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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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How To Get More Than 2% Cash Back With Your Credit Cards


The following is a post by guest blogger Michael, who is the founder of CreditCardForum.com.

With the exception of a few specific categories of spending, nearly every credit card on the market gives rewards which are only equal to 1% or less. Many people assume this is the best they can do but the truth of the matter is they can get double that amount – at least a full 2% cash back – if they know how to play the game. Below is a straightforward, two-part approach for you to do so.

Part One: Get 2% on regular purchases

There are a few credit cards on the market that will give you a full 2% rebate, without any tiers or caps, on virtually every dollar you spend. Since the recession, the number of cards offering 2% have dwindled, but these five are still available:

Fidelity credit cards
There are 3 different cards offered by Fidelity which offer an unlimited 2% cash back without any tiers or caps. This rebate is deposited into the cardholder’s eligible Fidelity account, and hence, you must be a Fidelity client in order to qualify.

  • Fidelity Retirement Rewards American Express Card
  • Fidelity Investment Rewards American Express Card
  • Fidelity Investments 529 College Rewards American Express Card

All three of these cash back credit cards have no annual fee and essentially operate the same way, but as their names imply, each has a specific purpose.

One caveat I would like to point out about the Retirement Rewards card is that the rebate which is deposited into your IRA will reportedly count against your annual tax-free contribution limits. For this reason, it may be wiser to have the rewards deposited into a Fidelity mySmart Cash or brokerage account.

Discover Escape card
Because this card is rarely advertised most people are not aware of it, which is shame, because in many ways it is Discover’s best credit card.

For a $60 annual fee, this card gives 2 miles per dollar spent without any caps or tiers. Each “mile” actually converts to a $0.01 value, which can be redeemed in the form of a statement credit to offset the cost of virtually any travel purchase made with the card. Although the $60 annual fee is a drawback, it does offer a number of benefits including primary rental car coverage, trip cancellation insurance, trip delay insurance, and more.

Capital One Venture card
This card is extremely similar to the Discover Escape – it has a $59 annual fee and gives 2 miles per dollar spent. Like the Escape, each “mile” is worth $0.01 that can be applied to a travel purchase. It is the only 2% card that I’ve actually seen advertised on TV (and probably a little bit too much lately).

Between the Capital One Venture and the Discover Escape, I choose to advertise the latter on my site. You can check out my review of the Capital One Venture card for a comparison to see why.

Part Two: Use card(s) that offer 3% on category spending

As we all know there are a plethora of credit cards on the market that give higher rebates on categories like gas, groceries, drugstores and many others. You should use at least one of these cards and then your 2% card on all other purchases – that way your average credit card rebate will be more than 2%.

What are the best cash back credit cards for category spending? Well to be honest, I do not believe there is a universal answer. It all depends on which categories you spend the most. Here are a few of the most popular ones that I hear about on Credit Card Forum:

Chase Freedom: This no annual fee card gives 5% on categories which change four times per year. In 2010, the spending that would earn 5% cash back was capped at $1,500 per quarter. It looks like that same cap will also be in place throughout 2011, but I can’t say that for sure because this program has been modified quite a few times during the past couple years. Here is my full review of the Chase Freedom.

Discover More: This operates in a similar manner as the Chase Freedom – you get 5% cash back on rotating categories. The drawback is that the 5% caps are usually lower and the spending on all other purchases is tiered. However what I really like about this card is that you can actually get more than 5% when you choose to redeem your cash back for gift cards – i.e. $40 in cash back will get you a $50 Ace Hardware gift card.

American Express Blue Cash: With this you will earn an unlimited 5% on groceries, gas and drugstores but only after your annual spending exceeds $6,500. Under that amount only earns you 1% in those categories and 0.5% on all other purchases. For some people, this no annual fee card is a smarter choice than the 2% cash back credit cards discussed above. Why? Because the Blue Cash gives an unlimited 1.5% on non-category purchases after you reach that $6,500 threshold. Depending on how much you spend on the aforementioned categories, it may be possible to average out with 2.5% or more over the course of a year.

