Before more stores switch to giving discounts for using debit, buying with a rewards credit card still lowers the net price.
Outside airline and hotel rewards cards which redeem for a specific airline or hotel chain, very few cards give 2% rewards on every purchase. The short list of cards that are still taking new applications includes Fidelity AmEx and Capital One Venture. That’s about it.
Now comes a card that pays more than 2% on everything. It’s called Barclaycard Arrival™ World MasterCard®. The catch is that to get the best redemption you have to redeem against travel expenses — airlines, hotels, rental car, etc. It’s not a big deal. We have those expenses anyway.
Similar to Capital One Venture, it calls the rewards “miles” but they are really just points redeemable for a statement credit against a travel charge. Every $1 spent earns 2 miles. There is no cap on how much you can earn or any special categories you have to keep track of. 2 miles for $1 spent is on everything, every day.
2,500 miles are good for a $25 statement credit against travel expenses. You don’t have to use any specific airline or hotel. You don’t have to book the travel through any specific travel agency or website. You don’t have to wait until you have enough miles to cover 100% of the travel expense. After you redeem for statement credit against a travel expense, you get 10% of the miles credited back. With the credit-back, a $100 statement credit only costs 9,000 miles, which you earned with $4,500 worth of spending. $100 / $4,500 = 2.22%.
There is a $89 annual fee, which is waived the first year. If you spend $3,000 within 90 days after you open the account, you get 40,000 bonus miles. The 40,000 bonus miles are worth $444. Redeeming 40,000 miles gets $400 statement credit plus 4,000 miles credited back; redeeming 4,000 miles gets another $40 statement credit plus 400 miles credited back, … That $444 worth of statement credit will pay the annual fee for another 5 years.
In addition to the usual rental car insurance, extended warranty, etc. this card also offers no foreign transaction fee, Price Protection, trip cancellation and trip interruption benefits.
2.22% rewards on everything, every day, effectively fee-free for 6 years is the best deal. 6 years down the road there may be something else better. You can get a similar signup bonus from other cards but those don’t give you 2.22% rewards. This one is a keeper.
If you are dead against an annual fee even though the signup bonus covers it for 6 years, there is also a no annual fee version, but that one only gives you 2% reward on travel and dining, not on everything. It still works as a good travel card because there’s no foreign transaction fee.
Barclaycard Arrival™ World MasterCard® beats the other 2% rewards cards with 11% more rewards on every purchase. Being a MasterCard it’s also accepted at more places than Fidelity AmEx. To me, the extra 11% in rewards is worth limiting redemption to travel expenses.
Links are referral links. If you use the link to apply for a card Barclays Bank will pay me a referral fee but you are not getting any less than if you go to them directly.
[Photo credit: Flickr user Local Play]