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How to Pick a Cash Reward Credit Card

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Rewards points and miles have a rather ephemeral quality; their entire existence is subject to the whim of a corporation’s loyalty program. On the other hand, cash back will always be the most valuable currency when it comes to credit card rewards. Unlike points and miles, cash can be used to pay your mortgage, to purchase any goods and services, or even to offset your credit card bill.

How to Find the Best Cash Reward Credit Card

First, applicants should look at the rate of return per dollar spent. Any decent rewards card will return 1% cash back on all purchases, and the best products will offer a flat rate 1.5% – 2% cash back. In addition, many cards offer bonus categories of spending that can allow cardholders to earn as much as 6% back at select categories of merchants.

Next, cardholders should look at the costs involved with these cards. Although some of these products have no annual fee, the cards with the highest percentages of cash back often require an annual fee. To determine their eventual cash back, cardholders should carefully consider their anticipated spending, tabulate the rewards, and subtract the annual fee. In many instances, reward card users will find that it makes sense to hold multiple cards in order to earn the most rewards on various purchases.

And finally, cardholders should consider any ancillary benefits such as travel insurance and purchase protection. Some cardholders may value these policies while others find them superfluous.

In general, credit card users who carry a balance should not be in the market for a cash-back credit card. These cardholders should be looking for cards with the lowest interest rates, as they will be paying more in interest than they will earn in rewards.

A Few Good Cash Reward Credit Cards

Capital One Cash Rewards

This card offers 1% cash back on all purchases as well as a 50% bonus each year, for a total of 1.5% cash back. There is no annual fee for this card, and no foreign transaction fees as well. Currently, new applicants will also receive a $100 sign-up bonus after spending $500 within the first three months of opening an account.

Chase Freedom Visa

With this card, account holders earn 1% cash back on all purchases, and 5% cash back at qualifying merchants within bonus spending categories that change each quarter. There is no annual fee for this card, but there is a 3% foreign transaction fee on all charges processed outside of the U.S. As with the Capital One Cash Rewards card, new applicants also receive a $150 sign-up bonus after spending $500 within the first three months of opening an account.

Blue Cash Preferred Card From American Express 

This card offers 6% cash back at U.S. grocery stores (limited to the first $6,000 spent annually), 3% cash back at U.S. gas stations and 1% cash back on all other purchases. Currently new applicants can earn $200 statement credit after you spend $1,000 in purchases on your new Card within the first 3 months. There is $95 annual fee for this card, and American Express imposes a 2.7% foreign transaction fee on all charges processed outside the U.S.

At publishing time, Chase Freedom Visa and Blue Cash Preferred Card from American Express are offered through Credit.com product pages and Credit.com is compensated if our users apply for and ultimately sign up for either of these cards. However, this relationship does not result in any preferential editorial treatment.

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