Best Rewards Credit Cards of 2014
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Part 1 of 4 – The Simple Dollar 2014 Rewards Credit Cards Series
This is the first part in a series of four posts on rewards credit cards. In the upcoming posts, I’ll focus on the more specific types of rewards cards, like cash back, hotel, and airline credit cards. I’ll let you know what the best cards are in each of these types, why the cards are the best, and then explain how you can use them to put money back into your pocket.
Part 1: General Rewards Credit Cards
Part 2: Airline Credit Cards (coming soon)
Part 3: Cash Back Credit Cards (coming soon)
Part 4: Hotel Credit Cards (coming soon)
For this post, my goal is to identify the best overall rewards credit card. I understand it may be impossible to pick a clear winner. How can there be one card that’s the best for everyone? We all spend our money on different things. We demand rewards in various forms. We have different credit scores. Some of you pay the balance on time and others don’t. I get it. The overlying opinion is that there is no best card for everyone. Strictly judging the cards – not the people using them – I’m confident I have an answer and the data to back it up.
For starters, here are my three overall best rewards credit cards for 2014:
- Barclaycard Arrival(TM) World MasterCard® – Earn 2x on All Purchases
- Capital One® Venture® Rewards Credit Card
- Chase Sapphire Preferred® Card
Before I dive into each of these cards, let me provide you with a little background on my process. To begin, I compiled a list of nearly 200 popular credit cards. From that list, I pulled out the 80 rewards credit cards. I knew I had to cut the list of 80 down to an even more manageable amount because cross comparing that many cards would take months (if you did it the right way). What I did next was look at the most important features for the 80 cards and rank them in order of importance, with rewards and yearly savings being the most important. Based on that data, I was able to select around 30 top rewards credit cards. Now it was time to really start digging in.
The features I looked at far surpassed what I found on other review websites. I went beyond the introductory APR, standard APR, sign up bonus, rewards rate, additional bonus rewards, introductory balance transfer rate, and standard balance transfer rate. (You can get this information on any credit card site and it’s all presented the same.) While using this data, I had to make assumptions. One assumption is that you have good enough credit to get a credit card. The other is that you plan on paying your balance on time, for the most part.
Beyond the data, I wanted to put myself in the position of the cardholder. My only limitations were that I couldn’t sign up for every card. I compensated by learning about the sign up processes and the benefits of the cards that often can’t be measured. I read thousands of reviews like these from the actual cardholders to see if I could pick up additional information that the data couldn’t measure.
I wasn’t looking for just the highest rewards or simply the lowest APR. I want the card that has the best combination of everything — the kind of card that you tell your entire family to sign up for. So the focus turned to the general rewards cards. With these cards, you can capitalize on just about every purchase you make.
A quick understanding of credit cards
The industry is fairly complicated. You have credit card issuers or banks, like Chase, Bank of America, and Capital One. Then you have Visa, MasterCard, American Express, and Discover — these are the financial services institutions that supply the credit cards. With some cards, brands come into play and you’ll see a trio of partnerships on one card. Take the US Airways Premier World MasterCard® as an example. The issuer is Barclays, a British bank, it’s a MasterCard, and the partnership is with US Airways. Barclays is one issuer that is particularly active in the travel industry. They have partnerships with Priceline, Travelocity, and other travel companies, like cruise lines.
On the consumer side of credit cards, things can also get a little confusing. Imagine this massive umbrella of every credit card in existence. One category of credit cards – the largest category – is rewards credit cards. Within rewards cards, you’ll find a different set of sub-categories. You have airline credit cards, travel credit cards, cash back credit cards, and hotel credit cards.
It’s common to see these cards being categorized into deeper sub-categories to highlight specific purposes or features, such as balance transfers, low interest, or no fee cards. You don’t need to get caught up in these classifications. Think of them more as filtering tools because many of the top cards will excel in these areas. If someone advises you to look into a balance transfer card, they’re typically talking about rewards credit cards that offer the best deals on balance transfers.
You might be wondering about gas credit cards being a specific type of card versus a classification. In the credit card industry, you can’t find many, if any, gas credit cards that aren’t already cash back cards. My view on gas credit cards has changed to thinking of it more as a deeper sub-category or classification, rather than a full categorization, like airline credit cards. To qualify as a “gas credit card” it must offer nice rewards on gas purchases. There are brand-specific gas credit cards, but nobody considers them as elite credit cards.
The brand loyalty rewards credit cards
The top general rewards cards allow you to earn two points for every dollar spent. Some of the airline cards and hotel credit cards are able to offer you higher rewards earning potential than, but only if you make purchases from that company. They’re able to do so by tying in the rewards from the credit card into their own customer loyalty or rewards program.
