Having the right rewards credit card can reduce nearly every expense in your budget by 2% — or at least put that money back in your pocket.
Getting 2 cents on the dollar may not sound like much, but think of it this way: If you put $1,000 worth of expenses on your card every month, the rewards add up to $240 a year. Spend $1,500 a month, get $360 worth of value. That’s money you can put aside for your future, pay toward your debt or spend on things that make life more enjoyable. And it requires no extra effort to claim.
If you have good credit, a 2% flat-rate rewards card is entirely within your reach. The only question is: How would you like your rewards served up — as cash back, travel credit or a direct deposit straight into your retirement account?
2% flat-rate travel rewards
With a 2% general travel card, you get rewards that you can use to pay for most travel purchases, leaving more cash in your pocket. There are two main contenders with rewards valued at 2%.
Capital One® Venture® Rewards Credit CardCapital One® Venture® Rewards Credit Card is well-loved for its refreshingly simple rewards structure. You earn an unlimited 2 miles per $1 spent on everything — no need to remember special rewards rates for different types of purchases. Because miles are worth 1 cent each, that equates to a 2% flat rewards rate. You can redeem rewards for nearly any travel purchase. Simply book travel as you normally would and use the Capital One® Venture® Rewards Credit Card to pay for it. Then log on to your card account online and use your miles to erase some or all of the charge. There’s no minimum redemption amount as long as you use your miles to cover the entire cost of a specific purchase; partial redemptions have a minimum of 2,500 miles ($25). The card has an annual fee of $0 for the first year, then $95.
Barclaycard Arrival Plus® World Elite Mastercard®Barclaycard Arrival Plus® World Elite Mastercard® works very much like the Capital One® Venture® Rewards Credit Card. You get an unlimited 2 miles per dollar, and miles are worth 1 cent each. But the Barclaycard Arrival Plus® World Elite Mastercard® has a slightly lower annual fee: $0 for the first year, then $89. Plus, you get 5% of your miles refunded to you every time you redeem. This turns the 2% rewards rate into an effective 2.1% rate. On the other hand, you can’t redeem miles until you have $100 worth saved up, which equates to $5,000 in spending.
2% straight into savings
Fidelity® Rewards Visa Signature® Card
For some people, putting every spare penny toward a savings goal is more satisfying than redeeming credit card rewards for travel or cash. The Fidelity® Rewards Visa Signature® Card pays a flat 2% on every purchase, and the $0. Cardholders can deposit their rewards automatically into a Fidelity Investments regular brokerage account, individual retirement account or 529 college savings plan. You could redeem your rewards in other ways, but their value drops well below 2% unless they’re redeemed through a Fidelity account.
1% now, 1% later
Citi® Double Cash Card – 18 month BT offerCiti® Double Cash Card – 18 month BT offer is a bit different from the cards listed above in that its rewards are split: You get 1% cash back when you make a purchase, then another 1% cash back when you pay it off. Put them together, and you get one of the highest flat cash-back rates available anywhere. For people who pay off their credit card balances in full every month — or need more motivation to do so — this is a great option. It has an annual fee of $0, making it a cheap card to carry, and the rewards rate is the same whether you redeem as a statement credit, gift card or check in the mail.
Earning more than 2%
Although 2% is the gold standard in flat-rate cards, it’s possible to earn even higher rewards rates if you’re willing to juggle multiple cards. For example, several credit cards pay 5% back in specific spending categories that rotate quarterly. Or you can pick a card that pays higher rewards in the areas where you spend the most, like groceries and gas, and then use your 2% card on everything else.