The other day, a reader wrote in with the following question:
I’m in the market for a reward credit card. Which one do you recommend?
That’s a great question, especially since many credit card issuers have been scaling back on their rewards programs over the past year or two. I’ve always been of the opinion that, when it comes to reward cards, cash is king. Sure, you can get cards that offer points, miles, etc., but there are always strings attached. You have to convert the points into gift cards, free flights are subject to availability, and so on. With that in mind…
My favorite cash back credit card is the Blue Cash from American Express, which offers up to 5% cash back on your purchases with no annual fee. For the first $6, 500 in annual expenditures (based on your cardmember anniversary date), you’ll receive 1% on “everyday” purchases (gas, groceries, and drugstore purchases) and 0.5% on everything else.
But… After you hit the magical $6, 500 mark, the rewards kick up to 5% on everyday purchases and 1.5% on everything else. So you’ll save $0.20 on every gallon of $4 gas, 5% off your entire grocery bill, and even 5% on drugs when you’re sick. And the 1.5% on all other purchases is half again as much as what most other reward cards offer. And there’s no limit on the amount of rewards that you can earn.
Real world performance
Those numbers are all well and good, but what does that translate into in terms of real-world earnings? Well… I just logged into our account and pulled out some numbers. First of all, as you can see from the graph below, we’re fairly typical when it comes to Blue Cash cardholders…
Looking across our total spending, 14% of our purchases came from the “bonus” gas/grocery/drugstore category with 86% coming from all other purchases. Overall, we’ve earned an average of 1.9% cash back this year (our anniversary date is in December, so we’re about eight months in). These rewards will accrue throughout the year before being posted as a credit on our cardmember anniversary date.
The only real downside to this card is that not everyone accepts American Express. This isn’t a widespread problem, but it happens often enough that we carry a Visa rewards card as a backup. It’s not quite as good as the Blue Cash card, but a solid stand-in when needed.