With Lisa Gerstner, Contributing Editor at Kiplinger Personal Finance
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To discover the current best rewards card offers, Steve spoke with Lisa Gerstner, contributing editor at Kiplinger Personal Finance. Lisa recently penned an article on the subject, “The Best Rewards Credit Cards 2019”.
Recent Rewards Trends
Steve opened the conversation by asking Lisa about the latest trends in credit card rewards. Lisa noted that one recent trend is an increase in dining rewards, with many cards either adding dining rewards or increasing the dining rewards they already offer. She’s also noticed a number of cards offering rebates on streaming services such as Netflix, Hulu, and Pandora.
Best Flat Rate Cash Back Cards
Steve was happy to learn that he’s apparently a pretty good credit card shopper, as he has both the top-rated cash back cards in his wallet—the Citi Double Cash Mastercard and the Alliant Cash Back Visa Signature card. The Citi card, which has no annual fee, offers a 2% cash back on everything you buy, so there’s no worrying about what you do or don’t get rewards on. You get 1% cash back when you make a purchase and the other 1% when you pay your credit card bill for the purchase. Steve made the important point that if you don’t pay your balance in full every month, if you keep carrying a balance on the card, that prevents you from getting back that extra 1%.
In fact, with nearly every card, you only really get the benefits of rewards if you pay your credit card balance in full every month. Otherwise, the interest rates you pay eat up those rewards.
The Alliant card requires a credit union membership which is usually not difficult to get. It offers 3% cash back the first year, with no annual fee. After that, you get 2.5% cash back, but there’s a $99 annual fee. To overcome that fee with your rewards, you have to charge a large number of purchases (by Steve’s math, about $20,000 a year), so that’s a consideration.
Best Rotating Categories Rewards Card
The winner for cards offering rewards in rotating categories is the U.S. Bank Cash+ Visa Signature card. With this card, you can select two categories of purchases every quarter and get 5% back, up to $2,000, on purchases in those categories. You can select a third category that will qualify for 2% back and also earn 1% cash back on all other purchases. The important thing to remember is to select your categories every quarter. Otherwise, you’ll just get 1% cash back rewards on everything. Some of the most popular categories are internet and streaming services, utilities, and cell phone bills.
A Rewards Card For Savers
One card offers cash back incentives specifically for savers and investors—the Fidelity Rewards Visa Signature card. This card offers you 2% cash back on all your purchases as long as you deposit your cash back rewards into a Fidelity account. Qualifying accounts include brokerage, retirement, health savings, and 529 education savings accounts. This is a great money management card because it encourages you to regularly deposit money into a savings or investment account that will eventually put more money in your pocket.
Best No Fee Travel Rewards Card
Lisa rates the PenFed Pathfinder Rewards American Express card as the best travel rewards card with no annual fee. Along with generous travel rewards, which include up to 25,000 bonus points, this card offers some really nice perks for travelers, one being up to $100 in reimbursement on travel incidental fees every year—in-flight food and drinks, baggage fees, and day passes to airport lounges. The card also offers up to four points in rewards for travel purchases.
Why Use A Credit Card?
Steve noted that a lot of people ask, “Why should I use a credit card if I’m going to pay off the whole balance every month anyway?” There are a couple of good reasons. The first is the rewards you get, the extra money in your pocket that you can’t get by using a debit card. The second reason is better financial security. Legally, there’s a $50 cap on your liability if your card is lost or stolen, and most major card issuers actually offer zero liability.
To get more details on these cards or to find out what the other top-rated rewards cards are, check out Lisa’s article at Kiplinger Personal Finance.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: Every year I sit at the computer and start to compare my credit cards to others in search of greater benefits. This year I decided to be smart, so I reached out to Lisa Gerstner contributing editor with Kiplinger Personal Finance to see if she’s been following this topic, and glory be, she has done the work for me and all of you too. In her recent article, “The Best Reward Credit Cards 2019,” it fits the bill perfectly. Hey, Lisa, welcome to the program.
