Navigating The Credit Card Jungle

There are a lot of credit cards to choose from. Many of them follow the same general formula and are not optimized to empower your goal of saving money by using them. As mentioned above, never accept a credit card that has an annual fee attached. That defeats the purpose of saving money with them. The only exception is on cards that are perfectly suited to reap high rewards in the specific niche that you want to use them in, where the saving would far outweigh any annual fee.

Have you ever wondered how the credit card industry can be lucrative? Let’s look at a few scenarios to see why banks make money on just about every type of credit card users:

Those who carry a balance: Credit card users that carry a balance every month are feeding the bank in several ways. They might be paying an annual fee, over the limit fees, late fees, and they are certainly paying interest, and when they use their card, they are generating transaction fees. This represents 54% of all active credit card accounts in the US in the first quarter of 2022.

Those who pay their balance monthly: Assuming these savvy users have cards that do not carry an annual fee, these users do not generate interest income for the card issuers. But they are generating income for the bank with transaction fees. And many of these users might be using their card quite heavily, in lieu of cash. That can generate enormous income from very small fees that add up quickly.

Those who never use their cards: These people do not generate profit for the card issuers unless they are paying an annual fee. But holding this account is not exactly expensive for the bank, so there is minimal overhead.

Citi® Double Cash Card

If you are looking for a card that gives you cash back no matter where you use it, then this is probably your best option. The amount of cash back that companies are offering is extremely competitive, and the 2% cash back that this card offers sets it apart from all the rest in a few ways:

• Cash Back is unlimited
• Cash Back for anything you purchase
• No extra requirements

For many people the sound of a measly 2% cash back might not seem like it would put this card at the top of the list, but the market really is that competitive. With merchants paying anywhere from 1.29 to over 3.0% per transaction, much of that profit is fueling this 2% cash back, with revenue being bolstered by interest and other card fees. The reason this card is so special is that it is so unrestricted! There is no limit to the amount of cash back you can get, there are no categories to fuss about with, and of course no annual fee. There are no special requirements such as having a bank account with the issuer or using a particular payment option to receive full benefits. If there is only one card that you can take with you on any given day, this would be the one that would ensure that you are going to save 2%.

There are other cards that seem to offer more, but there is always a catch. The PayPal Cashback Mastercard also offers an unlimited 2% cash back, but you have to have a PayPal account to receive it. However, in the case that you do, you can also get 3% cash back if paying with PayPal. Adding the PayPal card to your arsenal if you are primarily a high-volume online shopper is a solid choice that we can’t argue with.

Discover it® Cash Back Card

This card is another great option without an annual fee. Adding this card to your wallet is a strategic choice, as you can only expect 1% cash back unless you target its use to the rotating categories each year that give you 5% cash back. Yes, that’s two and a half times more than the Citi Double Cash Card. But the catch is that there is a limit ($1500 per three-month category). Thereafter, you’re only getting 1%. But used wisely, this card can net you much greater savings that most others.

Oh yes, did we mention that at the end of your first year they will match you dollar for dollar on all your cash back? Yep, they will. For example, if you earn $1000 in cash back during your first year, they will give you another $1000. This is a onetime deal, but considering the fact that it is an excellent card to begin with, it’s hard to go wrong with this card.

As mentioned earlier, staying vigilant is key to the successful use of this card. Set a reminder to know when the categories change each quarter. I personally carry this as one of my moneystretching weapons, and I (try) to use it for its full effectiveness.

Costco Anywhere Visa® by Citi

Continuing our tradition of choosing cards with no annual fee, Citi once again scores a winner. This card is absolutely killer for using at the gas pump. For the first $7000 a year you spend in gas, you will get 4% cash back. In the unlikely event that you spend more than that, you still get 1% thereafter. Based on this benefit alone, this card is an excellent tool for saving on the high price of fuel. Nevertheless, there is more. You get 3% cash back on restaurants and travel. And since it is affiliated with Costco, throw a 2% cash back there as well. Well, just for the heck of it, why not 1% on everything else? This card has an amazing array of savings.

A good strategy to use with the Costco Anywhere Visa by Citi would be to target gas purchases, restaurants, and travel, making this the perfect vacation card. This is supported by the fact that…well, vacations consist of allot of gas, restaurants and travel expenses! If you pair this card with one that offers a blanket 2% cash back for expenses that fall through the gaps, you will be taking the maximum benefit possible.

Wells Fargo Active Cash® Card

This card (with of course, no annual fee) is a very close competitor to the Citi Double Cash, as it offers an unlimited 2% cash back, no fees, and no rotating categories. Both cards are flexible in how you receive your rewards, even down to sending you a check in the mail. In fact, the only measurable difference is that the interest rate on the Wells Fargo Active Cash is a bit higher than on the Citi. So, if you are one of those who pay off your balance every month (and we highly recommend that you do) then you likely won’t be able to tell the difference between these two cards in practical use. Carrying a balance on this card can be more expensive, so it really comes down to discipline.

We don’t feel that one-time bonuses should be a major factor in deciding on a credit card that you will have to live with, but if that is important to you there is another difference between these two cards. For a limited time, Citi Double Cash is offering $200 cash back when you spend $1500 in the first 6 months after opening your account. Wells Fargo comes out on top here with $200 cash back after spending only $1000 after just 3 months. You might get your cash bonus sooner with the Wells Fargo Active Cash, but in the end, there is no real difference for many people. Ultimately, either card is an excellent unlimited, unrestricted 2% cash back option.

Alliant Cashback Visa® Signature Credit Card

For those of you who do not mind joining a credit union, there is one card that trumps them all. The Alliant Cashback Visa Signature card offers an amazing 2.5% cash back on all purchases, up to $10000 a month. For many people, that $10000 limit is more than adequate, and represents an unlimited bonus in most respects. If you are a high-volume spender, it gives you a generous ceiling to shoot for, with 1.5% cash back once you go beyond that lofty threshold. It is very rare to have unrestricted 2.5% cash back on a card to use on anything you like. However, there is the caveat about joining the credit union to receive these benefits.

However, as credit unions go, Alliant is not too shabby. With no minimum balance fees and a higher-than-average checking account interest rate of .25%, you could do much worse. One viable strategy is to use the cash back to fuel your checking or savings account with Alliant. Of course, with a minimum deposit of $25 to open the account, you could interpret that as a one-time $25 annual fee, but we wouldn’t hold that against you for taking advantage of this card!

Conclusion

This completes our roundup of the 5 best cards that we have found with no annual fees. There are allot of cards out there that do charge annual fees, and it is up to you to decide if they are worth it. Some of them offer crazy high cash back in particular categories, which may more than offset the annual fee. Ultimately, we like to keep it simple and leave those choices out of the discussion.

Remember, the key to maximizing your savings with credit cards is to use each of them for their strengths, and never carry a balance. If you have an arsenal of cards that are each the best at saving you in a particular category, then use them for that category. On any given day, using a high reward card for gas and another for the restaurant is a prudent strategy, and a well though out wallet can put you miles ahead of those that use cash. The money is there, free for the taking. Go ahead and take it and stretch it as far as you can!

If you enjoyed this content, consider sharing. Also, leave a comment. We would love to hear what you think!