Making financial cents of credit card rewards

Dan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

You've seen the plethora of credit cards rewards out there. Some give you cash back, others offer credit toward purchasing plane tickets.

But they're all the same. Right?

As one car rental credo famously says: Not exactly.

The Miles by Discover card (NYSE: DFS) gives its card holders one "mile" for each dollar spent for any purchase. You then get to redeem those miles when you reach a certain threshold. For instance, if you rack up $10,000 in charges, you get $100 in credit toward the purchase of a airplane ticket.

Not bad. But, not surprisingly, there are other options out there. You just get the money back a different way.

Chase (NYSE: JPM) offers a variety of cards, including its Freedom credit card. The upside is that you can earn 5 percent cash back. The downside: it only applies to certain purchases in a given quarter. For some, gasoline purchases are the quarterly feature. Other times, it's trips to the grocery store and hotel stays. But if you make a purchase and it doesn't fall into the quarterly promotion, you only get 1 percent cash back.

And just don't think publicly traded banks offer credit cards. There are plenty of other options out there.

In fact, Pentagon Federal Credit Union offers a Platinum Cash Rewards card that gives its members 5 percent back on all gas purchases and 0.25 percent on everything else. The latter is a pretty measly amount. But let's say you spend $10,000 and if $2,000 goes toward gasoline, over the course of a year you'd get back $132 as through the course of a year.

$2,000 may sound like a lot to spend in gas in a year's time. But spend just over $38 a week in gas and you're there. It adds up pretty quick, doesn't it?

So what's the better option for a credit card? If you like to convert your purchases into airplane tickets, you have one option. If you'd rather get the cash back through your statement -- and you like to charge all of your gasoline purchases -- you have another way to go.

Either way, you have options to reward you for your purchases. Just choose one that's going to be the best fit for your lifestyle -- and your wallet.


news423 has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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