Capital One® Cash Rewards Card Review

Posted by CreditCardGuru

January 2014 update: This card offer is no longer available. For a good alternative, check out these top cash back cards of 2014 or this new Capital One card that was just launched in July of last year:

The old Capital One® Cash Rewards card has been discontinued and the review of it (below) is now outdated and for historical reference only. That card offer is no longer available
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The man giveth and the man taketh away… that’s the drawback with most high cash back credit cards on the market. They might give you 2-5% on selected categories of spending – but for everything else – they only pay 1% or less.

The problem? You probably spend the most money on “everything else” rather than special categories!

That’s why the Capital One® Cash Rewards card is so useful for people with excellent credit. With it you earn 1% cash back on everything you buy. In addition, you also enjoy a 50% bonus on the cash back you earn every year. Combined, that’s a whopping 1.5% value!

How does the rewards program work?

  • 1% cash back on all your purchases – You earn a full 1% on all categories of spending.
  • 50% bonus every year – You get this on the 1% earned throughout the year. For example, if you earned $500 cash back during the year, you will get a bonus of $250. The 50% bonus is added to your rewards balance every year on the account anniversary.
  • Get a one-time bonus of $100.00 – After spending $500 on purchases within the first 3 months.

So in a nutshell, you’re earning 1.5%. Really the only catch to the program is that the 50% bonus is awarded on a yearly basis… but that’s just fine with me, because you end up with a value that’s significantly higher than what most credit cards pay on non-category spending.

There are 3 other advantages worth pointing out:

  • No Earning Cap – Most of the cards out there which offer extra rewards on categories will impose an earning cap (and sometimes it’s quite low). However with this credit card, you can earn unlimited rewards.
  • No Expiration – Your rewards never expire.
  • No Minimum For Redemption – There’s an old card I have (from a different bank) and the thing I hate about it is that you have to accumulate at least $50.00 worth of rewards before you can redeem them. What’s unusual (in a good way!) about the Cash Rewards credit card is that you can redeem at any time, for any amount. There’s no minimum required.

One of my favorite things about this program is that Capital One gives you the option to setup automatic redemption – then when your accumulated cash back reaches a certain amount, it will automatically be redeemed.

What are the benefits?

  • Visa Signature benefits – If you’re not familiar with this tier of Visa, it’s a higher level which comes with extra perks. One of which is having no pre-set spending limit – a feature that can provide more buying power versus having a preset credit limit. However, if you are approved for a credit limit of less than $5,000, you will instead receive a Visa Platinum (which will not come with the Signature benefits).
  • Extended warranty program – For qualifying purchases that come with an original manufacturer’s (or U.S. store brand) warranty of 3 years or less, this Visa Signature benefit doubles the coverage period (up to 1 additional year).
  • Auto Rental Insurance – On eligible rentals which are paid for using your Cash Rewards card. The benefit provides collision, damage and loss insurance on a secondary basis.
  • Travel Accident Insurance – Provides coverage for eligible Common Carrier fares (such as airline tickets) which are paid for using your card.

What’s the best signup offer?

Update: this offer is no longer available.

  • One-time bonus of $100.00 – You earn this after spending $500 on purchases within the first 3 months. That’s an average of only $167 per month, so it certainly is not a high hurdle. Contrast that to the signup offers found on most other credit cards right now – they require you to spend more (typically $1,000 or $2,000 within 3 months) in order to get their bonus.
  • 0% intro APR on balance transfers & purchases until June 2014 – What’s unusual about this offer is that you are getting 0% on BOTH purchases and transfers (most card offers only give one or the other). The 0% for purchases is unusually long, which makes the Capital One Cash Rewards the perfect card for financing that big ticket item. After the 0% intro period, the regular APR is 12.9% – 20.9% (V) based on creditworthiness.

Obviously there are some cards on the market that will pay you more than a 1.5% rebate on some categories. But my question for you is… how much of your spending falls within categories vs. everything else?

Even if you buy a lot in categories, it’s still a good idea to apply for the Capital One Cash Rewards card so you can earn above-average on your other spending.

For comparative purposes, here’s how much money you are losing out on if you currently use the following cards for your non-category spending:

Discover More
Categories: 5% on rotating categories (subject to quarterly cap and enrollment)
Everything Else: 0.0025% (1/4%) on the first $3k spent annually, 1% after that
Lost Earnings: If you average $750 per month on non-category purchases, over a 12 month period you would have earned $67.50 on them. Compare that to Capital One Cash Rewards, which would have earned you $135.00 (that’s twice the amount).

Chase Freedom
Categories: 5% on rotating categories (subject to quarterly cap and enrollment)
Everything Else: 1%
Lost Earnings: Using the same assumptions as above, over a course of a year you would have earned $90.00 on the non-category purchases. Meanwhile, the Cash Rewards credit card would have earned you $135.00 (that’s $45.00 more).

AmEx Blue Cash Everyday
Categories: 2-3%
Everything Else: 1%
Lost Earnings: With the same assumptions as above, this AmEx would have earned $90.00. Meanwhile this Capital One card would have earned $135.00 ($45.00 more).

Conclusion?
As you see, the drawback with these other reward cards is that they never give you more than 1% outside the categories (and if you’re like me, most of the stuff you buy falls outside those categories). This is why it’s such a smart idea to use the Cash Rewards card. Simply put, getting 50% more cash is just too good to pass up. Especially when you consider the fact that it has no annual fee.

Update: This card offer is no longer available. However, here is another excellent rewards card from Capital One:

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