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Optimizing Credit Cards For Everyday Spending Without Annual Fees (2019)

Published 28 October 2019 | 1,844 words | Categories: Personal Finance, Analysis

About 70% of American adults have a credit card. Credit history has become increasingly important since the 1970 Fair Credit Reporting Act. But how many people are getting a good deal out of this? A CNBC survey found that 55% of credit card holders carry debt on those cards (an average of $4,293). This can cost thousands of dollars in interest. Collectively, Americans owe more than $1 trillion in credit card debt. FOR ANYONE WITH CREDIT CARD DEBT, PAY IT OFF ASAP. The interest rates are higher than everything except certain personal/payday loans (36-400% interest). Alternatively, a balance transfer to a 0% APR card may buy time.

For those without credit card debt, it’s the opposite: using rewards cards can add up to thousands of dollars in benefits. A survey from found “57 percent of U.S. adults have at least one rewards credit card. Cash back cards are the most popular (43 percent), well ahead of other types of rewards cards… Nearly three out of every four rewards cardholders (72 percent) have at least one card with no annual fee.” 

Some cards offer zero or sub-par benefits. My first credit card didn’t do anything except build a little credit history. No cash back or other perks. For maximum value, one has to juggle multiple credit cards. So what’s the best strategy? The problem is a lack of one-size-fits-all solutions. Everyone has their own needs and budget concerns, making certain cards more valuable than others due to circumstances. In general, the best place to start is rotating-category cashback cards, and fill in the blanks with cards that don’t have an annual fee. That’s what this post will focus on. Cards which charge an annual fee may have higher value, just evaluate the costs vs benefits and see if it works. I won’t detail all the options of signup bonuses or extras, just cash back for fee-free basic utility. That’s what most people like anyway, according to the above survey.

No-fee credit cards usually offer 2% or 3% cash back at best, so category cards are the best starting point for maximum value. Most offer 5% back (often the best deal available). The most popular “category” cards are the Discover It and Chase Freedom. They both earn 5% cash back on the first $1,500 spent each quarter. For average spending levels, this cap isn’t an issue. Having both cards can be valuable, especially since neither has an annual fee, and the categories don’t currently overlap. Regional alternatives may be available, such as the Amalgamated Bank of Chicago Platinum Rewards card (although its redemption options have different values, so it’s not always 5% back.) The US Bank Cash Plus earns up to 5% on various chosen categories, including utilities, but it has more limitations. Discover and Chase are the most popular because they’re the most straightforward. Easy enough to obtain and use. 


Q1 Jan-March: Grocery stores
Q2 April-June: Gas stations, Uber/Lyft
Q3 July-Sept: Restaurants, Paypal
Q4 Oct-Dec: Amazon, Target, Walmart

CHASE 2019

Q1 Jan-March: Gas stations, tolls, drugstores
Q2 April-June: Grocery stores, home improvement stores
Q3 July-Sept: Gas stations, streaming services
Q4 Oct-Dec: Paypal, department stores

These cards earn a measly 1% cash back if used outside of a 5% category, so other cards are needed for supplementary value. At least 3% whenever possible. And, the one issue with “rotating” cards: categories aren’t the same every year. 2018 for example had overlap, with both Chase and Discover having gas stations in January/February/March.

In 2019, grocery stores are covered in Q1 and Q2. For Q3 and Q4, a card that earns 3% back like Huntington Voice would be decent. Since groceries are the most popular spending category, it’s tough to find a card which always gives more than 2% back at grocery stores. Banks don’t want to give out too many customer rewards. There’s exactly one card which has 6% cash back on groceries year-round, but it has an annual fee, so it’s not worthwhile for everyone. (Spending about $3,500 annually on groceries would make it worth the fee. If not, a zero-fee 3% card is better.)

Gas is covered every month except the last 3 in 2019. For the select few who can get it, the USAA American Express card earns 5% cash back on gas (the first $3,000 annually). Otherwise, any card earning 3% will do, for example Bank of America’s Cash Rewards Mastercard. Or the Wells Fargo Propel American Express which is good for restaurants, gas, and travel. This card is overloaded: it gives 3% back on dining, gas, airfare, hotels, public transit, car rentals, streaming services, and more. It's even comparable to a few cards with annual fees.

At restaurants and fast food places, the best no-fee option used to be the Barclays Uber Visa (a flat 4% cash back). Unfortunately it was reduced to 3% in October 2019, and it now gives Uber credit instead of cash back. Most people will now be better off with a different card, but I'll leave the information here just in case. Keep in mind that Uber often has gift cards on sale for 10-15% off, which is a better value than earning 5% cash back on Uber purchases.

The Capital One SavorOne Rewards card earns 3% cash back on dining and entertainment (including museums, zoos, and movie theaters).