I only found a handful brand credit cards that were deserving of consideration. Many offer a similar rewards rate to the general credit cards and are much less versatile in terms of earning rewards. Plus, loyalty isn’t exactly at the forefront of the airline industry, especially with the rising cost of airfare and the ability to check all airfare prices at one time. At least for me, I know I have no loyalty to one airline. My last four flights were on Delta, American, Frontier, and Southwest.
If you have loyalty to a specific airline, hotel, or brand – and you spend a lot of money on this brand – it’s a good idea to get the card offered by the company. Just be aware that the card only offers higher rewards on items purchased from that brand so your purchases must be very targeted to take full advantage.
With so much variety within the rewards credit cards category, measuring the value of what you can earn with each card is difficult. Some cards offer straightforward cash back percentages (1%, 2%), others reward in miles (1x miles, 2x miles), some have points, and then there are the rotating cash back categories for the 5% cash back cards. The brand credit cards can get a little confusion. As mentioned, the rewards you earn translate into hotel reward points or a company’s rewards program. In that case, your sign up bonus and rewards are not connected the credit card account. Everything is tied to the brand’s program. I understand this is probably what you’re looking for if you sign up for these cards. Just know that the point conversions are not always 1:1. You’ll want to be sure to accurately calculate your rewards and bonus earning potential.
There’s one more thing to mention. No credit card is going to be good news for you if you plan on carrying a balance on the card. Avoid carrying a balance at all costs. If you don’t plan on paying off your balance, you probably shouldn’t be getting a credit card. I know people run into trouble from time to time (it’s happened to me too), but you simply don’t want to ruin your credit for the rest of your life. (For those of you who are unphased by this practice of carrying a balance and don’t plan on paying your balance on time, get a card with the lowest APR you can find. A solid starting point is the Discover it® card. It has a low APR and, as a bonus, it isn’t as widely accepted as other cards so I’m recommending it to hopefully slow down your spending.)
Getting hooked for life: The impulsivity of sign up bonuses
The issuers have created so many cards in such strategic areas of consumption that it’s nearly impossible to resist. These cards magically exist in the industries where we spend the most money. Clearly, it’s not magic. It’s intentional. I’m not implying this is a negative thing either. But what it has done is make people think they need multiple cards for different expenditures in order to maximize their rewards earning potential. This is a good strategy if you’re able to capitalize by spending a significant amount of money each month (on all your cards, in the right categories, to earn the maximum rewards). I don’t think this is feasible for the majority of us, which is why I don’t view it in a positive light. But yet, it’s so tempting… Why is that?
The reason is because of those big sign up bonuses. These intriguing bonuses dump a pile of rewards points in the lap of new cardholders. The airline cards, in particular, use bonus miles that can be redeemed for free flights to hook impulsive prospective cardholders. Once you own the card, though, the rewards can often be subpar. I don’t doubt that the sign up bonuses benefit the cardholder. Everyone likes a good deal and so should you. I’m just saying you should look for a great sign up bonus and a solid long-term credit card, rather than holstering eight cards in your wallet because you’ve been hunting sign up bonuses.
By collecting multiple sign up bonuses (and several cards), you might gain in the short term, but owning so many cards will do you more harm than good in the long run. Each time you get a new card, the issuer has to pull your credit information, which can negatively impact your score, according to FICO. Opening or applying for new credit accounts in short period of time is also a red flag. The issuers know that closing a credit card account is the biggest mistake you can make. So you can see why the enticing sign up bonuses exist. Once you’re locked in, it’s game over. That’s why it’s important you make the right decision on a card from the start.
According to the large credit reporting agency, Experian, the average number of cards per US consumer is 2.19. An AARP survey found that 27% of people 50 and over have four or more credit cards. I believe people own several credit cards for two reasons. Reason One: They got sucked in by a tempting sign up bonus. Reason Two: The potential to earn rewards from major brand purchases has led to people signing up for more targeted credit cards.
You might disagree, but let me attempt to prove my point. Take a look at the chart below. As you can see, the Baby Boomer generation and older are the best credit managers of any generation.
Source: http://www.experian.com/assets/consumer-information/infographics/experian-state-of-credit-2013.pdf
The conclusion I’m drawing is that people do not own multiple credit cards due to balance transfers or spreading out credit card debt. First, the Baby Boomers and Greatest Generation manage their credit responsibly. Second, they make payments on time. These two groups also have the least average credit card utilization of any generation. They own the cards, but aren’t using them that much. That sounds like a behavior of someone who capitalizes on a sign up bonus and stops using the card.
The best thing you can do for your long-term credit and short-term financial gain is to get the big sign up bonus from the card that you’re going to use for a long time. If you can afford to spend more (without carrying a balance), or you’re loyal to a brand, only then does it make sense to start adding the more specialized cards to your arsenal.
