Best Credit Cards Part 2: Cash Back or Travel Rewards
Keep it simple and focus on rewards you can use widely
In part one of this two-part series, we looked at how to determine what kind of credit card is best for you and whether you should consider applying for a new card.
This time, we look at the best credit cards on the market, based on how you spend.
With more than 1,000 credit cards available, it’s easy to get lost in the weeds. Thing is, you do not want a credit card that is too specific.
You might be the world’s biggest fan of a Starbucks half-caf double vente triple mocha foam-free iced latte with sprinkles and a salted-caramel swirl, but earning free lattes or breakfast treats every few months with a Starbucks Reward Visa card likely doesn’t provide a huge benefit to your lifestyle.
What you want is a broad-based credit card that gives you substantial perks or flexibility in how you use the rewards you earn.
So, let’s consider the best cards in the two broadest credit card categories: cash-back and travel-rewards cards.
There’s nothing wrong with using accumulated rewards to claim a free latte, but having to use every reward at a specific store limits your consumer freedom. With a broad-based cash-back card, you’re earning real cash you can use any way you want: Pay down your credit card balance, claim gift cards from a variety of retailers, or stuff the money into your emergency fund.
A few cash-back cards stand out.
Blue Cash Preferred from American Express.
This is an all-around excellent card for the weekend Gordon Ramsey — who also likes to stream Spotify while cooking, then relax after dinner with a bit of Netflix or HBO.
Blue Cash Preferred pays 6% cash back on the first $6,000 you spend each year on groceries, the highest cash-back offer you’ll find for supermarket shopping. That’s $360 in your pocket. Beyond $6,000, the cash-back rate falls to 1%.
Blue Cash Preferred also gives you 6% cash back on streaming entertainment services (Spotify, Netflix, etc.) and 3% on gas stations, taxis, rideshares, parking, highway tolls, trains and the like, and 1% on everything else. That’s easily another couple hundred dollars a year.
The annual fee is $95, but you’ll pick up a $300 cash-back bonus after spending $1,000 in the first three months.
Capital One Savor Cash Rewards Card is a solid, all-around card if your spending is more associated with eating out, ordering in and entertainment. It offers a league-leading 4% cash back on an unlimited amount of spending on dining (restaurants, cafes, bars, fast food, bakeries, etc.) and entertainment (movies, sporting events, live theater, amusement parks, tourist attractions, among others).
Beyond that, you’ll collect 2% at grocery stores and 1% on everything else. It’s the same $95 fee, waived the first year, and you earn a $300 one-time bonus after spending $3,000 in the first three months.
The US Bank Cash+, meanwhile, is a high-quality card if you don’t want to pay an annual fee. This card offers a two-tiered bonus structure.
In the first tier, you choose two categories every quarter that pay 5% cash back. Those categories cover fast food, streaming entertainment, department stores, utilities, movie theaters, etc. Your bonus is limited to the first $2,000 you spend in both categories combined, but that’s still worth as much as $400 a year. (Above $2,000 a quarter of your cash-back rate reverts to 1%.)
In the second tier, you get unlimited 2% cash back in one of three categories that never change: non-fast food restaurants, supermarkets and gas stations. US Bank is offering a $150 cash-back bonus if you apply online and spend $500 in the first 90 days.
Travel is on hold right now, but surely coming back. Just about every major airline and hotel chain offers one or more branded credit cards. And loyalty to one particular brand does have benefits — from free checked baggage and access to shorter check-in and security lines, to free hotel nights and airport lounge access.
But for most occasional travelers, an all-purpose travel-rewards credit card is a better option. With an all-purpose card, you can trade the points or travel miles you earn for flights on multiple airlines, free nights at numerous hotel chains, or a cruise.
Two of the best are Chase Sapphire Preferred and Capital One Venture Rewards ($95 annual fee, waived the first year).
These two cards distinguish themselves because they allow you to accumulate travel points relatively quickly and offer a host of valuable travel-oriented benefits.
For instance, the Venture Rewards card offers a $100 statement credit when you apply for TSA PreCheck or Global Entry, which can make security screening and passport control quicker and easier.
Chase Sapphire, meanwhile, offers a 25% bonus when redeeming points for travel through Chase Ultimate Rewards, a highly regarded website among travel-points junkies.
With the Chase card you earn 2x points for every dollar spent on dining and travel, and travel is a broad category that includes tolls, taxis, parking lots and garages, rather than simply airline tickets, hotels and the like.
Which of these cards is best is a tossup. While Capital One Venture Rewards offers 2x miles on every purchase, Chase Sapphire has the 25% redemption bonus. Ultimately, either one is likely to serve you well as a primary credit card aimed at collecting travel rewards.