After our recent rant-and-rave against the so-called credit card rating websites, we figured it was time to update our list of our favorite travel/reward credit cards. There are MANY reward credit cards out there, and your personal financial situation will have an effect on the cards you choose. Remember, unless you pay off your cards every month, go for the lowest-rate credit card, and ignore reward cards (which usually have much higher APRs).
In the broadest terms, we strive for at least a 3% reward ratio for all our purchases – whether that’s cash-back, airline miles, hotel stays, or for international purchases. We have also generally refused (with one exception, see below) to pay an annual fee on any card. And although it makes for a fat wallet, we don’t mind using multiple cards for different purposes.
We have three current favorites:
Chase Freedom Visa – This card offers 3% cash back on your “top 3” (from 15 different) categories of spending each month, up to $600 (after that, it’s 1%). Even when only used for the $600 spend/month, we get more than $200 in cash rewards each year.
We also have a Chase Business Visa that gives us 3% cash back at hardware/building supply stores, office supply, gas stations, and restaurants (1% elsewhere). We use it only for those purchases. (Especially as it’s getting harder to find cards that give good rewards at restaurants.)
Schwab Bank Invest First Visa – This new card (it’s only been available since November) offers 2% cash back on everything. Domestically (see also International Travel, below), we use it for purchases that don’t give us our 3% or better with some other card.
[We are somewhat concerned about the future of cash-back cards. For example, we’ve heard that new Chase Freedom card holders are seeing different reward terms than for the card we have. There was a recent Wall St. Journal article on the topic. The Schwab card is new, so we wouldn’t expect any changes soon. Nonetheless, confirm reward schemes before applying, and be ready for possible changes in the future.]
We still believe that the Hilton American Express is one of the best cards available. It offers 6 Hilton “points” if used in certain categories and for Hilton hotel stays, with 3 points for other spending. The way we value Hilton’s points, and based on hotel room rates, the 6-point level represents to us about a 5-6% reward. But it’s really only useful if you plan to stay in (and otherwise pay for) Hilton chain hotel rooms.
[The above has been UPDATED to reflect Hilton’s new 6-point reward level.]
We continue to hear wonderful things about the Starwood American Express card, but simply have too many other cards that we currently use to be intrigued enough yet to acquire the card (which carries an annual fee).
[An advantage of the hotel cards is that your points are held in a system that is probably more stable than an airline, and that are less likely to change in value than a bank’s cash-back structure.]
We believe that signing up for airline cards can be a worthwhile deal, if you can get some big initial miles bonus and if the (usually high) annual fee is waived for the first year. The choice of card(s) will depend on the airlines or alliances you fly. Every major U.S. airline offers such a card, as do many international carriers. The value of airline miles varies by how you use your one-mile-per-dollar spent on the card. We generally value most airline miles at about 2 cents per mile, equivalent to 2%. That said, we seldom use an airline card except....
The only airline card that we’ve been willing to pay an annual fee for over the past couple of years has been the Alaska Visa, which offers a generous initial sign-up bonus; a $50 companion ticket every year; and 2,000 bonus miles every year. We’re torn about renewing it each year, though, because of the $75 annual fee. But the companion ticket seems to make the fee worthwhile, especially if you use it for something like a pair of $800-each Hawaii tickets (with the second ticket therefore “costing” only $125).
As with the Starwood card, we’re intrigued by a couple of airline cards that we don’t have – as they’re offered by airlines we fly less frequently. Those include the JetBlue Amex, the Virgin Atlantic Amex, and the Virgin America Visa. If our travel patterns change to where we fly those airlines more often, their credit cards might seem much more appealing. (The JetBlue and Virgin Atlantic cards carry annual fees.)
[There have been innumerable articles about the decline in value of airline miles. We’ve touched on the topic a few times, but it’s too long of an issue to go into here. That said, carefully evaluate the value of your miles, as well as associated redemption fees – either for “free” tickets or upgrades.]
With one exception, we only use a card that does not charge foreign-exchange fees. The best offerings for us right now are:
The Schwab Visa, mentioned above, that charges 0% forex fees, and offers 2% cash back. It’s like getting the equivalent of a 5% reward for foreign purchases (as nearly all other credit cards tack on foreign-exchange fees of 3%).
Capital One has many cards, all of which charge 0% forex fees. There are many different reward schemes (cash, miles, points – all usually translating to about 1% reward). In general, we don’t find their rewards very appealing, but with the lack of forex fees and a 1% reward, it’s still equivalent to 4% value.
The exception is the Hilton Amex (mentioned above) which charges 2.7% in forex fees, but does give us 3-6 Hilton points for purchases. But we use it internationally for one purpose – car rentals. It (and other Amex cards) has available an inexpensive car-rental insurance policy that offers primary CDW insurance. We consider the forex fees/points/insurance paradigm a worthwhile trade-off.
[As with other bank-based cards, discussed above, it seems that some of Capital One’s reward schemes may be changing.]
In addition, we have an Amex FreedomPass Business card that has a reward ratio of only 1.33%, but offers discounts of 3-5% with JetBlue, Delta, Marriott, Hyatt, and Hertz (and quite a few other non-travel discounts, such as 5% with FedEx), simply by purchasing with the card. Those purchase categories, therefore, give us at least a 4% reward. It, too, offers the same optional primary CDW car-rental insurance coverage as does the Hilton Amex.
We still have no problem juggling cards – using one card for something and a different card for another purchase category. But, after considering all of the above, and all the various reward factors and card use for a wide variety of travel patterns (and if companies like Chase do indeed reduce their reward options), and if we were limited to only two cards, our two top choices would currently be....
Schwab Visa – No forex fees for international purchases; 2% rewards on everything.
Hilton Amex – Points go into as much of a “fail-safe” program as possible; bonus points for selected categories of spending; car-rental insurance.
This photo has nothing to do with this article.