How to Compare Cash Back Credit Cards

March 30, 2011

Choosing a cash back credit card can be a little more involved than simply going with the lowest interest rate. 

Of course if you carry a balance on your credit card, don’t bother with cash back cards. You should instead try to lower your interest rates and pay off your debt, as I covered yesterday in my review of David Bach’s new book. 

He outlines a process you can use for getting those lower rates but when all you’re comparing is the interest rates it does make it simpler to choose a card. For example he writes in one of his case studies about going with a 0% interest offer that has the lowest balance transfer fees.

However, if you don’t carry a balance and you’re not concerned with low interest cards then choosing the right card is a little more involved.  As I mentioned yesterday, I’ve thankfully never had to deal with carrying a balance so I look at criteria other than just the APR.  I recently did some comparisons of several cash back cards and thought I’d go over those as an example.

I’m not necessarily going over them in order of importance – I’ll list what criteria I look at and you can choose which are the most important to you.

  • Earning Rewards
  • Redeeming Rewards
  • Card Fees
  • Interest Rates
  • Reward Limits
  • Promotions
  • Payment Policies 
  • Card Programs
  • Customer Service
  • Other Features

Earning Rewards

The key here is to choose a card that best suits your spending patterns.  For example, I look at things like your amount of annual spending and specific types of things you buy when comparing the Blue Cash vs Discover cards.  Look at the types of spending behavior that various cash back cards reward and narrow it down to the one or two that best match how you spend money.

This is easier to do if you already use a credit card and are looking for a replacement because you can look at the previous year’s data online.  If you’ve never used a credit card before then you’ll have to look back through your check register and old bank statements to see your spending patterns.

Redeeming Rewards

The least amount of hassle to get your money back the fastest is what I look for in this category – I like to use my cash back earnings to help offset my expenses.  However, if you’re more interested in using your cash rebates to get deals on purchases of new stuff then your criteria will be a little different.

Going back to the Blue Cash vs More comparison again, one card lets you get your money back sooner but the other can earn you additional discounts on purchases in addition to your cash back.  So how you plan on using your rewards makes a difference in which card you might want.

Card Fees & Interest Rates

Obviously paying no fee is better than having the cost of an annual fee.  When you’re looking at travel rewards cards there are cases where the benefits of the card can outweigh the fee but cash back cards are usually a different story.  I can’t think of a cash back card with an annual fee that’s worth paying, if you know of one be sure to speak up in the comments.

I already touched on this at the beginning of the post so I won’t spend a lot of your time on it but if you’re carrying a balance then I don’t think a cash back card is right for you.  You should research low interest cards and focus on paying down your debt, no cash rebate will make up for your interest payments.

There are a few cards like the Citi Platinum Select that feature lower interest rates plus a form of cash back but in general you should just stick with a card that gets you the lowest interest rate possible.

Reward Limits

Since you’re chasing the highest cash back rates available, you want to make sure that as much of your spending earns at the top rebate rate as possible.  The trouble with reward caps is that they can get in the way of this, often times without you realizing it.  You’re usually not notified once you’ve hit an earnings limit, the cash back structure typically just reverts back to the minimum payout for the remainder of the period the cap applies to.

For example, when I looked at Discover vs Chase Freedom they both let you earn 5% cash back but also had some earnings caps on that higher rate to take into account.  The limits on earnings don’t mean they’re not good cash rewards cards, you just have to compare their bonus rebate caps and the timeframes they cover and see how they fit into how you spend.

Card Promotions

If you’re opening card after card simply to earn the account opening bonus then you’re probably going to negatively impact your credit score – I wouldn’t recommend that.  However, if you’re comparing cards and have two that are similar in most criteria and one pays a significantly higher bonus than the other, I don’t think it’s a bad thing to let the bonus help you decide.  For example, as I shared in my look at the American Express Gold card, I got a free plane ticket when I signed up for the card a few years back.

One thing to be aware of is that the really good credit card promotions are usually reserved for new customers.  So if you do have two similar cards to choose between that are both are offering bonuses – if you’ve previously used one of the cards you might not qualify and that might help make your decision a little easier.

Payment Policies

These are things like the number of days you have to pay off your card, late fees that are charged, how interest is calculated on a balance, and how late or missed payments impact any rewards you might have earned.

Even if you typically pay off your balance each month it’s smart to read up on these because there might be a month where you get busy or something happens and you forget to pay or are late.  It’s good to know what it will cost you in the event something like that happens.

Customer Service

I don’t know what your experience has been but I’ve never had bad customer service when dealing with a credit card company.  Unlike every other company I deal with that has you navigating phone menus and waiting on hold for minutes, the credit card companies always seem to have you talking to a person in under a minute.

One night before leaving on a trip I called American Express at 2:30 in the morning to ask about rental car insurance on my card and the lady was probably the most polite and helpful phone rep I’d talked to in a year.

Of course courtesy and response time aren’t as important as whether the company is willing to work with you. Going back to my discussion of payment policies and late payments, it’s something that happened to me before.  I’d had my Blue Cash card for years and always paid in full and on time but one month I was a few days late.  When I called in to see what I could do about the late fee and interest charges I’d incurred they were willing to work with me since I was a long time customer with a good track record. 

If you have a history of good customer service with a particular company then that’s something to consider.  You can’t always rely on past experience – for example if you’re thinking about getting a card from Capital One but have always had a Discover card it’s tough to compare since you’ve never had any dealings with Capital One.  The best approach in a situation like that is to ask a few people you know who have used the company.

Card Programs

One thing I looked at when comparing Blue Cash vs Chase Freedom is that both cards were eligible for a program specific to that card.  All the “Blue” AmEx cards were part of the “Blue Savings” program that gives you discounts on your purchases with certain partner merchants.  The Freedom card, along with a few others from Chase, can participate in the Chase Blueprint program. 

What Chase Blueprint does for you is let you arrange your payments to help you pay off your balance and lower what you pay in interest.  So Blue Savings is a way to save more on top of your cash back and Blueprint helps you pay off your debt.  They’re different types of programs, which one is more attractive obviously depends on your personal situation but the main point is to investigate what they offer when comparing cards.

Other Features

Some cards have unique feature that make them stand out a little and those can be tough to compare.  If only one company or card offers a feature, how do you figure that into your comparison?  The best way I know how is to try and determine what that feature could be worth in dollars and cents.

For example, with my Blue Cash card I get one free credit score a year through Experian.  The value of that is pretty easy to evaluate since I know what a credit score costs on average.  They also offer periodic discounts & deals, like a recent 35% off TurboTax software – again easy to figure out the dollar value.

Choosing a Card

Obviously choosing a cash back card isn’t the most important financial decision you’ll make in your life.  Since they say most people spend more time planning their vacations then they do their retirement, I’m not too worried that anyone will over analyze this decision.  I’ve gone over a number of points to consider when comparing cards; don’t feel like you have to study each one of these.  Use the ones you want and ignore the rest, good luck choosing the right card!


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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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