Why You Should Have a 2% Cash Back Card

I'm a big proponent of cash back credit cards myself. I appreciate the opportunity to get my money back for purchases I would have otherwise made. Unlike many travel cards, cash back cards tend to be pretty straightforward. There's also a universal appeal - who can't spend more, right? And most cash back cards have no annual fee.

Especially with today's very high inflation rates, small discounts on anything you buy can add up. Last year I paid back over $1,700 in cash. There's one big exception: If you have a balance, you should prioritize your interest rate, since the average credit card interest rate is close to 20%. Focus on paying off debt at the lowest possible cost (possibly via a 0% debit card). Once you're done, you can search for rewards more aggressively.

What is the best credit card? It's hard to choose a basic no-annual-fee card that gives you 2% cash back on every purchase when you can avoid interest by paying off your credit card bill in full.

Examples include the Wells Fargo Active Cash® Card (get 2% cash back on purchases), the PayPal Cashback Mastercard®* and the Citi® Double Cash Card. (Technically, Citi Double Cash gives you 1% when you buy something, and another 1% when you cash out.)

I used to be afraid to give that answer. It's kind of boring, isn't it? I've mentioned flashier cards like the Chase Sapphire Reserve® and the Amex Platinum®. When I mention perks like airport lounge access and first-class upgrades, people nod. These are great cards - for some people.

But even with all the advantages and benefits, the truth is they are expensive. Most people can't or don't want to spend that much on a credit card ($550 or $695 a year, respectively).

Let's be honest, most of us don't travel enough to maximize the benefits anyway, especially as travel costs keep going up. In fact, according to a recent Bankrate poll, 37% of Americans said they decided not to take a vacation in 2022 because of the economic situation.

Multi-card strategy: If you're a maximizer and willing to use different cards for different purchases, you can earn over 2% cash back (or travel points/miles) on certain purchases. However, I think you should still base yourself on the 2% cash back card.
For example, I really like the Blue Cash Preferred® Card from American Express. 6% cash back at US supermarkets (up to $6,000 in annual spend, 1% thereafter). Cardholders can also earn 6 percent cash back on select U.S. streaming subscriptions and 3 percent back on U.S. gas station purchases and public transit. But other purchases only earn 1% cash back—that's where your 2% card comes in.
There are too many such examples. Find out where you spend the most money and rely on those categories (groceries, food, travel, gas, or other). Whatever it is, take it to the extreme. But since most cards with generous rewards tiers only offer 1% cash back on "everything else," your 2% cash back card is a great addition. avoid annual fees A great cash back card strategy can also help you avoid those costly annual fees and still earn a great rewards rate. For example, the Discover it® Miles card offers 1.5 miles per purchase and matches all miles earned within the first 12 months, with a 3% effective first year accrual rate. If you only use one card long term, I'd vote for cards like Wells Fargo Active Cash, Citi Double Cash, or PayPal Cashback Mastercard. If you're willing to accept some restrictions, such as if, for example, you're redeeming to a separate account at a specific financial institution, then the Fidelity® Rewards Visa Signature® Credit Card, TD Double Up℠ Credit Card, and SoFi Credit Card may be just what you need. final result Whether it's a card on hand with every purchase or part of a mix-and-match strategy, there's a nice spot in every wallet for a 2% no annual fee cash back card.

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