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All Contents © 2019The Kiplinger Washington Editors
By Lisa Gerstner, Contributing Editor
| January 19, 2018
Rewards credit cards keep getting more and more rewarding. For the past several years, card issuers have been hustling to attract customers with generous sign-up bonuses and ongoing perks that have the potential to line your pockets with hundreds of dollars a year. The six largest credit card issuers are spending more than twice as much on card rewards than they did in 2010, according to a study by personal finance site MagnifyMoney.com. Chase pumps the most money into its cards, and it shows: Five cards issued by Chase grace our latest list of the best rewards credit cards. Plus, the release of the Chase Sapphire Reserve card in 2016 shook up the market for premium travel rewards cards—those with fees in the hundreds of dollars annually and perks to match—spurring competitors to beef up their offerings or introduce new cards.
As you choose the card that suits you best, take stock of your spending habits. Also keep in mind that if you don’t pay off your credit card bill in full each month, a rewards card probably isn’t for you. Interest charges will likely cancel out any earnings that you capture.
To help you evaluate the winners, we calculated a typical annual rebate for each card, drawing on data from the U.S. Bureau of Labor Statistics Consumer Expenditure Survey to determine average spending in various categories and assuming a total of $22,000 spent on the card annually. Except where noted, the rebate doesn’t account for sign-up bonuses or annual fees if they are waived the first year; earnings do not have caps or expiration dates; and these travel-oriented cards do not charge foreign-transaction fees.
Winner: BankAmericard Travel Rewards Visa
Interest Rate: 0% for 12 months, then 16.24% to 24.24%
Annual Fee: None
Sign-up Bonus: 20,000 points if you spend $1,000 in the first 90 days.
Typical Annual Rebate: 34,500 points, worth $345 in statement credits for travel purchases
If you’d like to bank your points for travel purchases without worrying about an annual fee or spending categories, this card will serve you well. You’ll earn 1.5 points on every dollar spent (three points per dollar on purchases you make through Bank of America’s Travel Center shopping portal). After you accumulate at least 2,500 points, you can redeem them at a rate of 1 cent apiece for a statement credit toward travel purchases you make on the card—anything from flights and hotel stays to taxi rides and amusement-park visits. Points are worth 0.6 cent each if you redeem them for cash; point values for gift cards vary. This card is eligible for a rewards bonus if you bank with BofA.
Honorable mention: Discover It Miles (0% for 14 months, then 12.24% to 24.24%; typical annual rebate: 33,000 miles, or $330 in statement credits) doles out 1.5 miles per dollar on all purchases, and you can redeem miles in any amount at a rate of a penny per mile for either a statement credit on travel purchases or cash. At the end of your first year of card membership, Discover matches the miles you’ve earned, doubling your miles for the year.
Winner: Barclaycard Arrival Plus World Elite MasterCard
Interest Rate: 17.24% to 24.24%
Annual Fee: $89, waived the first year
Sign-up Bonus: 40,000 miles if you spend $3,000 in the first 90 days
Typical Annual Rebate: 46,200 miles, or $462 in statement credits for travel purchases
You’ll earn two miles for every dollar you spend with this card, and once you build up at least 10,000 miles, you can redeem them at a rate of a penny per mile for a statement credit on a travel purchase of $100 or more that you’ve made in the past 120 days. Qualifying purchases range from flights, hotel stays and car rentals to fares for train, bus, taxi and ferry rides. Each time you redeem miles, you’ll get a 5% bonus on the number of miles you trade in. Miles are worth a half-cent each if you redeem them for gift cards or statement credits on non-travel purchases.
Honorable mention: The Capital One Venture Visa card (14.24% to 24.24%; $95 annual fee, waived the first year; typical annual rebate: 44,000 miles, or $440 in statement credits for travel purchases) also pays out two miles per dollar on every purchase, redeemable at the full penny-per-mile value for statement credit on travel purchases made within the previous 90 days (miles are worth a half-cent each if you get a check or a non-travel statement credit). Or book travel with miles through Capital One’s Rewards Center.
