I love credit cards, or more precisely, the cash back that they give me. I’ve got three of them. This seems to be the magic number for me, but your mileage may vary. Before I continue with telling you the cards I use, let’s talk about safety.
Credit cards, like many other things are a tool, and can be optimized to be helpful, or painful. In the same way that a saw or a car when used improperly can cause injury, credit cards can be dangerous. Missing payments will have an immediate and significant effect on your credit score. Also, running a balance will lower your score over time and have a significant impact on your net worth. I recommend avoiding both. If you don’t plan on paying it off ever month, don’t use credit cards.
So what are credit cards good for?
In the United States all credit cards have Zero-Liability protection. In other words if someone buys something with your card you’re not responsible. Debit cards don’t have to carry this same protection, although most do anyway.
One more thing to be aware of: credit cards do have reasonableness requirements for purchase protection:
- Take reasonable actions to protect your cards
- Promptly report any theft or bad transactions
Following these rules means if my card gets stolen, it’s not my problem.
Rewards are my favorite credit card perk. Personally I get cash back on all my credit cards, but in the case of my second favorite card: The Costco Visa Card I get a wad of cash back every year. Sweet!
I don’t have any airlines miles or points based cards, but if you travel a lot it may be worth reviewing points based cards. In some cases points based cards can provide more rewards than cash back cards.
Many credit cards have other perks that can help in different situations. For example earlier this year I had a flight cancelled and I found myself stuck in Las Vegas for an extra day. While I was stuck I saved every receipt and submitted a claim with my Citi. They refund my hotel, and all the food I bought while in Vegas. Some cards provide rental car coverage, free TSA Precheck, airport lounge access, and other neat things.
My Cash Back Cards
I’ve have three cards, here’s how I use them:
Discover It Card
Why I love it: 5% cash back on rotating categories. The categories change quarterly, but are usually useful.
What I use if for: Just where I can get 5% back.
Gotchas: 5% back is only valid on the first $1,500 per quarter in the qualifying category. If used at a non-qualified category it only provided 1% cash back. That’s not bad, but not great either. You also need to be sure to sign register for the categories, although discover does a good job of sending reminders for this. You can check out the cash back calendar here.
- Double cash back for first year
- Bonus cash back for redeeming for gift cards
Citi Costco Card
Why I love it: 4% back on gas, 3% on travel and restaurants, 2% on Costco purchases and 1% on everything else.
What I use if for: I use this card at Costco, restaurants, travel and for gas. I also use if for all international travel.
Gotchas: Only 1% cash back on everything else. Requires a Costco membership, however in some cases is may be worth getting a membership just to use this card. For example this year I’ve gotten over $300 in cash back, over five times the membership fee. The reward structure is also rather complicated, I frequently reference Citi’s website to figure out what card to use.
- Extended warranties on some items
- No foreign transaction fees
- Pays cash back in cash once per year
Citi Double Cash Back
Why I love it: 2% cash back on everything. If you want one card to use for everything, I recommend this card.
What I use if for: Everything that another card isn’t giving me more.
Gotchas: The additional perks are not great. The card is rather basic, only offering 2% cash back and nothing else.
Honorable Mention Cash Back Cards
There are a couple of great cards that I don’t have, but have heard good things about. The cards are worth mentioning, because they may be worth getting, they’re just not right for me.
Blue Cash Reward Card
Why it’s good: This card give up to 6% cash back! You’ll get this rate at supermarkets and streaming services. 3% cash back is also available at gas stations and for public transporation.
Gotchas: It’s got a $95 annual fee. And American express cards are not widely accepted. If you can make more than $95 per year back on grocery spending alone, this is a great card to get.
Chase Freedom Card
Why it’s good: This card work like the Discover It card, offering 5% cash back on rotating categories.
Gotchas: You’ll need to activate the categories every month, and the chase doesn’t show the categories in advance. Although you can see the current category here. The categories also tend to favor lower spending.
I love these cards. I’ve found that three cards is the optimal combination to improve my credit score and give me lots of cash back. If you only need one card go with the double cash card. It’s accepted everywhere and provides more cash back than almost every other card.