With their outsized sign-up bonuses and enticements of exotic trips, travel-rewards credit cards have gotten more than their fair share of consumers' attention in recent years. Indeed, it sometimes seems as though loyalty points are the only rewards on offer from credit-card issuers.
In fact, points are not the only reward available from credit cards. More importantly, they may not even be the most rewarding credit-card rewards. The right cash-rebate card can deliver a better return-on-investment and a significantly more hassle-free experience as well.
Miles vs. Money
The typical travel-rewards card awards one point per $1 spent, plus a bonus for select categories of spend. For example, the Citi / AAdvantage Platinum Select World Elite MasterCard awards one mile per $1 for most charges, and two miles per $1 for purchases of American Airlines products or services. (Disclosure: Citi is an Airfarewatchdog advertiser.)
And when redeemed for travel, miles or points are generally worth between 1 and 2 cents apiece, and closer to the former than the latter.
So in the end, the great majority of consumers earn a decidedly modest return on their rewards points of just over 1 percent.
Sure, it's possible to squeeze better value from travel cards—for example, by taking advantage of periodic category bonuses to increase earning, and using points for discounted award flights—and some people do. But most consumers aren't inclined to make an obsession of maximizing the value of their credit-card rewards.
Such calculations treat points like money, which is misleading. While it's become commonplace to refer to frequent-flyer miles as currencies, they lack some of currency's core characteristics. For one thing, they can't be readily combined or converted into other currencies. And for another, their range of high-value redemption options is limited to travel. (Just try redeeming points for consumer electronics or other non-travel awards and you'll see.) Neither of those constraints applies to cash.
So, what if you could earn a reliable 2 percent rebate in cash instead of points that amounted to an effective rebate of just over 1 percent? Here are two cards that allow you to do just that.
Citi Double Cash Card
The Citi Double Cash Card's name and advertising promise 1 percent cash back on purchases, and an additional 1 percent when the purchases are paid for. Marketing gimmickry aside, cardholders get 2 percent cash back, on all purchases, with no limit. And there's no annual fee.
For all of those reasons, this has become the card-to-beat when it comes to cash rebates.
Fidelity Rewards Visa Signature Credit Card
Like the Citi Double Cash Card, the Fidelity Rewards Visa Signature Credit Card delivers a 2 percent cash rebate on all purchases, with no cap on earnings, and no annual fee.
What may be a deal-killer for some consumers is the Fidelity link: The cash awards must be deposited into a Fidelity brokerage, retirement, or cash-management account. That's fine for anyone who already has a relationship with Fidelity, especially if their financial focus is on investing or retirement saving. For others, it'll be a high hurdle.
Neither of the above cards comes with an outsized new member bonus, as many travel-rewards cards do. In fact, they come with no new member bonuses at all. So they lack the short-term sizzle of cards that offer 50,000 points or more for new cardholders. But these cash-back cards will prove their worth over the long term, with a solid return on everyday spending.
Editor's Note: This content is not provided by any bank, credit card issuer, airline, or hotel chain. Any opinions, analyses, reviews or recommendations expressed here are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by the aforementioned entities.