Lisa Gerstner: Hey, thank you for having me.
Steve Pomeranz: Well, you know, it’s a big effort and it’s tiresome to go through all those cards and come up with the best. Thank you for doing that. What did you find this year? Anything new? Anything different?
Lisa Gerstner: Yeah, there’s a couple interesting trends. One is that dining rewards are hot. A lot of cards are either adding those or they’re increasing their rebate if you eat out at a restaurant or get delivery, so that’s a big one. I also noticed that getting a rebate on streaming services, so things like Netflix or Hulu or Pandora, some cards are picking that up too. So, that’s something to look out for. If you spend a lot in either of those categories, there are some options out there with those.
Steve Pomeranz: I also noticed that one of the credit card issuers was a new name to me in this space and that was Uber. First, let’s start with cash back, which personally is my favorite category. I am proud to say that of the two top cards that you mentioned, those are the two top cards that I use, so I guess I’m doing okay. What was the first card, the winner of the flat rate cash back card?
Lisa Gerstner: Yes. We have the Citi Double Cash MasterCard for that one. It’s a very widely appealing card. You’re going to get 1% back when you make a purchase and then an additional 1% when you pay the bill for that purchase. So, ultimately you’re going to get 2% back on everything you buy, which is a great flat rate if you don’t want to think about different categories and trying to get this or that. Just anything you spend you’re going to get 2% back. No annual fee. It’s just a really easy card to use. We liked that one a lot.
Steve Pomeranz: What was the second one?
Lisa Gerstner: So, our honorable mention in that one was the Alliant Cashback Visa Signature. That card comes from a credit union called Alliant Credit Union. So, you do need to join a credit union to use it, which is pretty easy, but especially if you’re kind of a big spender, this is a great option. You’re going to get 3% back that first year with no annual fee, which is a really great rate. Then, from the second year on you’re going to get 2.5% back and then a $99 annual fee does kick in after that, but, like I said, if you’re going to have pretty big balances on the card, that’s a great option. You may get more back than just the 2% with Citi Double Cash, so just do some math and see which one might work.
Steve Pomeranz: Yeah, I did some math some time ago. I think you needed like $20,000 to kind of break even on that 100 or that $99 charge.
Lisa Gerstner: Yeah, that sounds about right.
Steve Pomeranz: So, you’ve got to be spending a fair amount of money. Also, you have to be careful with these cards because if you don’t pay the complete balance … Well, I know on the Citibank you don’t get that at 1%, you get the second 1%, so you’ve got to be careful. These really are cards for people who pay off their balances every single month, right?
Lisa Gerstner: That’s exactly right. Yeah, the interest rates tend to be higher on rewards cards than on non-rewards card, so it can especially hurt if you carry balances, rack up interest, that’s going to eat into your rewards.
Steve Pomeranz: Yeah, you don’t want to use those cards. Now, these two cards you just mentioned are cash back on everything, but most cards have cash back in rotating categories. Who’s the winner there?
Lisa Gerstner: Yeah, this year we like the US Bank Cash Plus Visa Signature. This card is interesting because it really offers a lot of flexibility in which categories you’re going to get the best of rebate. So, there’s a 5% category where you get to select two different options for your rebate, there’s a preset list. One new one that I think is really interesting is TD internet and streaming services. You can get 5% back on those. I think for a lot of people, I mean, even if you’ve cut the cable cord, if you’ve got Netflix and Hulu and all this stuff. Then you’re going to need broadband internet to all that streaming and that can add up for you. So, I think that’s a compelling one and then some other options for that category are cell phone bills, home utilities, movie theaters. You can take your pick of a few of those.
Steve Pomeranz: Okay, all right. So, if you’re not the person who is going out to dinner a lot, but you’re the person who’s staying home and streaming, this might be something of good value to you.
Lisa Gerstner: Right, right, yeah. Take a look at those categories and then see if they kind of fit your spending.
Steve Pomeranz: Okay, you have it a category here called cash back for savers winner. What does that actually mean?
