Benefits of Rewards Credit Cards

This advice cannot be stressed enough. Credit cards are one of the few areas where I would be wary of asking what a friend succesfully uses (on a car for instance I would always be asking for what worked best for others). The sad thing is with credit you are to a large extent on your own. Your brother’s 5% cash back gas card may be great for him but if you go to work by train and live in New York, it may not be so good for you.

Forget “gkr”’s comment above. The only real advantage of
cash is potential anonimity. That’s a whole other issue - You
came for credit card advice, right?

As “James” said above, what works for others might not work
for you. But that said Cash-Back cards are a “Good Thing”
with certain caveats. Read on,..

First of all, I recommend “Cash-Back” cards only. Those that
give “cash reward points” are really trapping you into what is
in effect a coerced relationship with some on-line retailer
whom you may not want to shop with in the first place. Ok,
some send gift certificates but nothing has liquidity like cash.
So I say: avoid “reward points” and go for the Cash. One
other minor point of cash-back - it’s not taxed because the
card companies don’t report it as “income”. Nice.

Likewise, Freq. Flyer miles are nice, but look closer. If you’re
not an actual Frequent Flyer yourself than your miles may
expire ( or not even accrue meaningfully) when you need them.

Consider This (based on my own comparisons):

1% cash reward = $1.00US /100.00 charged.
100 Freq. Flyer miles = U.S.$1.00 of ticket price.
100 Reward points = U.S. $1.00 of purchase power.

Get the point? They all earn (roughly) at the same rate.
True, some Flyer cards offer “bonus miles” for this or that
but then so do most Cash-Back cards - but in CASH. So do
yourself a favor and go with the Cash-Back option.

As James said above- YOU must take the time and do the
homework to find the best fit for you. Consider it a given
that any card that offers bonus back, like 5% on groceries,
will have caveats that limit your exploitation of those rates.
For instance, “groceries” doesn’t include warehouse clubs
like Sams,etc. Now you’ve got to ask yourself, “Is the markup
on those sodas worth the cash-back later on?”
See the point?

Bottom line for me is that Cash-Back cards are a great idea
but will only make a meaningful diff. if they are used as follows:

1. NEVER incurr ANY fee.(you lose your gains). So,..

2. Pay in FULL every month/Billing cycle. ALWAYS!

3. Never use it for Cash Advances (fees plus most cards
require you repay advance in full before paying off
other charges and most advances earn NO cash-back.)

4. Never use it for Balance Transfers (see above.)

5. Charge like Hell! (That’s how you get more back,doh!)

6. Be MATURE enough to let cash lie in your checking
until you dump an on-line pay to the card. A crucial
skill.

7. Be wary of “Convience Checks” they may be equal to
a Cash Advance (see above.) -And don’t earn cash-
back most times. You must call customer service to ask.

8. “Bank Transactions”, “wire transfers”,etc. earn NADA.
But you still have to pay off so beware.

Long Read to wade through I know, but I hope this is helpful to all.