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Best Credit Card Reward Structures | 2012

Posted by Joss Poulton on Sat, Dec 03, 2011
  
  
  
  

I'll admit that I geek out on credit card rewards. I'll also admit that over the past four years or so I have received at least $1,500 in free cash back, gift cards, free flights, or other swag.  I thought I'd share the best rewards cards around.  Although the best reward structure depends on your spending habits, chances are it will be one of these cards, or a combination. 

 

Citi Forward citi forward xlarge

The Citi Forward offers 5 reward points for every $1 spent on Restaurants, Books (including Amazon), Movies, and Music.  It offers 1 point per $1 spent on anything else.  This results in ~3.6% straight cash back for bonus category purchases if you go the statement credit redemption route, or a remarkable 5% cash back when used on some gift cards.  The quality and range of the gift card options are very high.  You can check those out at the Thank You Rewards homepage.

 

Chase Freedom44681 lo Chase Freedom resized 600

The Chase Freedom offers 1% cash back on all purchases, and 5% cash back on up to $1,500 in purchases in select categories, alternating quarterly.  The rewards do not expire.  You have the option to redeem the cash back via check or statement credit at any increment greater than $20.  The current calendar is:

  • October-December 2011:  Department Stores, Dining (all restaurants), Movies

  • January-March 2012:  Gas, Amazon

  • April-June 2012: Grocery, Movies

 

Discover Morediscover more card review resized 600

Much like the Chase Freedom, the Discover More offers 1% cash back on all purchases, and 5% cash back on up to $1,500 (previously $250) in purchases in select categories, alternating quarterly.  The rewards do not expire.  You have the option to redeem the cash back via check or statement credit at any increment greater than $20.  The current calendar is:

  • January-March 2012:  Gas and Entertainment

  • April-June 2012:  Restaurants and Movies

  • July-September 2012: Gas and "Summer Fun" (<-- Not sure either...)

  • October-December 2012:  Holiday Shopping (<-- Also vague)

 

American Express Blue Cash EverydayAmerican Express Blue Cash Everyday resized 600

The American Express Blue Cash Everyday has the cache, cool card design, and great customer service that you know and love from AmEx.  The card features 3% cash back at supermarkets, 2% at gas stations and department stores, and 1% everywhere else.  Reward dollars don't expire, and can be redeemed at $25 intervals.

 

Pro Tips:

  • Are you going to be buying a car or a house within the next five years?  If so, be careful about the amount of new card applications that you have.  Applications count as "hard inquiries" to your credit report.  These can bring down your score, but fall off your report after five years.  One, two, or even three hard inquiries spaced over five years are ok, but any more have the potential to bring down your score.  It could be a signal to lenders that you need money. 

  • All of these cards have incentives if you sign up.  They change so frequently, I won't go into detail, but you can get $150 cash back on the Discover Card if you spend > $1,000 in the first three months.  You can also get 6,000 points on the Citi Forward card if you spend > $250 within the first three months.

  • Already have a different Chase, Citi, or Discover card?  You can actually call the nubmer on the back of the card and ask to convert your current card to one of these, as long as it's within the same company (ex. Chase, Citi, or Discover). 

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Comments

I'm surprised you haven't mentioned cards that you have to pay in, but get back much more from signing up. Namely, Southwest gives 50,000 points away for new sign ups. So you pay 99 bucks, but have $50 gift cards for each 5,000 points. Do the math and you get 500 bucks for spending less than a 100. To add to that, the points get reduced down to 4,200 in the holiday months to bring the value up to about $600 if you sign up near the Christmas season. Fill out a mailer and accept an email blast to a fake spam account of yours and now you're looking at an additional 3,000 points. 
 
Oh yeaaaah....
Posted @ Sunday, February 12, 2012 2:41 AM by Yair
Good points, Yair!  
 
Personally I'm not a huge fan of sign-up incentives for a few reasons: 
 
1. If you go after the incentives you're solving for the short term. You're not really interested in that card's rewards going forward. 
 
2. In this example, it has a $100/year fee after you get your $500 reward but the reward structure doesn't warrant the fee. 
 
3. Sign-up incentives aren't scalable. It isn't good for your credit to apply for too many cards (see Pro Tip #1 at the bottom of this article).  
 
I'd be more in support of this strategy if you converted the card to a $0 annual fee card with a good reward structure within the same bank. Since this card is issued by Chase, I'd look at the Chase Freedom. Note that you can't go the other way around here...you only get the $500 bonus if it's a net new card, not if you convert from a different Chase card to the Southwest card.
Posted @ Tuesday, February 14, 2012 10:40 AM by Joss Poulton
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