A Financial Revolution 

December 29, 2005
Comparing Cash Back Credit Cards

For the past few years my wallet has been home to an American Express Blue Cash card (and a lot of lint.) I try to use the card whenever possible to take advantage of the 1.5% rebate (5% on everyday purchases including gas and groceries.) While I've had good luck with the card, some of my largest purchases have been at suppliers that don't take AmEx. As the commercial says, "you can get enough saddle sores to last a lifetime at Pink Flamingo Dude Ranch, but bring your visa card because they don't accept American Express."

I decided to compare cash back credit cards to see if there is a Visa or MC that offers a better return. I've compared eight cards and the winner is... [drumroll] ... American Express Blue Cash. Capital One No Hassle and Citi Dividend Platinum Select come in a far second.

Before I display the results, a few assumptions:

  • Monthly spending equals $2,000 per month
  • 25% of purchases are "everyday purchase" (e.g., gas, groceries, drug store items)
  • No purchases are at warehouse clubs (these sometimes pay a lower rebate)
  • Balances are paid in full at the end of each billing cycle (i.e., no interest charges)
  • The card must not have an annual fee
CardTotal Rebate
American Express Blue Cash Card$456.25
Citi Dividend Platinum Select Card$300.00
Capital One No Hassle Card$300.00
MBNA Cash Back Platinum Plus MasterCard$240.00
National City Cash Builder Elite Visa$230.00
US Bank Cash Rewards Platinum Visa$225.00
Discover Platinum Card$221.25
CIBC Dividend Card$221.25

To be fair, Discover pays a 5% rebate on purchases from select merchants and they will double the value of a rebate if you accept a gift card from a partner merchant (e.g., FTD.com, Hyatt, Blockbuster) instead of a check. Since I don't frequent any of the 5% merchants listed for January to March, I assumed all purchases on Discover received only 1% cash back.

If you have a card that offers a bonus for "everyday" purchases, My Money Blog has an good tip for maximizing rebates:

Many supermarkets and drugstores (like Safeway) sell gift cards to stores like Starbucks, Home Depot, Barnes & Noble, Old Navy, Circuit City, you name it. Buy a gift card at a grocery store with this card, and boom! 5% cash back.

If you want to compare the cards for yourself, download my credit card comparison spreadsheet. Just plug in your total monthly charges and the percent of those charges that are "everyday" purchases and you'll see which card is the best deal for you.

[Update: I've posted a Javascript cash back comparison tool.]

Anonymous fivecentnickel.com said...

Are you saying that your largest purchases are at the Pink Flamingo Ranch?

12/31/2005 5:23 PM  

Blogger Jeremy said...

Shhh! That's a secret.

My biggest single credit card expenditure in 2005 was for home improvements. Fortunately, my contractor was not the Pink Flamingo. Unfortunately, they didn't take AmEx so I used a non-rewards Visa to take advantage of the float.

I'll have to apply for that Citi card so I don't make that mistake again.

1/01/2006 5:39 AM  

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