Choosing one card from a list of hundreds
If you’re looking for a new credit card, the best all around rewards credit card is the Barclaycard Arrival(TM) World MasterCard® – Earn 2x on All Purchases. No other card offers the right combination of rewards, benefits, generous sign up bonus, and low APR like this Barclaycard. The key to this card is its versatility. It fits the lifestyle and spending habits of anyone, meaning you’ll maximize your rewards for every dollar spent.
I’m not saying the Barclaycard Arrival(TM) World MasterCard® – Earn 2x on All Purchases is hands down the single best card for everybody. It’s just the best for the majority of people. Ultimately, your spending habits determine what the best card is given each situation. (If you fly a specific airline every week, get that airline’s credit card.) If you book your travel on various sites or don’t have any extreme loyalty to a brand, this Barclaycard is the right choice.
The general rewards cards are the best in the industry because they can stand alone as your one and only credit card. Generally, most are classified as travel credit cards by most review websites, but they are the premier all-around rewards cards. These cards offer rewards on everything, including dining out, gas, airfare, and any travel. You won’t find the 5% and 6% earning potential, but you’ll get a consistent rewards rate that is greater than 1% for just about every purchase you make. Since there aren’t caps on earning potential, these cards are good for big spenders and average people who just want to be rewarded for all the hard-earned money they spend. Let’s look at the three best rewards credit cards and a few others that just missed the cut.
Barclaycard Arrival(TM) World MasterCard® – Earn 2x on All Purchases
With the Barclaycard Arrival(TM) World MasterCard® – Earn 2x on All Purchases, the points start racking up right when you sign up. Earn 40,000 bonus miles if you make $1,000 or more in purchases in the first 90 days from account opening. Forty thousand bonus miles equates to $400 off your next trip! You earn 2x miles on all purchases. You don’t have to worry about caps, categories, or anything. You can also get 10% miles back when you redeem for travel. For example, redeem 25,000 and get 2,500 miles back. There is an $89 annual fee but it’s waived for the first year.
This is a fairly new card. It’s a step up from the Barclaycard Arrival(TM) World MasterCard® – Earn 2x on All Purchases, if you don’t have a problem paying the annual fee (and you shouldn’t given the rewards). Full disclosure: I’ve been kicking myself for not owning this card. I have a checking account with Chase bank, so I own Chase credit cards by default. I’ve been content for the past few years but I’m realizing after writing this that I’m missing out. Anyway, I’m definitely applying for this card ASAP. If you’re in a similar situation, I advise you to do the same. Put simply – the Barclaycard Arrival(TM) World MasterCard® – Earn 2x on All Purchases is probably better than any card you own.
Who’s it good for?
You’ll need a decent credit score to be approved, but this card is good for everyone. It’s especially beneficial to people who travel, but don’t necessarily do so with one company. It works well for those of you who price hunt for travel on sites like Priceline, Travelocity, Orbitz, Expedia, or Booking.com. You’re going to get 2x miles on any flight, any hotel, and any piece of food you eat. The ability to get miles back when you redeem for travel makes it an even better card for travelers.
I also think this card is a perfect for people who are really busy. I’ll be honest, I don’t have the time to check the rotating categories every month for my Chase Freedom® Card. Imagine how nice it is to swipe this card and lock in 2%, no matter what you buy.
What’s the best way to use it?
Use the card for anything and everything. Redeeming miles for travel is a good practice to get into because you get 10% of them back. This is one of the rare cases where this is the only card you need. I wouldn’t recommend pairing it with any other card unless you consistently fly one of the airlines that offers a card with 3x miles or higher rewards. It may also pair nicely with the Discover it®, which isn’t as widely accepted as MasterCard. One strategy would be to hit the quarterly $1,500 cap on earning 5% cash back with your Discover it®, and then put every purchase on the Barclaycard.
Capital One® Venture® Rewards Credit Card
The Capital One® Venture® Rewards Credit Card is one of the most popular cards around. It’s a very close second to the Barclaycard Arrival(TM) World MasterCard® – Earn 2x on All Purchases. You still earn 2x miles per dollar spent on every purchase. The annual fee is $0 for the first year and then $59 after that. You earn 20,000 bonus miles when you spend $2,000 on purchases within the first three months. That’s only half the bonus miles of the Barclaycard and you have to spend twice as much to get them. You also don’t get a bonus for redeeming miles for travel. All that said, I’m comparing it to the best of the best. You can’t find many cards that beat this one. It’s versatile and an excellent long-term choice.
Who’s it good for?