Winner: Chase Sapphire Preferred Visa
Annual Fee: $95, waived the first year
Sign-up Bonus: 50,000 points if you spend $4,000 in the first three months; add an authorized user along with your first purchase for an extra 5,000 points
Typical Annual Rebate: 29,095 points, or $364 in travel purchases through Chase Ultimate Rewards
Frequent travelers should fare well with this card, earning two points per dollar spent on travel and dining and one point spent on everything else. Points are worth 1.25 cents each if you use them to book travel through the Chase Ultimate Rewards shopping portal, or you can transfer them at a 1:1 ratio to several partner airline and hotel programs, including Southwest Airlines Rapid Rewards, United MileagePlus and Marriott Rewards. If you go for gift cards or cash back instead, points are worth a solid penny apiece. (But they’re worth just 0.8 cent each if you use them at checkout at Amazon.com.)
Honorable mention: The Amex EveryDay card (0% for 15 months, then 14.24% to 25.24%; typical annual rebate: 32,521 points, or a $325 value for certain travel redemptions) is a no-fee avenue to earning American Express Membership Rewards points, which you can exchange at a penny-per-point value for flights, gift cards for certain hotels and restaurants, and Uber rides (some other redemption choices offer lower point values). You can also transfer points to participating frequent-travel programs, including Delta SkyMiles, at a 1:1 ratio for most programs minus a fee of 0.06 cent per point converted to a U.S. airline program. You’ll earn two points per dollar spent on up to $6,000 in supermarket purchases and at the American Express Travel shopping portal, and one point on everything else. Plus, if you make at least 20 purchases per billing period, you’ll get a 20% point bonus. The card charges a 2.7% foreign-transaction fee.
Winner: Chase Sapphire Reserve Visa
Annual Fee: $450
Sign-up Bonus: 50,000 points if you spend $4,000 in the first three months of card membership.
A credit card that charges an annual fee north of $400 may seem extravagant. But if you travel frequently, the supersize rewards that premium cards offer could outweigh the hefty fee. One of the card’s best benefits is a reimbursement of up to $300 each year for travel purchases you make on the card.
Travel and dining purchases earn three points per dollar spent, and other spending gets one point per dollar. Points are redeemed at 1.5 cents per point for travel purchases through the Chase Ultimate Rewards shopping portal, or you can transfer them at a 1:1 ratio to partner loyalty programs. Other features include a credit of up to $100 for a Global Entry or TSA PreCheck application fee, a free Priority Pass Select airport lounge membership, discounts with National Car Rental and Avis, and daily breakfast and late checkout at Luxury Hotel & Resort Collection properties.
Honorable mention: The Platinum Card from American Express is also worth a look. It recently upped its annual fee from $450 to $550, but it also goosed benefits for jet setters. Cardholders now earn five Amex Membership Rewards points per dollar on eligible flights and hotel purchases and one point on everything else. The initial bonus is 60,000 points if you spend $5,000 in the first three months. You’ll also get free access to a host of airport lounges, including Centurion, Priority Pass Select, Airspace and Delta Sky Club lounges (when flying on Delta). Among other perks: a $200 annual credit on incidental fees (such as checked bags or in-flight meals) with one airline of your choice, a $15 monthly reimbursement for Uber rides (plus an extra $20 in December), a fee credit of up to $100 for a Global Entry or TSA PreCheck application, and Gold status with the Starwood and Hilton hotel loyalty programs.