Note that major hotels and airlines have specialized cards which often give extra benefits to loyalists. For example the Hyatt credit card from Chase Bank has more than 9% cash back for members, and its small annual fee is erased by a yearly certificate for a free hotel night. And it might be the only card to earn more than 2% cash back on gym memberships. However, it’s useless for those who don’t use Hyatt hotels. 

Another note on travel: many cards charge a foreign transaction fee (usually 3%) if the card is used outside the USA. It's good to have at least one card which doesn't have this fee.

Anyone who frequently uses Amazon or Whole Foods should consider Amazon’s credit card (issued by Chase Bank). One version gives 5% cash back at Amazon and Whole Foods for Prime members, and another version gives 3% for non-members. (If you can't see both options, log out of Amazon or use another internet browser.)

Costco members have the option of getting a card there (issued by Citi Bank). It gives 4% back on "eligible" gas stations, 3% on restaurants, 3% on airlines/hotels, and 2% cash back at Costco. This isn't a great card compared to other options, but might fit because of the 4% for gas.

Note: Most in-store cards are terrible. They might still be okay depending on the situation. Check Wal-mart, Target, and other frequently-used stores for potential savings.

The above options should cover most category-specific spending. A recent CNBC article used consumer spending data to create an ‘average household’ budget of “...approximately $21,852 in retail spending. This budget is comprised of the most common spending categories, including groceries ($5,019), gas ($2,394), dining out ($3,365), travel ($2,154), utilities ($4,959) and general purchases ($3,961).”

For general purchases which don’t fit into a particular category, there are many options. These 5 cards give a simple 2% cash back on all transactions:

Because of these 2-percent-on-everything cards, there isn't any reason to get a card promoting 2% cash back in a specific category. It's unnecessarily limiting. Some general-use cards only give 1.5% back (such as Capital One Quicksilver or HSBC Cash Rewards) but then why not replace it with a 2% card?

Weird Cards, Exceptions, and Combinations

Things can get more complicated even sticking with cash back.

One unique card, Citi Rewards+, gives a variable cash back rate depending on the transaction amount. It earns cash back in the form of points, which have variable value themselves depending on how they’re redeemed. (Best value is to redeem for travel or gift cards, or transfer points to one of Citi’s airline partners.) Rewards+ gives 2x points on gas/grocery with 1x points on everything else. The card rounds up points to the nearest 10 for each purchase, making it best for transactions under $100. It gives the most value when buying something for $5 or less, or something just over an increment of 10. For example, a $3 purchase at a grocery store gives 6.7% back, $18 gives 2.2% back, and $31 gives 2.58% back. For anyone who loves numbers and optimizations, this has high potential. For most people it’s too complex to keep around, compared to other cards. Incentivizing microtransactions is a weird strategy.

A main draw of Rewards+ is to combine it with the Citi Premier card. Premier gives a 25% bonus when redeeming Citi points toward travel. Points would then increase in value from 1 cent each to 1.25 cents each. The cards work well together, although it’s not for everyone since the Premier has a $95 annual fee. Benefits need to outweigh the drawbacks. Citi also gives signup bonuses once every 2 years. 

The Citi Double Cash card (mentioned above) doesn’t give points so it can’t be combined with the Premier for bonus value. Citi customers may get it anyway, because of the flat 2% back on all transactions regardless of category. It's good for "other" spending.

Chase Bank has a similar 3-card setup, known as “the Chase trifecta” in card-optimization circles. The following cards earn points like Citi, with each point worth approximately a penny:

Points earned from Freedom cards can be transferred to Sapphire cards to increase their value. The Preferred card gives a 25% bonus to points redeemed for travel (like Citi) and Reserve gives a 50% bonus. Points can also transfer to select airline/hotel partners. What some people do is sign up for both Freedom cards (not at the same time) for their respective signup bonuses. Then apply for a Sapphire card later to increase the value of accumulated points. Having the Sapphire Reserve brings the Freedom Unlimited card from 1.5% cash back to 2.25% back on everything, and Freedom card from 5% cash back to 7.5% back. Plus the Sapphire cards have their own benefits (including signup bonuses) to offset annual fees. But fees don’t make this an option for everyone.


The downside of a general “optimal” strategy is sifting through many cards. It requires occasional tinkering which many people don’t want to bother with, and the exact cards in one’s wallet depends on the time of year. It might mean carrying 5 to 10 credit cards, which is a lot to juggle. The upside is cash rewards year-round which can easily total hundreds of dollars. For those who want a balance between simplicity and value, there are definitely options. And people have their methods of keeping track of things, like affixing labels to each card, or cloud-based notes like Google Keep

Credit cards do have their risks (high interest rates). With a little planning, and responsible spending, it's worth the investment.

More Information


This post is an introductory overview (not comprehensive) and doesn’t constitute financial advice. Please research based on your personal needs and see a professional financial advisor for more information.

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