Anyone who wants to consistently earn rewards on all purchases and travelers. Earning 2x miles on any purchase has to make you think twice about signing up for any credit card associated with a specific brand that offers you the same deal or less. The main reason you would get this card over the others is because you’re a loyal Capital One customer.
What’s the best way to use it?
It’s an easy answer, but you should use this card on everything. If you have a cash back or airlines card where you can hit rewards of 3% or higher, you’ll want to combo the two cards. Personally, I find this to be a task, but I can see how it might be a fun little game for some people. This card will function perfectly on its own without owning any other credit card.
Chase Sapphire Preferred® Card
One of the most-liked credit cards in the industry is the Chase Sapphire Preferred® Card. This is one of the two cards I own. The Sapphire offers 2x points on travel and dining at restaurants. While this is very solid, it doesn’t quite stack up to the two cards mentioned above just because they offer 2x on everything. You’ll also earn 40,000 bonus points when you spend $3,000 on purchases in the first three months from account opening.
The Chase Sapphire Preferred® Card has a secret weapon that the other top travel cards don’t possess. You automatically get a 7% Annual Points Dividend on all new points earn on purchases throughout the year – even points you have redeemed. It might not be the ideal way to book a trip, but you always get 20% off travel when you book through Chase Ultimate Rewards. There’s no annual fee for the first year and then it’s $95 after.
Who’s it good for?
This card is a nice fit for young professionals, city dwellers, and travelers. If you’re not home a lot and often eat out, this is the right card for you. Loyal Chase customers should also choose this card for convenience alone.
What’s the best way to use it?
You want to use it for any meals out and whenever you travel. The card is loaded with travel insurance benefits that have you covered if anything gets in the way of your trip. There’s an often overlooked benefit of owning both the Chase Freedom® Card and the Chase Sapphire Preferred® Card. Here’s the strategy: Use the Chase Freedom® Card to earn your 5% rewards in rotating categories and use your Sapphire for everything else. You can transfer rewards from one card to the other if you use both. So you can take all of your 5% rewards from the Freedom® you earned and throw them into the Sapphire account, which has more exclusive reward redemption opportunities.
Other travel credit cards that are close to the top 3
The competition was tough in this group. The cards below didn’t make the top three, but don’t beat yourself up if you own one of them. These are still some of the better credit cards available. You don’t want to close down any of these accounts to get the cards mentioned above. If you don’t spend a lot each month on your card or you’re carrying a balance, I advise you to stick with these cards for now.
BankAmericard Travel Rewards® Credit Card
- Earn 1.5 points per $1 on every purchase, every time with no annual fee
- Earn 10,000 bonus points after qualifying purchases, that can be $100 towards travel purchases
- No limit to the total number of points you can earn and points don’t expire
Why it didn’t make the cut
You only earn 1.5 points per $1 on every purchase, which is less than the top cards. The sign up bonus is lacking at only 10,000 bonus points.
Capital One® VentureOne® Rewards Credit Card
- Earn 1.5 points per $1 on every purchase, every time with no annual fee
- Earn 10,000 bonus points after qualifying purchases, that can be $100 towards travel purchases
- No limit to the total number of points you can earn and points don’t expire
Why it didn’t make the cut
Again, you only earn 1.5 points per $1 on every purchase, which is is 0.5 less than the best cards. The sign up bonus is very weak in comparison to the competition.
U.S. Bank FlexPerks® Travel Rewards Visa Signature® card
- Get 20,000 Bonus FlexPoints after the first $3,500 in net purchases in the first 150 days
- Award travel starts at just 20,000 FlexPoints (up to a $400 ticket value) on over 150 airlines with no blackout dates or redemption fees
- Earn two FlexPoints for every $1 spent on gas, grocery, or airline purchases – whichever you spend most on each monthly billing cycle – and on most cell phone expenses
- Earn Triple FlexPoints for your charitable donations
- $0 Annual Fee* the first year, after that $49
- Earn 3,500 bonus FlexPoints each year when you spend $24,000 in Net Purchases. You can redeem these FlexPoints for your annual fee or combine them with other FlexPoints for travel.
Why it didn’t make the cut
The sign up bonus is half as much as some of the top rewards cards and you have to spend much more to achieve it. Earning two FlexPoints for every $1 spent is on gas, grocery, or airlines is on par with the other top cards. You don’t earn 2:1 rewards points on everything, but these are big enough categories to capitalize. Taking that into consideration, this probably isn’t the card to get if you eat out a lot.
Is your favorite general rewards card missing from my top three? Do you have any unique strategies to maximize your rewards? Feel free to share and let’s discuss.
Check back for Part 2 of 4 in this series of posts on 2014 rewards credit cards. I’ll get into the best airline credit cards for 2014 and tell you why I’ll never own one (even though you may want to because the rewards can be astronomical).
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