Lisa Gerstner: Yeah, so this one, we like the Fidelity Rewards Visa Signature because you’re really encouraged to put that money away to get the best rebate. So, as long as you redeem your points for cash back into a Fidelity account, and there’s a pretty broad range you can pick from. So, Brokerage, 529, their version of a checking account, retirement accounts, all of that, you’ll get a 2% back rate. So, similar to that Citi double cash rate, but you’re going to have to put it into a kind of savings type vehicle or an investment vehicle to get that good rate on it. So, that’s why we liked that one, it really encourages you to put that money in a good place.
Steve Pomeranz: Yeah, of course, they’re earning money on your money and so they’re able to kind of give you pretty decent rates. So, you’ve got to learn that, you’ve got to figure out what the system is, and then learn how to manipulate the system in your favor.
Lisa Gerstner: Exactly.
Steve Pomeranz: No fee travel reward’s winner, PenFed Pathfinder Rewards, tell us about that.
Lisa Gerstner: Yeah, so this is another card from a credit union, Pentagon Federal Credit Union, and you can join that one just by making a donation to a qualifying organization if you don’t meet the other qualifications. What’s special about this card is it has no annual fee, and it has a couple of perks that you generally don’t find on cards that don’t have annual fees. One is going be $100 reimbursement of airline incidental fees every year. That includes baggage, in-flight food and drinks, it even includes day passes for an airport lounge associated with one of those airlines.
So, if you want to go hang out in the Delta Lounge for a day and just get a day pass, you can get reimbursement up to $100 for that each year, so that’s pretty neat. Then you also get up to a $100 for a TSA pre-check or global entry, a refund, if you charge it to that card. So, if you want to kind of zip through airport security and take advantage of that benefit, that’s really nice too. Then, you do get points for travel. You can get up to four points per dollar on travel, depending on your status with the credit union or military affiliation. Otherwise, three points per dollar on travel. So, all around, it’s just kind of a nice package for a no fee card.
Steve Pomeranz: Yeah, but you know you have to remember that if you’re going to keep a balance, and you’re paying 17% or 20% interest, that’s going to erode the awards value quite a bit. So, these again are really cards for people who pay their balances every month, right?
Lisa Gerstner: Yep, Yep, that’s exactly right. Just make sure you’re covering that whole balance and not spending more than you can afford charging on that card.
Steve Pomeranz: Well, people ask, why do I need a credit card? Why should I use a credit card if I’m going to pay my balance off every month? I think the answer is that number one, you can get money back or rewards back, so this is free money in your pocket, better than a debit card which gives you nothing back. Then there’s also some security with regards to purchases you make, right?
Lisa Gerstner: Credit cards do you have better liability than debit cards and banking. So, legally, your liability is capped up to $50 if there’s fraud on your card. Then, you know, all the major card issuers, all those networks, have zero liability policies. So, yeah, if there is a fraudulent purchase, you really don’t have to worry about it on a credit card, typically.
Steve Pomeranz: If you have control of your finances and you’re good at that or you really work hard to stay on top of it and not let it get the best of you, it is wise to use a credit card and get all those benefits. All right, travel rebates worth the fee. Tell us about that.
Lisa Gerstner: Yeah, so if you are spending quite a bit and then you’re willing to pay that annual fee, the Capital One Venture card. It’s been adding some nice perks lately. It has a $95 annual fee, but it is waived the first year, so you can give it a try and see how you like it. Generally, you get two miles per dollar on that card, and through January of next year, it’s actually offering 10 miles per dollar on hotel bookings through a hotel.com portal that Capital One has. So, if you’re spending a lot on hotels especially, that’s kind of an interesting rebate on that one.
Then it’s added a couple of other things. So, you can now transfer miles to participating airline programs. Those are mostly international carriers, it’s not so much the big domestic like Delta or any of those, but if you happen to fly any of those participating airlines, that can be kind of an interesting perk. Then, card holders also get, again, that $100 rebate for TSA pre-check or global entry. There are some nice additional things in addition to the points that you get on that one.
