If you travel a lot by car, airline reward cards won’t do you much good. You’ll be better off with cash-back cards that offer rewards in driver-friendly categories
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Dear Cashing In,
Dear Cash Strapped,
A consistent 1 percent cash back is a solid return for a low- or no-fee card, but before we get into those, I should add that cards with revolving categories can earn up to 5 percent back. You do have to remember to register for the new categories every quarter though, and you may (understandably) consider that a hoop. On the other hand, 5 percent on ordinary expenses such as gas and groceries is a return on investment that’s hard to ignore if you’re truly cash-strapped. So it might be worth setting up an alert on your smartphone if you have one.
Chase Freedom and Discover are two well-known no-fee cards that offer 1 percent cash back on all purchases and 5 percent (up to $1,500) on rotating categories. Right now, both cards are focusing on summer road trips. You can get 5 percent cash back at gas stations, theme parks and Kohl’s on the Freedom card. Discover is offering 5 percent back at stand-alone gas stations through September.
If you don’t want to keep track of rotating categories, a couple of no-fee cards give you bonus points all the time for groceries and gas. The BankAmericard Cash Rewards Visa offers 3 percent cash back on gas and 2 percent back on groceries for the first $1,500 of combined grocery and gas purchases you make each quarter. You earn 1 percent back on other purchases. The American Express Blue Cash Everyday card has no annual fee and also earns 3 percent on groceries (within limits, which I’ll get to in a moment), 2 percent on gas and select department store purchases and 1 percent on everything else.
The premium version of that card, Blue Cash Preferred, has a $75 annual fee and earns a generous 6 percent cash back on supermarket purchases, 3 percent back on gas and select department store purchases and 1 percent on everything else.
If you’re looking for a card to use for those kinds of purchases on a regular basis, you might want to do a quick calculation to see if that $75 fee will pay for itself. If you spend at least $50 per week on groceries ($2,600 in a year), for example, the extra 3 percent cash back amounts to $78 for the year — enough to cover the annual fee. Be aware, however, that American Express has a cap of $6,000 on groceries eligible for rewards, which means any supermarket purchases you make over that limit will only earn 1 percent cash back.
See related: Chart: Compare and find the best gasoline rewards card for you, Keep things simple with a cash back credit card, Cash back or miles? Ask yourself these 6 questions first