An Easy Way to Compare Credit Card Reward Programs

I always assumed the cash-back card to be a better value than the one passing out airline miles, but I never did a detailed analysis to confirm my suspicions.  For me it just made better sense to get a dividend check a couple times per year that I could put to use for whatever I wanted.

Since we always pay the card off in full at the end of the month, this is pure profit.  At a penny for every dollar I spend, the dividend isn’t much — but, hey, it’s free money!   And who doesn’t like free money?  ;-)

In 2008, we charged $21,089.93 on our dividend credit card.  That is an average of $1757.49 per month.  The charges resulted in dividend payments to us of $210.89 just for buying things on the card.   :-)

But what if I had chose airline miles instead?

With my particular card, I would have been entitled to 1 mile for each dollar spent.   At that rate it comes down to a trade between a $250 dividend check for a round-trip ticket to anywhere in the continental US, or a $400 dividend check for a round-trip ticket to Hawaii.   Of course the airlines would restrict the days and times I could use those tickets, assuming I could get them at all, but that’s life.  Right?  :-)

A recent check on a national travel website showed round-trip airfare from Los Angeles to Hawaii for as little as $374.   Based on this unscientific survey I would clearly be better off collecting the dividend miles than saving for a flight to Hawaii.

When it comes to cashing in miles for a trip within the continental US, this is not necessarily the case, as it all depends on the desired destination.  For example, at the time of this writing, the cheapest round-trip ticket from Los Angeles to Boston cost $414 — clearly a better deal than the $250 rebate.  Then again, trips could be had to many other parts of the country for less than $250.

Based on that observation, those of you who live near airline hub cities such as Dallas, Atlanta, Denver, and Salt Lake City may decide that the airline miles option would be less desirable because hub cities tend to have lower airfares.  It might not be a slam dunk rule of thumb, but it is worth considering.

For those who are considering applying for a new credit card but are not so inclined to do all of this analysis themselves, there is good news.  While surfing the net the other day I came across this handy credit card rewards comparison tool at CreditCardFlyers.com.

You simply enter a breakdown of your credit card spending habits and it returns a listing and complete description of the best rewards cards on the market.  After entering data such as how much money I charge per month, and estimating how I distributed that spending (e.g., how much I spent on groceries, how much I charged on gasoline, etc), it gave me a rated list of 17 different cards to compare.

For those who don’t want to break down their spending, it is sufficient to simply give your estimate of how much you charge per month.  Keep in mind, though, that this can affect the analysis because many cards give additional bonuses for buying groceries or gas, for example.

The resulting credit card summary separated the winners by the type of rewards offered, be it rebate, points, or miles.  It also provided an estimated first year payout for each of the cards.   The payouts included bonuses and other incentives for signing up.

CreditCardFlyers.com also includes comprehensive reviews on various credit card programs, including information on interest rates and annual fees, and a summary of credit card perks and benefits.  Although there are some low rated cards, the majority of the reviews seem to have a lot of 4.5- and 5-star ratings; still, all of the information is there for you to make an informed decision.

Hopefully, CreditCardFlyers.com will take a lot of the mystery out of deciding which credit card program is the right one for you.

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2 comments to An Easy Way to Compare Credit Card Reward Programs

  • One of the biggest pluses for me when it comes to cash back cards vs. airline cards is just the fact that I can simply cash my cash back check and be done with it instead of having to deal with the hassle of cashing in points and finding the best qualifying travel date, etc. I know that there are some people that swear by their airline credit cards (Tim Ferris from 4 Hour Workweek comes to mind) but I personally just really like the convenience of the cash back card (although it could also be that I do not travel as much as Tim that is for sure!)

    • I think cash is the only way to go, and it is also the only sure way to get reliable feedback regarding exactly just how much rewards I am actually getting. For example, with airline miles it is tough to correlate my rewards on a dollar-spent to dollar-earned ratio. That is not the case with cash back.

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