Rewards cards for low spenders

As a childless person who has a short commute and flies only a handful of times a year, my monthly spending is pretty low: I don’t have big grocery bills. I fill up the tank of my compact car once every other week. And, even though my plane tickets home are more expensive than I’d like, I don’t fit the spending profile of a road warrior. As a result, I generally spend less than $1,000 a month on credit cards – often much less.credit card with hundred dollar bills

Although heavy spenders may get the most mileage out of rewards cards, there are cards and rewards tactics for light-weights, too. First, we’ll cover some strategies for low spenders when it comes to choosing and using a card. Skip to the end for a list of card recommendations for the under-$1,000-a-month club.

Do the math to decide if an annual fee is worth it

If your spending is too low, an annual fee could cancel out most of the rewards you get. But crunch the numbers first – annual-fee cards often have higher rewards earnings than their no-annual-fee counterparts. And if your spending is *just* high enough, you might still earn more with a card that has a fee.

Say you’re trying to decide between the Capital One Venture card (2 miles per dollar; $59 annual fee, waived the first year) and the Capital One VentureOne card (1.25 miles per dollar; no annual fee). During the first year the card is open, the Venture is the clear-cut winner, due to the waived annual fee. But, after that, you’ll need to deduct the $59 annual fee from your rewards. Here’s what you’ll earn on each card, assuming $500 and $700 per month in spending (keep in mind that each mile is worth 1 cent when redeemed for travel):

Yearly rewards earnings (after annual fee deducted): Venture vs. VentureOne
Venture ($59 fee)VentureOne (no annual fee)
$500 monthly spending$61$75
$700 monthly spending$109$105

As you can see, once you hit the $700 mark in monthly spending, the Venture card starts coming out ahead, despite the annual fee.

Ask yourself: How long will it take me to earn something of worth?

Airline and hotel cards are among the most glamorous types of plastic, with their promise of free flights to exotic locations and nights in luxury hotels. But are these aspirations practical for low spenders after they’ve burned through whatever sign-up bonus came with the card?

Maybe not. If you’re not spending much on the card, it will take you a long time to earn anything of worth. Say you spend $500 a month on the AAdvantage Citi Platinum Select and you’ve already used the sign-up bonus. The card earns you 1 mile per dollar spent on most things. American Airline round-trip flights start at 25,000, so it would take FOUR YEARS to earn a free round-trip on your regular spending. And, even though the annual fee is waived in year one, if you take into account the cost of paying the $95 annual fee in years two through four, it adds up to $285. That might be enough money to pay for a discount round-trip domestic airline ticket if you can discipline yourself to set the money aside. That said, the sign-up bonus can get you a free round trip ticket anywhere in the lower 48 states and that alone can justify the cost of several years of the annual fee. You just have to decide if it’s a card that might make sense over the long term vs. other options in the marketplace.

You might have better luck with hotel cards. Let’s look at the same level of spending on the Starwood Preferred Guest card. You earn 1 Starpoint per dollar on regular spending. If you’re putting only $500 on the card each month, you’ll earn two free weekend nights in a Category 2 hotel per year, just on your regular spending. Not much, but not bad.

However, the ideal fit for light spenders may be cash-back cards and generic travel rewards cards. Unlike airline and hotel cards that require you to earn a huge bulk of rewards before you can redeem for something, cash back lets you redeem with lower hurdles (often $20, $50 or even no minimum at all). Generic travel cards, meanwhile, let you redeem miles against any travel expense. Instead of waiting to earn enough miles for a $400 plane ticket, you can use far fewer miles for a $60 car rental instead.

Squeeze all you can out of regular spending

Even low spenders will eat at restaurants and buy groceries. If you can find a card that boosts your rewards in easy-to-hit categories, you can make your puny spending more rewarding. Some cards give 2 percent, 3 percent or even 5 percent in static or rotating quarterly categories like groceries, movies, restaurants and home improvement stores.

If you don’t spend enough in any category to make it worthwhile, try to get a card that offers more than 1 percent back on all your spending. The Capital One Quicksilver, for example, gets you 1.5 percent cash back on everything.

Look for reward boosts and annual bonuses

Some cards give you extra miles, anniversary gifts and cash back without you doing any extra spending. The BankAmericard Cash Rewards card, for example, gives you a 5 percent bonus each time you redeem cash back into an existing BofA checking or savings account. The Barclaycard Arrival (which has a no-annual-fee version) gives you 10 percent of your miles back when you redeem for travel.

Several hotel rewards cards also kick in free stays with each account anniversary. The Marriott Rewards Premier card, for example, gives you a free night stay at a hotel in Category 1 through 5 each account anniversary (that could more than cancel out the annual fee). The Hyatt Credit Card does the same, for properties in Categories 1 through 4.

Cards for low spenders

These cards were chosen based on the criteria above – and, with a few exceptions, have no annual fee. While there’s a case to be made for snagging big sign-up bonuses and then cancelling the card once an annual fee kicks in, the cards below are recommended for low spenders who want to keep a card over the long term.

Capital One – Quicksilver and VentureOne Capital One Quicksilver
Capital one offers two no-annual-fee cards for the less spendy set. The Quicksilver card offers a steady 1.5 percent cash back on every purchase and lets you redeem any amount anytime. The VentureOne, meanwhile, gives you 1.25 miles per dollar, worth 1.25 cents toward travel. Once you consistently cross $700 in monthly spending, however, the Capital One Venture (with a $59 annual fee) will earn more rewards.

Chase FreedomChase Freedom The Chase Freedom has no annual fee and has been a fan favorite for years. It gives 1 percent cash back on all spending and 5 percent back (for up to $1,500 in spending per quarter) in rotating categories. Rewards can be redeemed for gift cards (sometimes at a discount) and for cash back. Cash-back redemption, however, requires you to have at least $20 in rewards – but you’ll probably earn that in a few months through spending in non-bonus categories (and in less time if you earn a lot in the bonus categories).

Barclaycard Arrival™ World MasterCard® Barclaycard Arrival™ World MasterCard®
If you want to redeem for the occasional travel expense (but not wait until you have enough for a free flight), consider the no-annual-fee Barclaycard Arrival™ World MasterCard®, which lets you earn 2 miles per dollar on travel and dining and 1 mile on other purchases. Miles are worth 1 cent when you redeem for travel, and you get 5 percent of the miles you redeem back.

U.S. Bank Cash+ cardUS bank cash+
You can apply for this card (which has no annual fee) only in U.S. bank branches, but it has some unique features that could give light spenders a leg up. You get 5 percent back on the first combined $2,000 each quarter on purchases in two categories of your choice. You also get 2 percent back in a category of your choice (gas stations, restaurants or grocery stores). You can change these bonus categories every quarter, and one of the 5 percent categories is fast food – which could be a boon for low spenders. All other purchases earn 1 percent cash back, and you get a $25 bonus once per lifetime of your account when you redeem $100 or more at once.

American Express Blue Cash cardsAmerican Express Blue Cash
There are two versions of this card from American Express (a CreditCardForum advertising partner): The Preferred version ($75 annual fee) and the Everyday version (no annual fee). Despite the fee, the Preferred version could still work for a low spender, considering it rewards 6 percent back on grocery purchases (compared to 3 percent with the Everyday card) on your first $6,000 in grocery purchases per year (and 1 percent after that). If you cook a lot to save money and frequent the grocery store, this card could end up outweighing the annual fee with rewards.

Updated August 4, 2016

 
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