6% Back on Groceries, 5% on Gas and More
Choosing the best credit cards for your needs depends on the kinds of spending and borrowing you do—and even on how organized you are. To get the most out of your credit cards, consider signing up for multiple cards and using each for what it does best—perhaps a card that offers 6% back on groceries…and one that gives 5% cash back on rotating categories such as restaurants and department stores. Or you may want a card that charges a relatively low interest rate on unpaid balances. Caution: Rewards cards make sense only if you pay off your balances in full each month to avoid interest payments.
Among the best credit cards in different categories for 2014 (with no annual fee unless otherwise indicated and in some cases with a hefty sign-up bonus if you spend a certain amount within a few months)*…
Many cards offer 1% cash back on purchases, but you can do much better…
Best card for straightforward cash back: Capital One Quicksilver Visa. Some cash-back cards have tricky rules that involve rotating categories…minimum required rewards balances before you can cash in the rewards…and/or various cash-back amounts for different spending categories. Quicksilver’s rewards program could hardly be simpler—1.5% cash back on every purchase. Those cash rewards are unlimited and do not expire. They can be redeemed at any time in the form of an account credit, check or gift card. CapitalOne.com
Runner-up: Fidelity Investment Rewards American Express. Earn 2% cash back on all purchases—automatically deposited into a Fidelity account. This rewards program isn’t quite as simple as Quicksilver’s—you can’t apply the cash rewards directly to reduce your credit card balance—but it’s simple enough for consumers who have, or are willing to open, a Fidelity account. Fidelity.com/cash-management/overview
Best card for supermarket purchases: Blue Cash Preferred from American Express offers 6% cash back on up to $6,000 (that’s $360) in annual purchases at supermarkets. Also, it provides 3% back at gas stations and select department stores…and 1% on other purchases. Cash rewards are received as “Reward Dollars,” which can be redeemed as a statement credit. There is a $75 annual fee, but recently the card was offering a $100 sign-up bonus if you spend at least $1,000 within three months. AmericanExpress.com
Runner-up: Blue Cash Everyday from American Express offers less cash back—3% at supermarkets, 2% at gas stations and select department stores and 1% elsewhere—but unlike Blue Cash Preferred, it has no annual fee.
Best no-fee card for gas stations: PenFed Platinum Cash Rewards Visa offers 5% cash back for gas purchases at the pump through April 4, 2014, with no annual fee—if you also have a qualifying PenFed credit union financial product, such as a checking account, money-market account or loan. After April 4, the gas reward drops to 3%. There are no caps or limits with this card’s rewards. Cash rewards earned are applied automatically to your account each month. You can become a member of the Pentagon Federal Credit Union and then open an account, even if you don’t work for the Pentagon, by joining either the National Military Family Association ($20 onetime tax-deductible dues) or Voices for America’s Troops ($15 onetime nontax-deductible dues). PenFed.org
Runner-up: TrueEarnings from Costco and American Express. This card offers 3% cash back on up to $4,000 each year in gas purchases from any gas station, plus 2% cash back at restaurants and on certain travel purchases, and 1% on other purchases. There is no annual fee for Costco members. Costco memberships start at $55 a year.
Best card for cash back in rotating categories: Chase Freedom Visa offers 5% cash back on up to $1,500 in purchases per quarter in shopping categories that change each quarter. These shopping categories might include gas stations one quarter, restaurants the next and department stores in the one after that—and you have to sign up for the 5% categories each quarter. All other purchases on this card earn 1% cash back, so the card makes the most sense if you use it only for purchases that qualify for 5% cash back while using other cards that give you cash back of more than 1% for other purchases. Cash-back bonuses can be redeemed in amounts of $20 or more in the form of a statement credit, paper check or direct deposit into a bank account. New cardholders can earn a $200 bonus by spending at least $500 in the first three months. Chase.com
Runner-up: Citi Dividend Platinum Select Visa has a cash-back program that is very similar to Chase Freedom’s—purchases in rotating spending categories qualify for 5% cash back, all other purchases 1%. Rewards are redeemed upon request in the form of a check, but only in increments of $50. CitiCards.com
TRAVEL REWARDS CARDS
These cards help consumers accumulate airline miles and earn reward tickets. It is becoming even more important to maximize frequent-flier miles because several airlines have increased minimum requirements to earn a ticket.
Helpful: Many airline-miles cards are linked to specific airline frequent-flier programs. Which of these is best for you depends largely on which airline has the routes you fly most. Setting that aside, Southwest Airlines Rapid Rewards Premier Visa is the best of these cards in large part because Southwest’s frequent-flier program has no blackout dates or seat restrictions. It charges a onetime $99 fee on the first billing statement.
Best travel card not linked to a specific airline: Capital One Venture Visa gives you two miles for every dollar spent, and the miles translate into specific dollar amounts that you can use to pay for any airline ticket, based on the price of that ticket—unlike travel cards that require a specified number of miles for an airline ticket. Example: A $195 ticket costs 19,500 miles. Miles don’t expire and can be redeemed on any airline without blackout dates or seat restrictions. Or redeem miles for other travel expenses, such as hotels or car rentals. Earn an additional 20,000 miles for spending at least $2,000 in the first three months. There is a $59 annual fee, which is waived for the first year. CapitalOne.com
Runner-up: Barclaycard Arrival World MasterCard has rules and rewards very similar to Capital One Venture’s—cardholders earn two miles per dollar spent, and those miles are redeemable on any airline without seat restrictions or blackout dates. But its annual fee is higher, $89, which is waived for the first year. Miles also can be redeemed for car rentals, hotel rooms and other travel purchases. The card offers new cardholders a bonus of 40,000 miles for charging at least $1,000 in the first 90 days. BarclaycardUS.com
Many consumers have priorities other than cash and travel rewards…
Best low-rate card: Simmons First Visa Platinum charges a 7.25% variable interest rate on new purchases and balance transfers, the lowest regular rate you are likely to find. (Other cards charge lower initial “teaser” rates for new cardholders, but those teaser rates soon will expire.) SimmonsFirst.com
Runner-up: Barclaycard Ring MasterCard charges an 8% variable interest rate. BarclaycardUS.com
Best Small-Business Rewards Cards
Small businesses can benefit from rewards cards that are designed especially for them.
Capital One Spark Cash Visa for Business offers 2% cash back on all purchases. New cardholders also can earn a $100 bonus for spending $1,000 in the first three months. It has a $59 annual fee, which is waived for the first year. Variable interest rates range from 13.9% to 20.9% depending on creditworthiness. CapitalOne.com
Runner up: Ink Plus Business Visa Card from Chase. Cardholders earn five points per dollar spent on up to $50,000 per year in purchases at office-supply stores and on cell-phone, landline, Internet and cable-TV services. They earn two points per dollar on up to $50,000 in spending per year at gas stations and hotels (hotel reservations must be booked directly with the hotel to qualify, not through an Internet travel Web site) and one point per dollar on all other purchases. New cardholders earn a 50,000-point bonus for spending at least $5,000 in the first three months. Points do not expire, and they can be redeemed one-for-one for miles in many frequent-flier programs. Additional perks include two airport VIP lounge visits per year. The card’s $95 annual fee is waived for the first year. It charges a 13.24% variable rate.
*Fees, interest rates, requirements, availability and details of credit card programs change frequently.