You Have it in the Cards

As most of us are aware, there appear to be limitless options when it comes to the benefits offered by credit card companies.

Cash-back, discounts, free travel, gift cards and store credits to name just a few. Add to this interest rates and the reputation and service levels of different card issuers and we have a complicated decision to make. How should we go about deciding which cards are best?

The first question is: do you plan to pay off the balance each month? If you do, then your focus should be on rewards. Here are few common rewards:

Cash Back: There are currently two major types of cash back rewards. The simplest are referred to as Flat Rate cards and usually give you a credit on your statement equal to 1.5% of your purchases, without limitations (Chase Freedom Unlimited and Capital One Quicksilver Cash Rewards cards). There may also be a one-time sign up cash bonus as well, typically $150 if you charge at least $500 on the card in the first three months.

The second type of cash back card generates credits on rotating categories through the year. For example, the Chase Freedom card credits 5% on up to $1,500 of purchases ( or a credit of $75) each quarter from certain businesses, such as grocery stores in one calendar quarter, gas stations and restaurants in another quarter, etc. Or, the US Bank Cash+ card credits 5% on up to $2,000 of purchases ($100) each quarter on any two categories you select.

Travel: Travel cards typically provide lots of “miles” (or “points”) when you open a card account and then accrue miles at some multiple of what you charge. They may also reimburse you for some travel charges such as luggage fees. Typical offers available now are for 50,000 points at sign up as long as a few thousand dollars are charged within the first three months the card account is open (just about any major airline card offers this through big banks like Chase and Citibank). In addition, cardholders accrue points based on their spending.

Charitable: Many credit card companies allow you to donate your points or miles. But, here is the rub: IRS considers credit card rewards to be discounts rather than money in our pockets, so giving away your points is not tax deductible. That said, there are cards that will automatically give to the charity of your choice based on your spending.

Note that credit card companies change their programs and perks frequently, so the examples we’ve given here may change by the time you read this and we aren’t promoting any of the cards we mentioned. Also note that rewards cards have some the highest interest rates if balances are carried on them month-to-month, so let’s now take a look at what to expect from credit cards designed to carry balances.

Lower Interest Rates: Many card companies offer introductory periods where they won’t charge interest for periods up to about 18 months. After that time period, some companies offer lower rates than others. Currently, the lowest rates available from major card companies are around 13% per year, which is considered low in the credit card world (lower rates may also be available on cards issued by credit unions). Generally, if there is something that needs to be financed, you are better off not using a credit card, but instead getting a personal line of credit at a bank or credit union.

Fees: There is another consideration: some card companies charge annual fees for having their cards. American Express is probably the company that has been doing this the longest, and their fees range from $95 per year for their Preferred card up to $7,500 for the Centurion “Black” card.

Service Levels: The last variable we’ll discuss is the service level of card companies. They vary widely and some have good reputations (American Express and Discover) and some have had service issues (Capital One and Wells Fargo). Service levels can be important, especially if you travel a lot and need to reach them immediately to replace a card or reject a charge.


The moral of this story is to carefully compare the total fees versus perks and services for all credit cards you’re carrying or considering. There are many websites that can assist as well (which are typically supported by the card companies) like thepointsguy.com, Creditkarma.com, and nerdwallet.com. Of course, we’re always happy to assist you with this process.