Credit card points or cash back?

All about maximizing your rewards!
Members share tips and tricks for getting the most miles, & points.
9 posts
hoingdinger
Green Member
Green Member
 
Posts: 5
Joined: Sat Nov 13, 2010 5:08 am

Credit card points or cash back?

Postby hoingdinger » Sat Nov 13, 2010 5:19 am

Howdy forum :) I'm starting to really get into the idea of credit card rewards and want to know if points or cash back is better? Almost all of last decade I used a plain card from my bank that gave 1 point per dollar and every 2,500 points would earn a $25 certificate. Now I realize there are programs for credit card points that give you a higher reward then what it would give with cash. Does that mean points are usually the smartest option?


jeffysdad
Centurion Member
Centurion Member
 
Posts: 875
Joined: Thu Apr 30, 2009 2:32 pm
Location: Texas

Postby jeffysdad » Sun Nov 14, 2010 10:49 am

If your reward is in points, the first thing you need to know is how many you get per dollar spent, which is pretty obvious. Then you need to know what the redemption rate is on the points.

If you get one point per dollar and spend, say, $2,000 you will have 2,000 points. If those 2,000 points are worth $20, then your reward rate is 1%. However, those 2,000 points might only be worth $10 or some other amount.

Some of the Citi cards offer a generous number of points per dollar spent in certain categories. To figure the actual percentage of the reward you need to check out their "ThankYou" network site and see what you can get for those points. Sometimes it's better to redeem for a gift card that you will use rather than cash back because the reward rate is higher. This is true with some of the things offered at ThankYou, if I remember correctly, and also for Discover.

These days I don't think it's unreasonable to expect a real 2% return on what you charge. Fidelity Amex will give you this, paid into a Fidelity account.

You can get 5% on groceries this quarter with Chase Freedom. Discover is paying 5% at restaurants this quarter. Rotating promotions usually cap how much you can earn. For instance, Discover only pays 5% on the first $300 spent at restaurants during the quarter; the rest earns 1%.

Before you spread your spending around to maximize reward return, you have to remember that there are redemption thresholds. It takes $2,500 spent with Fidelity Amex before you can get anything ($50 with $2,500 spending). Chase and Discover also have a minimum required to redeem.

At one time CapitalOne's rewards card would let you redeem at any amount. However, their card only paid 1% across the board, if I remember correctly. I do not know if this is still true.

I use Fidelity Amex as my default card for everything except whatever high-reward categories are in effect at Chase Freedom and Discover. That way I'm always getting at least 2% and sometimes 5%.
American Express: Blue Cash Preferred (groceries, 6%; gas, department store, 3%); Gold Delta SkyMiles (Delta Air Lines, 2 miles/dollar, free checked bag).
US Bank: Cash+ (utilities, phone, internet, restaurant, 5%; drugstores, 2%).
FIA Card Services: Fidelity Amex (everything, 2%); Fidelity Visa (everything, 1.5%).
Chase: Freedom (rotating, 5%); Amazon (Amazon.com, 3%); PriorityClub (IHG hotels, 5 points/dollar); Sapphire (not in use).

*All cards are registered with PriorityClub IDine program for 8 points/dollar at participating restaurants.

hoingdinger
Green Member
Green Member
 
Posts: 5
Joined: Sat Nov 13, 2010 5:08 am

Postby hoingdinger » Thu Nov 18, 2010 2:32 pm

Thanks for explaining things! I see what you mean how points can be worth different amounts. After I posted my first message I got a Citi credit card application in the mail but when I went to the website and studied the program I learned that most of the awards were a bad deal. :(

What's your take on using the Chase Freedom card if I only choose to get one new credit card right now? I know it is only 1% regularly but between that and the 5% I think I will make OK with it.

jeffysdad
Centurion Member
Centurion Member
 
Posts: 875
Joined: Thu Apr 30, 2009 2:32 pm
Location: Texas

Postby jeffysdad » Thu Nov 18, 2010 3:10 pm

I think Chase Freedom would be a good bet. I'm using it now for groceries as it's paying 5%. If it pays 5% on restaurants next quarter like I expect it to, I will use it for that. My main card is Fidelity Amex, which pays 2% all the time.

My personal preference is for a simple cashback card without rotating categories, tiers or caps. The Fidelity card is one of the few of these that pays more than 1% that I have found.

You might find this site helpful. I recently discovered it and wish I had known about it earlier as it would have saved me some effort comparing cards.

$$$> Credit Card Tune-Up: Calculate the Best Credit Card Reward Deal <$$$
American Express: Blue Cash Preferred (groceries, 6%; gas, department store, 3%); Gold Delta SkyMiles (Delta Air Lines, 2 miles/dollar, free checked bag).
US Bank: Cash+ (utilities, phone, internet, restaurant, 5%; drugstores, 2%).
FIA Card Services: Fidelity Amex (everything, 2%); Fidelity Visa (everything, 1.5%).
Chase: Freedom (rotating, 5%); Amazon (Amazon.com, 3%); PriorityClub (IHG hotels, 5 points/dollar); Sapphire (not in use).

