My Favorite Credit Cards (and More)

I get lots of questions about credit cards. Because so many blogs cover the subject, I’m getting away from doing a lot of credit card posts, but for those who ask, I want to keep my credit card coverage current. So I give you:
Six simple credit card rules.My favorite credit cards.A head’s up on current credit card sign-up bonuses.
I’ll update this as necessary (about once a quarter). Enjoy, and if you have any questions about my views on anything credit cards post them in the comments.

Note: Credit card affiliates are one way this site makes money, so occasionally writing about them keeps the lights on. Most credit cards will pay me and other bloggers if somebody clicks a link on our site and successfully applies for a card. Because most banks do this, I don’t feel like there’s a conflict of interest recommending one card over another because one is an affiliate and one isn’t—but I want you to know and make that call. In this post.

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TO START, SIX SIMPLE CREDIT CARD RULES

After five years of blogging, sometimes I feel like I write the same thing over and over again, but the good news is I’m now able to boil that advice down more and more. If I only had two minutes to sum up my credit card advice, this would be it:
Do use a credit card. If you’re not in credit card debt*, use a rewards credit card for almost everything you buy. For one, if you can get between 1-5% back on stuff you buy, why wouldn’t you? Second, credit cards provide a convenient way to track everything you buy. Third, credit cards are safer and more convenient than debit cards.Pay off the balance every month, no exceptions. As somebody who has come back from the brink of financial ruin thanks to ridiculous credit card debt, I will never again use credit cards for things I can’t afford to pay off at the end of the month. So as long as you pay your credit card balance in full every month, the APR on the card you pick doesn’t matter (you’ll never pay a dime of interest).When in doubt, choose a cash rewards credit card. For the average spender, cash rewards credit cards provide the most bang for your reward buck. Two possible exceptions: 1) you’re hoping to bank miles for a pricey international airfare (in which case the miles you earn are worth more) or 2) you travel for work so often you can benefit from perks that come with mileage cards.Re-evaluate your card every couple of years. Credit cards are constantly changing their terms and rewards and, often, better cards are available to new customers. Banks frequently jack interest rates and even trim rewards programs on existing cardholders because they know most people are too lazy or ignorant to switch. Prove them wrong.Don’t cancel old credit cards automatically. When you get a new credit card, you may be tempted to cancel your old one, but don’t cancel that old card just yet. Old credit cards are good for your credit score, even if you don’t use them. Cut them up for security sake, but don’t cancel them. The possible exception is if the old card charges an annual fee, go ahead and cancel it if you won’t be using it.Annual fees can be OK. Often times, cards with annual fees have better rewards programs that will benefit card members who spend a lot on the card each year. Consider what you hope to earn in rewards from the card, and you may find out the annual fee is well worth the additional perks.
*Note: There is a time not to use credit cards…when you’re struggling to pay off long-term debt. If this is you, focus on getting out of debt before you shop for a new credit card.

MY FAVORITE CREDIT CARDS

With that said, what are my favorite credit cards? It boils down to these two:

I have both an American Express Card and Chase Freedom, the latter of which I use for most purchases simply because Visa is accepted everywhere (I do, however, greatly prefer Amex’s customer service and Website). Chase Freedom pays unlimited 1% cash back on all purchases plus 5% back on categories that change every three months, up to a dollar max.

Amex Blue Cash pays 1% cash back on everything plus 3% cash back at supermarkets and 2% cash back at gas stations and department stores. There’s also a preferred version which, for a $75 annual fee gets you accelerated rewards: 6% cash back at supermarkets and 3% cash back at gas stations and department stores. There’s also a $100 sign-on bonus.

Chase is also offering teaser bonuses for new applicants…$200 cash back after you spend $500 in three months or $50 cash back when you spend $500 in three months plus a 0% APR on purchases for 12 months. Pick your poison.

If You Ever Carry a Balance

As someone who knows all too well how quickly you can get in trouble with credit cards, my advice to you is never carry a balance on your credit card; pay the balance off each month. Failure to follow this advice is, at best, an expensive way to borrow money and, at worst, a slippery slope that can quickly put you tens of thousands of dollars underwater.

That said, I know many people choose to carry a credit card balance occasionally—to finance a big purchase over a few months or take advantage of a 0% teaser APR, for example. If you must do this, pay careful attention to which card you’re using, because many of today’s cards with the best rewards have the highest interest rates and—at those rates—carrying even a small balance quickly adds up to more than whatever rewards you earn.

If you’re looking for a good contender, there is the Discover More Card† which combines 1% cash back with 5% back on changing categories with strong customer service and the best online account management I’ve seen. There’s also an 18-month 0% balance transfer option right now†. Both cards have regular APRs starting at 11.99%.

Although these are the cards I’ve liked for awhile, other issuers are catching up with the cash rewards options.

The Bank of America BankAmericard Cash Rewards card just changed its rewards structure to pay 1% cash back plus 2% on groceries and 3% on gas, but you only get those higher rewards rates on up to $1,500 in purchases per quarter.

Additionally, the new Capital One Cash Rewards Card offers 1% on all purchases plus a 50% bonus on your rewards at the end of the year (essentially 1.5% cash back).

CREDIT CARD SIGN UP BONUSES

In most cases, the best reason to apply for a new credit card is to get a card that’s going to deliver the best long-term value to you based upon how you spend. That said, if you can find a good card for you that’s offering $100, $200 or even more as a sign up bonus, even better…

Citi® Dividend World MasterCard® – $300 Cash Back† gives you $300 cash bonus if you spend $5,000 on the card in 3 months plus 1% cash back on everything and 5% cash back on categoreis that change each quarter (see a pattern yet?).

Although I think cash back credit cards are a better deal for most people, travel cards can be attractive 1) if the idea of earning free travel seems more “rewarding” than just cash or 2) you travel frequently enough to benefit from card perks like free checked bags or priority boarding.

The Chase Sapphire Preferred Card† (a $95 annual fee) is still offering a hard-to-beat 50,000 bonus points for signing up and spending $3,000 in the first three months. They claim that’s enough for $625 in air travel or hotel accommodations.

Other bonuses available at the moment include a free flight with the Southwest Airlines Rapid Rewards Card.

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