Sara Rathner
Sara Rathner, credit card expert for NerdWallet.com, which provides information about and reviews of credit cards and other financial products and topics.
Skyrocketing inflation is stretching budgets and devaluing savings. Credit card debt shot up 13% over a recent 12-month stretch as millions of US households struggle to keep up with their bills—that is the largest year-over-year increase in more than 20 years.
Inflation is increasing the cost of having credit card debt, too. The average credit card interest rate rose to around 19% in late November, the highest in more than a quarter-century, with many cards now charging more than 20%.
While credit cards are part of the financial problem facing many Americans, they also can be part of the solution—especially for people who have credit scores in the ballpark of 690 or above, the approximate threshold for obtaining many appealing cards. The right credit card could dodge steep inflation-era interest rates…offer savings to offset a portion of inflation’s price increases…and/or provide a cash bonus to help balance the
household budget.
Bottom Line Personal asked NerdWallet credit card expert Sara Rathner about some of the best credit cards* for these inflationary times…
Credit cards that offer new cardholders lengthy 0% introductory interest rates can be especially valuable at times like these, when most cards and loans charge steep rates. Currently the cards with the longest 0% introductory interest rates include Bank of America’s BankAmericard and Wells Fargo Reflect. Each offers a 0% rate on new purchases and balance transfers for up to 21 months, with a reasonable 3% balance-transfer fee. Example: If you transfer $10,000 in credit card debt to one of these cards from a card charging 20% interest, then pay off that debt over the ensuing 21 months, you could avoid more than $1,900 in interest charges. Factor in the $300 balance-transfer fee, and that would be a net savings of more than $1,600.
More great cards with 0% introductory rates: American Express Blue Cash Everyday…Capital One Quicksilver…Chase Freedom Flex…Chase Freedom Unlimited…Discover it…and Wells Fargo Active Cash. Each offer 0% on both balance transfers and new purchases for 15 months, with 3% balance-transfer rates and no annual fees. That’s six months less than the 21 months offered by the top cards in this category, but these cards can be appealing in other ways as well—see pages six and seven.
Grocery prices shot up 12% between the middle of 2021 and mid-2022. Gas prices were up a staggering 60% over those same 12 months. Sharp cost increases can be especially daunting with essentials such as food and fuel because, unlike discretionary purchases, this spending cannot be easily avoided. That makes this a good time to consider credit cards that provide cash back on essential purchases, partially offsetting inflation.
No card does this better than American Express Blue Cash Preferred. It offers 6% cash back on up to $6,000 in annual purchases at supermarkets—that’s enough to offset approximately half of the recent run-up in grocery prices. It also offers 6% back on streaming services, which have been rising in price recently…3% back on gas and transit…and 1% on everything else. It does have a $95 annual fee, which is sometimes waived for the first year, but that’s worth paying if you buy a significant amount of groceries—spend $6,000 per year at supermarkets, and the cash back you earn from those grocery purchases alone will come to $360.
If you are not willing to pay an annual fee: You can get 5% cash back on most grocery and gas spending using no-annual-fee cards—but you might have to juggle several cards to accomplish this. Discover it and Chase Freedom Flex both offer 5% cash back on spending categories that change every three months, plus 1% on everything else. Most years, both of these cards feature supermarkets as a 5%-off category during one three-month span…and gas stations as a 5%-off category during another. If you use both of these cards, there’s a reasonable chance that between them you can receive 5% off on groceries and 5% off on gas for six out of 12 months of the year, assuming that you carefully track which card to use when and follow these cards’ other rules.
For the remaining months, there’s Citi Custom Cash Mastercard, which offers 5% back on up to $500 in purchases per billing cycle in whichever of 10 categories you spend the most during that month, plus 1% on everything else. Eligible categories include grocery stores and gas stations, so you could use Custom Cash to get 5% back on groceries or gas in any monthly billing cycle—though not on both during the same billing cycle.
If you don’t want to keep track of multiple cards and changing spending categories: The next-best bet for cash back on both groceries and gas is American Express Blue Cash Everyday, the no-annual-fee version of the American Express Blue Cash Preferred card described earlier. Everyday offers 3% back on up to $6,000 in annual supermarket spending…on up to $6,000 in annual gas purchases…and up to $6,000 in annual purchases from online retailers, plus 1% on everything else.
Another option for cash back on groceries: Capital One SavorOne, best known for offering 3% back at restaurants and on entertainment but also offering 3% back at grocery stores and streaming services, plus 1% on everything else.
Note that cards that offer attractive cash-back rates at supermarkets often exclude chains that sell groceries but that are not stand-alone supermarkets, such as Walmart, Target and wholesale clubs.
Additional options for gas purchases: Sam’s Club Mastercard offers 5% back on up to $6,000 in annual gas purchases, plus 3% at restaurants, up to 3% at Sam’s Club and 1% on everything else…and Costco Anywhere Visa offers 4% back on gas purchases and EV charging up to $7,000 per year, plus 3% at restaurants and on eligible travel purchases, 2% at Costco and 1% on everything else. These are no-annual-fee cards, but you must be a member of the associated warehouse club to obtain them. Membership starts at $45 per year for Sam’s Club and $60 per year for Costco.
Caution: The rewards credit cards linked to specific gas station chains tend to be less appealing—they offer significant savings only when used at stations in a particular chain…and their savings often are provided in the form of cents off per gallon, which becomes less appealing than a percentage-based cash-back rate when gas prices are high. Example: The 15 cents back per gallon offered by BPme Rewards Visa for gas purchases at BP and Amoco stations is an impressive 6% savings when gas costs $2.50 a gallon…but a less exciting 3.75% when gas costs $4.
Whichever credit card you choose for gas purchases, also sign up for the loyalty programs of the gas station chains you frequent. These programs typically offer just a few cents back per gallon, but those rewards can be earned in addition to the rewards earned by using a rewards credit card.
Some credit cards offer cash sign-up bonuses—often ranging from $150 to $350—to attract new cardholders. Cardholders typically must reach a designated spending threshold during their first few months with the card to qualify. While a few hundred dollars might not solve today’s budget-stretching inflation, it doesn’t hurt.
American Express Blue Cash Preferred, described on page six, is among the best here, too—new cardholders can earn a $300 statement credit by making $3,000 in purchases in the first six months.
No-annual-fee cards featuring $200 sign-up bonuses include Citi Custom Cash Mastercard (spend $1,500 in the first three months to earn the bonus)…Chase Freedom Flex (spend $500 in three months)…American Express Blue Cash Everyday (spend $2,000 in six months)…and Capital One Quick-silver (spend $500 in three months), all mentioned above.
Additional no-annual-fee cards with $200 sign-up bonuses include Citi Double Cash (spend $1,500 in six months)…and Wells Fargo Active Cash (spend $1,000 in three months), both of which also offer the equivalent of 2% cash back on all purchases.
Warning: Before applying for any of these cards, confirm that the sign-up bonus remains in effect. Credit card terms can change with little notice, and issuers alter sign-up bonus offers with particular frequency.