Winner: Southwest Rapid Rewards Premier Visa
Annual Fee: $99
Sign-up Bonus: 50,000 points if you spend $2,000 in the first three months
Typical Annual Rebate: 31,000 points
Pile up extra points toward free flights with this card, earning two points per dollar spent on Southwest flights, gift cards and Southwest Airlines Vacation packages, as well as at hotel and rental car partners. All other purchases earn one point per dollar. Each year, on your cardmember anniversary, you’ll get a 6,000-point bonus, which “just about covers the value of the annual fee,” says Brian Karimzad, director and loyalty analyst of MileCards.com. (Point values may vary but a $400 Wanna Get Away fare class ticket equals about 27,000 points.) Along with booking flights on Southwest Airlines, credit card customers can use their points for hotel stays, car rentals and gift cards.
Honorable mention: Especially for an airline card with no annual fee, the JetBlue World MasterCard (13.24% to 26.24%; typical annual rebate: 35,196 points) offers an outstanding payback: three points per dollar spent on JetBlue purchases, two points at restaurants and grocery stores, and one point on everything else. Cardholders also get in-flight food and cocktails for half price.
Winner: Starwood Preferred Guest Credit Card from American Express
Interest Rate: 16.49% to 20.49%
Sign-up Bonus: 25,000 points if you spend $3,000 in the first three months
Typical Annual Rebate: 30,000 points
This card packs even more punch now that Marriott International has acquired Starwood Hotels & Resorts. Cardholders earn up to five Starpoints per dollar at participating Starwood hotels (including the Sheraton, Westin and St. Regis brands), two points at eligible Marriott properties, and one point on all other purchases. Use points to book free nights at Starwood hotels, or transfer them to a linked Marriott Rewards account at a ratio of one Starpoint to three Marriott points. Another appealing option: Convert points to frequent-flier miles with more than 30 partner programs (most conversions are at a 1:1 ratio of Starpoints to air miles, but the United MileagePlus ratio is 2:1). For each 20,000 Starwood points that you transfer to an airline program, you’ll get a 5,000-point bonus. Cardholders also get free, in-room premium internet access at participating Starwood hotels. Points expire if your Starwood card account is inactive for a year.
Honorable mention: With no annual fee, the Hilton Honors Card from American Express (16.99% to 25.99%; typical annual rebate: 95,256 points) offers seven Hilton Honors points per dollar spent at participating Hilton properties, five points per dollar at restaurants, supermarkets and gas stations, and three points on everything else. You’ll get 500 bonus points each time you use the card to both book your hotel stay online and pay for it. Cardholders get automatic Silver member status and are upgraded to Gold status if they spend $20,000 or more on the card in a calendar year.
Winner: PenFed PathFinder Rewards American Express
Interest Rate: 11.99% to 17.99%
Annual Fee: None
Sign-up Bonus: 25,000 points if you spend $2,500 in the first 90 days
Typical Annual Rebate: 43,000 points, or $507 in travel purchases through PenFed (for Honors Advantage cardholders)
This new card from Pentagon Federal Credit Union comes with a couple of perks typically found only on cards that carry an annual fee. You get an automatic yearly reimbursement of up to $100 for incidental airline fees charged to the card, such as fees for day passes to enter airport lounges for qualifying airlines or charges for baggage or in-flight food and entertainment. Charges from any of 11 U.S.-based airlines (including American, Delta, United and Southwest) are eligible. And cardholders are reimbursed for the application fee for TSA Precheck ($85) or Global Entry ($100) every five years (the fee for each program covers five years of membership).
As an Honors Advantage cardholder (you must be a member of the military or have an Access America checking account with PenFed to qualify), you’ll earn four points per dollar on travel purchases. Other customers earn three points per dollar on travel spending, and all cardholders earn 1.5 points per dollar on non-travel purchases. Points are redeemable at an average value of 1.18 cents apiece for travel bookings through PenFed. Take a pass on gift cards and merchandise—points are worth only 0.85 cent each for those redemptions. Points expire after five years.
You must be a PenFed member to get the card, and anyone can join by paying one-time dues of $17 to Voices for America’s Troops or the National Military Family Association and depositing $5 or more in a PenFed savings account.