5 Best Rewards Credit Cards to Take Advantage of in 2012

Ed. Note: We’re excited to welcome David Bakke, personal finance expert and regular Money Crashers contributor, as a guest blogger here on Block Talk. Enjoy!

You’ve seen the great promises credit card companies offer on their rewards cards: free plane tickets and hotel rooms, cash back, no foreign transaction fees, and discounts at grocery stores and gas stations. Seems to good to be true, sometimes. There must be some sort of a catch, right?

Well, not necessarily. Credit card companies can offer great deals, discounts, and rewards because they fully understand the tendencies of many American consumers: People take on new debt, don’t (or simply can’t) pay it off in full each month, and the interest charges pile on. Before long, the issuer has made back their losses on any incentives they offered to get you to sign up, and then some.

Taking advantage of a rewards credit card offer only has true benefits if you pay your balance in full and on time each month. If this is a task you manage, there are many great rewards and cash back credit cards you can take advantage of this year.

Photo: 401K via Flickr

1. Chase Freedom
With the Chase Freedom card, you can earn $200 cash back if you make $500 in purchases within the first three months. Also, you can get 5% cash back on up to $1,500 in purchases at gas stations and on Amazon through the end of March.

Each quarter throughout the year, the categories in which you can receive 5% cash back rotate, and include grocery stores, restaurants, and airlines. Additionally, you can earn 1% cash back on all other purchases without a spending cap, and cash back offers of up to 10% are available if you shop at select merchants through the Chase Freedom website. Best of all, this credit card has no annual fee and never expires. See this Chase Freedom Review for more on the advantages and disadvantages of this card.

Best for: Anyone, but especially users who spend a lot in the rotating 5% cash back categories like gas stations, Amazon.com, travel, and more

2. Capital One Cash
The Capital One Cash credit card will give you $100 cash back if you make $500 in purchases within the first three months. However, the card promises to be much more profitable over the long-term: Capital One will issue a 50% bonus on the cash back you earn each year. For example, if at the end of your first year of card ownership you earned $500 in cash back, they’ll issue you an additional $250.

The card returns 1% cash back on all other purchases, and there is no limit to the cash back you can earn. Another excellent bonus is that the rewards you earn never expire.

Best for: Users who prefer to stick with one credit card to maximize rewards

3. Gold Delta SkyMiles from American Express
If you make $500 worth of purchases within the first three months after sign-up, the Gold Delta SkyMiles card earns you a whopping 30,000 bonus SkyMiles, which gives you $300 to apply toward the purchase of a ticket on Delta Airlines. Furthermore, by using this SkyMiles card, your first bag is checked free on every Delta flight, and you receive double miles (two miles for every dollar spent) on Delta purchases.

Though you receive only one mile per dollar spent on all other transactions – other cards may offer more – you qualify for priority boarding and in-flight savings, in addition to the other airline bonuses. This may be the best option for those loyal to Delta Airlines. The card carries an annual fee of $95, which is waived for the first year. See this Gold Delta SkyMiles Review for more on the advantages and disadvantages of this card.

Best for: Frequent travelers loyal to Delta

4. Chase Sapphire Preferred
The Chase Sapphire Preferred card rewards you with 50,000 bonus points if you spend $3,000 on the card within the first three months of ownership. The 50,000 points are worth $625 for travel expenses, or $500 in cash back.

With the Chase Sapphire Preferred card, you can earn two points per dollar spent on travel and dining, plus one point per dollar everywhere else.  There are no foreign transaction fees, and you can also earn a 7% points dividend annually, even on points you’ve already redeemed.

This card is a great option for those who travel frequently, especially internationally. Like the Delta SkyMiles card, the $95 annual fee is waived for the first year. See this Chase Sapphire Preferred Review for more on the advantages and disadvantages of this card.

Best for: Frequent travelers and diners, especially those who use credit cards heavily (i.e. 50,000 sign-up bonus after spending $3,000 in the first three months)

5. Citi ThankYou Premier
If you make $2,000 of purchases within three months of signing up for the Citi ThankYou Premier card, you will be rewarded with $300 in gift cards. After that initial bonus, you will earn one point per dollar spent.

But there are more ways to save and earn flight rewards: If you book a domestic flight through Spirit Incentives, you will receive a complimentary companion ticket once per year. Furthermore, the value of your rewards will increase by 33% if they’re redeemed for airfare through Citi’s ThankYou Travel Center.

The Citi Thank You Premier card does not charge any foreign transaction fees. There is no limit to how much you can earn, and your rewards never expire.

Best for: Frequent travelers not loyal to any one airline

Final Thoughts
If you opt to sign up for one of these rewards credit cards, be sure to read the terms and conditions – it’s important to understand the fine print so you know what you’re getting yourself into.

With the recent banking legislation, which took a significant bite out of the banks’ bottom lines, card issuers are always creating new, clever, and oftentimes surreptitious ways to get more money out of customers. From inactivity fees to paper statement fees, there could be myriad charges that, over time, add up. Review your statement monthly for accuracy, and make sure that none of these fees crept onto your account.

What other rewards credit cards would you recommend? Are there any that you would avoid?

David Bakke is a contributor for Money Crashers Personal Finance, an online resource for all things money — including budgeting, taxes, credit cards, frugal shopping, retirement, and more.

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