Credit card holders can use cards that offer rewards to earn money, points or airline miles. But if these cards are misused, the rewards aren’t worth it, warns one expert.
Some cards will even pay you a few hundred dollars just to sign up, which can come in handy, especially when credit card debt piles up in part because of painfully high inflation. However, outstanding debt can hurt you with high interest rates if you don’t pay off your balances on time.
Credit card balances have already increased by 26% since the first quarter, and total credit card debt has already surpassed the $1 trillion mark, according to a recent report from the Fed’s Center for Microeconomic Data.
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“The second quarter of 2022 saw significant increases in mortgage, auto and credit card balances, driven in part by higher prices,” Joel Scully, administrator of the New York Fed Center for Microeconomic Data, said in a statement.
While credit card offers such as signup bonuses or cash back may seem attractive, some reward cards are “only useful inflation fighters for consumers who routinely pay off their balances in full every month,” FOX Business Financial said. Credit Sesame analyst Richard Barrington.
Often, these cards “charge higher interest rates, and in the long run, the difference in interest rates can be worth more than the reward is worth,” he added.
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“If you’ve built up debt and can’t pay off your card balances in full each month, you’re probably better off forgetting the rewards and looking for the card with the lowest interest rate,” Barrington said, adding that your actual interest rate may differ from the advertised rate. depending on your credit score.
However, if you repay the balance each month, the interest rate difference no longer matters. In that case, Barrington says, look for the card that offers the best reward for your shopping habits.
Here are some of the most popular bonus cards according to LendingTree.
Chase Freedom Flex Credit Card
The Chase Freedom Flex Credit Card, which has no annual free service and has an annual interest rate of 0% (APR) for the first 15 months, was voted the best reward card for 2022 overall.
It was voted the best in part because it “earns cash back across a variety of categories at generous rates, and on top of that comes with a light sign-up bonus,” LendingTree said.
Cardholders will earn $200 by spending $500 in the first three months after opening an account.
Consumers will also receive a 5% cash back up to $1,500 on combo purchases in bonus tiers they can redeem every quarter. Cardholders can earn 5% cashback on rides purchased through Chase Ultimate Rewards, 3% on restaurant and drugstore purchases, and 1% on all other purchases.
However, according to LendingTree, after 15 months, consumers will have a high annual return in the range of 17.24% to 25.99%.
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Blue Cash card from American Express
According to LendingTree, American Express’s Blue Cash card has been voted the best everyday shopping reward credit card, in part because it “has one of the highest U.S. supermarket shopping reward rates of any credit card on the market.”
By spending $3,000 within the first six months of opening the card, consumers will receive a $350 credit.
Cardholders will receive 6% cashback at grocery stores up to $6,000 per year. According to LendingTree, they can also earn 6% cashback on some streaming subscriptions, a 3% cashback refund at gas stations and vehicles such as taxis, trains and buses, and 1% on other purchases.
The card has 0% interest for the first year. After that, consumers can receive a high interest rate ranging from 16.24% to 27.24%.
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Capital One Savor One
The Capital One SavorOne credit card has been voted the best for dining and entertainment rewards.
Consumers can get 8% cashback on purchases and Capital One Entertainment tickets at Vivid Seats, as well as 3% cashback on restaurants, entertainment, popular streaming services, and grocery stores (excluding supermarkets like Walmart and Target). They can also get 1% cashback on other purchases.
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Cardholders can also receive a $200 cash bonus by spending $500 within the first three months of opening the card.
While there is 0% APR for the first 15 months, consumers will subsequently face an APR ranging from 16.49% to 26.49%.
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