PenFed Visa Platinum Cashback Rewards: Members of the Pentagon Federal Credit Union can get this no annual fee card which gives 5% for gas purchases without any caps. The only catch is that you need to pay at the pump (paying inside the gas station will only earn 1%).

Conclusion? It is quite easy to get at least 2% and if use a few of the best cash back credit cards strategically, it’s possible to achieve an average rebate that’s even higher. There are a number of members on my forum that have reported averaging out at nearly 3% annually!

  |     |   Comment #1
American Express Blue Cash actually gives you unlimited 1.25% unlimited cash back on non-category purchases after the $6,500 threshold.  Article mistakenly lists 1.5% for these purchases. 
  |     |   Comment #2
Seems to me as if that 5% at PenFed is going to worth more, when expressed as cents per gallon, with each passing day!  I hope they continue to offer the benefit as a percentage of the price.
  |     |   Comment #3
My picks for the top two travel (airline ticket) reward cards:

U.S. Bank FlexPerks ($49 annual fee): Earn one point per $1 spent.  Redeem 20,000 points for an airline ticket up to $400; each additional 10,000 points gains another $200 (for example, 50,000 points will buy a ticket up to $1,000).  Baggage fees and/or onboard purchases will be rebated up to $25 per ticket.  Potential Cash Back: up to 2.12%  Most non-airline ticket awards yield a flat 1% cash back.  Worth nothing that there are frequent bonus point opportunites offered throughout the year, for simply participating in a survey to purchasing specific item categories to purchasing from specific retailers (usually online).  The annual fee is waived when you redeem 3,500 points (1.5% CB).

PNC Points (no annual fee): Earn 4 points per $1.  With a qualifying (PNC) Checking account, earn up to 7 points per $1.  Redeem 100,000 points for an airline ticket (within the lower 48) up to $500. Potential Cash Back: up to 3.5%. 

Neither U.S. Bank nor PNC charge booking fees.  U.S. Bank's awards are powered by Travelocity, I'm not certain about PNC's but the prices quoted reflected the lowest fares available when I checked.
  |     |   Comment #4
I have a Schwab "Invest First" card -- does that still pay 2% or did FIA Bank of America **** with the terms yet?
  |     |   Comment #5
Schwab still gives 2% but is closed to new applications.
  |     |   Comment #6
I have a discover card that intially paid(couple years back) 5%(1st 100 If I remember correctly) back on gas purchases. Sometime back it changed to 2 1/2% on the first 200 . The 1% back on everyhting else is after a  minimum amount which I never reach, When I try to sign up for 5% cash back catagories it tells me I'm ineligible. Card is not worth the trouble anymore.
  |     |   Comment #7
I use Chase Freedom and I also opened a Chase Checking account. The two together gives me another special deal. I can earn $0.10 per credit purchase. I know we all got home cable bill, cellphone bill, and many other bills that can be paid online thro the companys' web sites. Each time when I ask any of these companyes to charge me any amount from their sites, I save $0.10. Most of the companys have no limitation on how many transactions are limited per day. Some may have a limitation on the amount per transaction.

I have seen other local NJ banks which are doing the same deal. For example, Citizens Bank has a thing called Green$nse that pays $0.1 per VISA check card transtaion and $0.3 per credit card transtion. I started thinking if it's after gov's bashing on overdraft fees, so banks started trying something new. But so far, I think I love the $0.1-$0.3 per credit card transaction. It's more than just 2% or 5% cash back. The only catch is that I have to do more work or have a program to do it for me everyday.

Finally, for the love of God, pls dont just rush to Chase or Citizens Bank to open an account, pls do your own math and research first. It's important to read thro all the fine prints before signing your name on some paper.
  |     |   Comment #8
To mystwu

Sure would like to see you elaborate a little bit more on your comment.   

"The only catch is that I have to do more work or have a program to do it for me everyday."

Am I missing something here.  ??
  |     |   Comment #9
To Anonymous - #8

It's really simple. Let me give you an example.