*All cards are registered with PriorityClub IDine program for 8 points/dollar at participating restaurants.

User avatar
Mogul of Pineapples
Centurion Member
Centurion Member
 
Posts: 1271
Joined: Sun Jun 01, 2008 11:32 pm
Location: Smogland

Postby Mogul of Pineapples » Sat Nov 20, 2010 4:12 pm

What I find is that most point redemption options are a bad deal but they structure them in a way where they hope you won't notice. Same goes for using points to get merchandise which almost always is at an inflated price.

I prefer cash back and points only if I can redeem for a 1 penny per point conversion.
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

Current Cards:
American Express: Blue Cash, Simply Cash Bank of America: WorldPoints Platinum Plus Chase: Amazon, British Airways, Cash Plus Rewards, Freedom, Ink Cash Citi: Thank You Premier, Dividend Platinum Select Discover: More
Primary Everyday Card: American Express Blue Cash
Primary Travel Card: Chase Sapphire Preferred

hoingdinger
Green Member
Green Member
 
Posts: 5
Joined: Sat Nov 13, 2010 5:08 am

Postby hoingdinger » Fri Nov 26, 2010 9:40 pm

That Fidelity cards is mighty tempting but I went to the page and I will need a Fidelity account. Maybe opening a 401k can be my new years resolution. Its credit card points it gives are fine as long as it gives 2,500 points for $25, which it does.

I think in the mean time I will go with the Chase 5% card. I'm not too enthusiastic about the rotating categories and having to sign up for them but the $100 promotion has convinced me to at least try it.

I can't believe this wasn't a matter I took more seriously up until now. By my rough calculations I could be earning $500 to $1000 per year if I used a combo of Chase's 5% card and the 2% Fidelity.

And I was always told there is no such thing as free money. That's wrong for sure!

jeffysdad
Centurion Member
Centurion Member
 
Posts: 875
Joined: Thu Apr 30, 2009 2:32 pm
Location: Texas

Postby jeffysdad » Sat Nov 27, 2010 7:28 am

Better late than never, HD. If getting a Fidelity card prompts you to also save for retirement, that would be a good thing. Remember, you can also open a SmartCash account at Fidelity and have your points deposited to that. It's basically a checking account; you'll get checks and a debit card. no fees or minimums.

I wouldn't dawdle on opening the Fidelity account. The similar card with Schwab has been discontinued for new accounts, and I don't know how long 2% will last in the post-reform era. Fidelity recently began offering a Visa card with a 1.5%-2% tiered structure. You need to spend $15k before you start earning 2%. My guess is they'll stop accepting new 2% Amex applications soon.
American Express: Blue Cash Preferred (groceries, 6%; gas, department store, 3%); Gold Delta SkyMiles (Delta Air Lines, 2 miles/dollar, free checked bag).
US Bank: Cash+ (utilities, phone, internet, restaurant, 5%; drugstores, 2%).
FIA Card Services: Fidelity Amex (everything, 2%); Fidelity Visa (everything, 1.5%).
Chase: Freedom (rotating, 5%); Amazon (Amazon.com, 3%); PriorityClub (IHG hotels, 5 points/dollar); Sapphire (not in use).

*All cards are registered with PriorityClub IDine program for 8 points/dollar at participating restaurants.

User avatar
Mogul of Pineapples
Centurion Member
Centurion Member
 
Posts: 1271
Joined: Sun Jun 01, 2008 11:32 pm
Location: Smogland

Postby Mogul of Pineapples » Sun Nov 28, 2010 10:53 pm

Another benefit is that Fidelity is one of the better brokers. I have had an Ameritrade account for nearly a decade and have encountered more problems with them than I can count. I also have an ML account and although I don't use it, I know that the wait time for me to talk with a live person was 21 minutes the last time I called them.
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

Current Cards:
American Express: Blue Cash, Simply Cash Bank of America: WorldPoints Platinum Plus Chase: Amazon, British Airways, Cash Plus Rewards, Freedom, Ink Cash Citi: Thank You Premier, Dividend Platinum Select Discover: More
Primary Everyday Card: American Express Blue Cash
Primary Travel Card: Chase Sapphire Preferred

Mr Chopstix
Green Member
Green Member
 
Posts: 10
Joined: Sat Dec 11, 2010 4:27 am
Location: Honolulu

Go with cash back

Postby Mr Chopstix » Sat Dec 11, 2010 4:38 am

If I could have the choice between 1 point or 1% cash back, I find that the 1% cash back is always the better deal. Sometimes 1 point can equal "up to" 1% cash back but to get it may redeeming 10,000 or more points at once. This is why I try and stick with cash back credit cards that don't play games like that. I like having a predictable rewards structure that won't change by the amount I am cashing out.



Return to “Rewards”

Who is online

Users browsing this forum: No registered users and 2 guests