeled "easy." It
might be easy to accrue the points, but not so easy to get significant rewards
out of them. TD
Easy Rewards Visa Card, for example, pays a standard 1 point per dollar
spent, but when you go to redeem your award on its website, you'll find those
points don't deliver the value of a cash-back card's 1 percent. For example,
TD's rewards site offers a $25 Amazon gift card for 4,500 points, which means
your points are worth slightly more than a half percent. (Other rewards on the
site work out a little better, but still significantly less than 1 percent.)
What you don't want to do is trade
convenience for value. If you're getting half the rewards for the same spend,
what's the point of having a rewards card? Your goal should be to maximize your
payback while minimizing your headache.
See related: What to consider before applying for a cash back credit card,
Comparing the value of cash back cards versus rewards
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Published: May 22, 2012
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