There is a company called Tmobile, if you use its cellphone service, you will get a bill every month. Let's say the amount is $44.39 for a 500 minutes talking plan. When you get the bill, you walk into Tmobile's store and use it's kisok to pay your bill. This little standalone machine will ask you some info and also "if you want to pay for another amount", you will touch the screen and pay $0.01 with your Chase Freedom credit card. As I said b4, each credit card transaction will reward you $0.1 or 10 points from Chase. So, the math is really simple, spend $0.01 and you get $0.1 back per transaction. The net return is $0.9 USD per transaction. This is the best case. The worst case can be when you buy something that would cost you $1000000000000000000000 and the $0.1 per transaction from Chase is just too little to make a difference, so in this case, the Chase Freedom card is really just a  1% cash back card. But hey, you have the tool, you just need to use it in the way that it was designed for correctly(in the best of your interest). As you know, this kinda transaction takes time. It takes about 50 seconds to get everything done. We all know the oil is hitting over $100, that means the gas is going to be super expensive again. There is another way to pay. You can still use tmobile.com and pay $1.01 at least and get $0.1 back. But this requires more typing and time, I just don't think the return is that good. I mean it's sttill good. It's like another 10% off stacked on your already 10%-25% off discounted cellphone bill. I remembered that Freedom card was doing some 5% cash back on util cellphone transaction last year or two years ago, and after studying Tmobile refund policy, we all know that tmobile will refund you money if there is something left. Yes, they have to. But they don't send it back to your original credit card, if you request, they will send you a check. All I am saying is that this is really just some extra work that pays not that much but it does pay.

None of these above can be compared to the time when we could use C2it from Citi bank to get cash out of credit card with no fee and go buy US gov bond and then pay back to Citi credit card. This is the true leverage with unlimited return on %.

Sometimes, I really think everyone should study our Tax code to understand what kinda Godly deals a company can get from uncle Sam. But I guess most of us just want to be an avg worker who does 8-5 and get paid.
  |     |   Comment #10
I set up chase on macro to pay bills(dish net and comcast allow 0.01) for a few months did 500-1000 transactions a month without any problems. Last month I forgot to turn the program off and Chase closed my account after 11,000 transactions went through. Would keep it at 1000 per month or less
  |     |   Comment #11
To #6:

You can call Discover to change your card from "Open Road" to "More" ... and you'll be able to sign up for the 5% cash back categories. We did this recently, no problems.


PNC Customer
  |     |   Comment #12
Comment #3. - PNC Points. You mentioned you get a $500 airline credit for 100,000 points. I would like to know where you got that number. In my points section, its only a $250 credit. Also, PNC points average out to be less than 1%. Yes its 4points per dollar, but their rewards on average require more than 4 times that of the average card. i.e.- $10,000 spent gets you $100 back. PNC Points 41,500 points gets you $100 back. So, divide 41,500 points by 4= $10,375 spent gets you $100 back. After doing much research, all cards are abou the same. You may be able to save a few dollars here and there, but just get a card from a local company. Customer service with every card company is going to suck, so don't expect good service going in. They are just like cell phone companies. Just Saying...
  |     |   Comment #13
See the recent article on credit card rewards at -

  |     |   Comment #18
And the Penfed gifts are worth less than the points value. Ie. a $20 gift for 2500 pts.
  |     |   Comment #20
I look upon all Penfed rewards cards as instrumentalities of a scam.  I would not carry such a card.  Penfed should be ashamed of having devalued its rewards points.  Doing so was reprehensible.  
  |     |   Comment #21
The PenFed 5% cash back rewards card for pay at the pump gas works for me. Along with the Citi 2% cash back I'm good to go. Just got my first rewards check from Citi and couldn't be happier.
  |     |   Comment #22
The Citi DoubleCash is a nice card.  Once I made 2 BillPay transactions at my bank to pay my Citi DoubleCash balance, I was able to request the rewards be direct deposited to that bank account.  My last reward posted within 1 business day.
  |     |   Comment #19
Just completed doing the AMEX card deal which has a 25% reward on the first $1000 only.  There is no annual fee.  Beyond the first $1000 of spending the reward is lower, though not horrible.  After I harvest my $250, I still might use the new AMEX card some day if my other cards, with higher rewards, bite the dust.

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