Except rewards redeemable only at specific places (airline miles or hotel points), 2% cash back seems to be the high watermark for credit card rewards on “everything else” spending outside special categories. If you are not earning 2% cash back on your “everything else” spending, you are not getting the most out of your rewards cards.
2% cash back is also the point many cards fail to sustain over time. The most visible failure is probably the Schwab Visa. Schwab gave up on it after a year and half. More recently there was a Sallie Mae card that didn’t even last a year at 2%.
Currently there are two no-annual-fee 2% cash back cards: Fidelity American Express and Priceline Rewards Visa. Because I use an American Express card for grocery and gas, I want my catch-all card on a different network (not all places take American Express). Nobody knows how long Priceline Rewards Visa will stay at 2%.
Two other 2% cash back rewards cards more likely have staying power: Escape by Discover and Capital One Venture. Both give rewards in “miles” but these miles are really just points that directly translate into dollars. The miles don’t transfer to any airline programs. There isn’t a “fixed number of miles per ticket” redemption option as airlines do with 25,000 miles = 1 domestic round-trip ticket. The miles are redeemable for gift cards and statement credit against travel purchases at a miles-to-dollars ratio.
Besides redeeming for statement credit at 100 miles = $1 against a travel expense, the miles can also be redeemed at 100 miles = $1 for buying at Amazon. Given the large selection of items and good prices at Amazon, that’s almost like cash and you don’t need that many miles before you get a reward.
The card comes with primary car rental insurance. This is quite unique. The car rental insurance on other cards are secondary, which means it only pays the deductible on your auto insurance. You still have to file a claim with your own insurance for the rest, which may increase your insurance premium down the road. Primary car rental insurance is much better than secondary.
The card also offers trip cancellation insurance for illness and injury and trip delay insurance for weather and airline equipment problems. That’s also very nice.
All Discover cards offer the Money Messenger service, which you can use to pay another person electronically at no fee to both you and the recipient. You actually earn rewards on it.
All Discover cards have the one-time credit card number generator. This makes online shopping safer because you are not giving out your real card number.
Capital One Venture is a Visa Signature card. It also gives 2 miles per $1 charged. Similar to Escape By Discover, the Capital One Venture card also has a $59 annual fee but it’s waived in the first year. You get a bonus of 10,000 miles worth $100 after spending $1,000 in the first 3 months.
Redeeming the miles is at the same 100 miles = $1 statement credit ratio against travel purchases but it’s all-or-nothing. If your travel charge is $500, you will need 50,000 miles. You can’t just redeem 20,000 miles against a $500 charge. There are options for gift cards though.
Capital One’s claim to fame is its “no foreign transaction fee” policy although the actual benefit depends on how much you really charge in foreign countries. I rarely use credit cards overseas. I just withdraw cash from ATMs and spend cash.
Winner: Escape By Discover
The annual fee and the slight friction in redeeming rewards make Escape By Discover and Capital One Venture more likely to stand the test of time for 2% rewards on “everything else” spending.
Between these two similar 2% cash back cards, I would choose Escape by Discover. It has better features.
Redeeming rewards from Escape by Discover in small increments for Amazon purchases just makes it so much easier than redeeming for statement credit against large infrequent travel purchases. Primary car rental insurance, trip cancellation insurance, trip delay insurance, Money Messenger person-to-person payments, and one-time card numbers offered by Escape by Discover are all very valuable.
Capital One Venture on the other hand has more places accepting it because it’s a Visa card. Discover is accepted by more merchants than American Express but not as many as Visa or MasterCard. Capital One Venture also has the benefit of no foreign transaction fee if you charge a lot overseas.
If I didn’t already have Priceline Rewards Visa, I would go with Escape by Discover. I don’t know how long Priceline Rewards Visa will stay at 2%. If Priceline Rewards Visa ever stops giving 2% rewards, I will get Escape by Discover.
Some links are referral links. If you use them to apply for a card they will pay me a referral fee but you are not getting any less than if you go to them directly.
[Photo credit: Flickr user wonderwebby]