Steve Pomeranz: You get a sign-up bonus of 50,000 miles too if you spend 3,000 in the first three months?
Lisa Gerstner: Mm-hmm (affirmative) and that’s another thing. Yeah, a lot of these, especially travel cards, they tend to really offer some attractive sign-up bonuses to get you hooked in.
Steve Pomeranz: Yeah.
Lisa Gerstner: Of course, you have to look at the rest of your spending too, but it’s pretty nice to get that extra perk at the beginning.
Steve Pomeranz: What I’ll do sometimes is get one of these high-reward, let’s say 50,000 mile cards, use them for the three months and then stop using them and get the reward and then go back to my cash back card. So, not rocket science, but you know something that again understands the system and uses the system to my advantage.
All right, flexible travel redemptions winner, Chase Sapphire Preferred Visa. Actually, what does that even mean?
Lisa Gerstner: Yeah, so we like that there’s a lot of different ways you can use the points you earn with his card. So yeah, Chase Sapphire Preferred, it does have a $95 annual fee. So again, you’ve got to be spending enough to make it worth it, but there’s some different ways you can redeem those points. They’re worth about 1.25 cents each for travel bookings through Chase, which is a nice. We kind of look for a baseline 1 cent value for points, so anything above that is pretty good. Then you also can transfer those points to a different hotel and airline loyalty programs, and there’s a really nice set of these. I know with the last card, I said it’s mostly international carriers, not everyone’s going to use those with the airlines, but this one includes Southwest, United, Hyatt, Marriott. Those are all included in point transfers. So, we really like that flexibility that you can do a number of different things with your points and get a good value from them.
Steve Pomeranz: There’s a signup post bonus of 60,000 points if you spend 4,000 in the first three months. Now you said 1.25 cents per. Now, compare that to the cash back, which is a 2% or 2.5% on the Alliant card, so now you can compare apples to apples and really what these points are worth. The reason that I like cash back, and I don’t know that it’s a 100% this way, but I control the rate of inflation or, at least, the Federal Reserve controls the rate of inflation on my dollars cash back. Whereas these cards and the airlines themselves, they control the rate of inflation by making each point less valuable over time.
Lisa Gerstner: Right, and I think that’s why the numerous surveys I’ve seen have shown that people overwhelmingly prefer cash back because it’s simple. You know exactly what you’re getting. You don’t have to think about, well, how much is this point worth and how do I redeem it? It’s just much easier with cash back. Now granted, sometimes with points you can actually squeeze out a better value if you’re really good at it, such as with this Chase card, but you have to be willing to think about it.
Steve Pomeranz: All right, we’re low on time, so I want to do one more because this next card has an annual fee of $450. What could they possibly be giving me to make it worth me paying that fee?
Lisa Gerstner: Yeah. Yeah, so again, this is a card if you’re doing big spending on travel, take a look. So, it does have $450 annual fee, which sounds crazy, but for starters, you’re going to get a $300 statement credit for travel purchases per year. So as long as you’re spending at least three, $300 in a year, you’re going to effectively knock that fee down to $150. Then after that, you do get some nice other perks. You get that TSA pre-check or global entry refund, you get access to priority pass lounges, and then at certain hotels that are part of their program, you can get some extra perks.
So, for frequent travelers who are putting a lot of money on that card, it can be worth it. You’re also going to get three points per dollar on dining and travel purchases as well and then one point on everything else.
Steve Pomeranz: We’re going to post the link to Lisa’s article on our website, which of course is stevepomeranz.com, and don’t forget to hear this interview again. If you have a question about anything we’ve discussed, we do love your questions, come to our website, which is stevepomeranz.com and sign up. Sign up for our weekly update too, where you’ll hear about all of our live events and a summary, a transcript, and the audio for every single segment that you hear here. My guest, Lisa Gerstner from Kiplinger Personal Finance. Thanks, Lisa.
Lisa Gerstner: Thank you.