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Cash Back Programs: Which Credit Card Should You Choose?

Monday, May 9th, 2011
Q: My credit card issuer changed the terms of my cash back rewards card program, so I’m looking for a better alternative. What cards offer the most generous cash back rewards?

A: These days, cash back is the most popular type of credit card reward program, and consumer advocates agree they’re typically the most generous. With cash back rewards, cardholders generally earn 1% to 5% on every purchase. The reason these programs are particularly generous is that these days, a number of card issuers are offering sign-up bonuses to attract new customers (although cardholders need to spend a certain amount of money using the card before the bonus is paid).

J.P. Morgan Chase & Co.’s Chase Freedom Visa card is among the most generous of all cash back reward cards. The card offers $100 cash back for cardholders who spend $500 within 3 months of opening a new account. It pays 1% cash back on all purchases, and cardholders can earn a total of 5% cash back every quarter for spending money in certain “bonus categories” (this quarter, the categories are home improvement, lawn and garden, and home furnishings). You can even earn an additional 10% on purchases if you shop for them online through Chase’s retail member network.

The Freedom card has a 0% introductory annual percentage rate (APR) for the first year on balance transfers made during the first 30 days the account is open. There’s also a trial 0% rate on purchases for the first 6 months. After that, both rates have a variable APR of 11.99% to 22.99%. For those who need to transfer balances, the card does have one big drawback: A fee of 3% of the balance transferred.

For those with large balances to transfer, a slightly less rewarding cash back program comes with a definite advantage—an unusually generous 0% APR trial period. With the Citi Dividend Platinum Select card, cardholders pay 0% APR for 15 months on both purchases and balance transfers. (After that, both rates have a variable 12.99% to 20.99% APR.) The program also offers a $100 sign-up bonus and, like the Chase card, cardholders must spend $500 within the first 3 months.

Cardholders earn 2% cash back on purchases for the first 6 months, and then 1% thereafter. Like Citi, it also has a special program that offers 5% on purchases made in certain categories, as well as purchases made with City’s retail partners. Rather than charge a fee, the card pays $5 out cash back on balance transfers of $1500 or more.

No matter which rewards card you choose, remember that the biggest drawback to these types of programs is that they tend to charge higher-than-average APRs, so unless you want to end up paying for your rewards in the form of high finance charges, make an effort to pay the card’s balance in full every month.

Do you have a personal finance or financial planning question? Email me at tcullen@hcplive.com and I’ll answer them for you and we’ll post answers (with no personal information) here at “On the Money.” Or you can leave a comment for your colleagues. You can also sign up for Physician’s Money Digest’s weekly eDigest email of money articles relevant to today’s health care professionals at www.physiciansmoneydigest.com/signup.
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Terri Cullen, Managing Editor, Physician's Money Digest
Blog Description
This financial expert blogs on financial information, advice, and news you can use.
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ABOUT TERRI CULLEN, Managing Editor, Physician's Money Digest

When Physician's Money Digest launched as a monthly print publication in 1994, the United States was powering out of its last recession, the economy was growing at a healthy 4% clip and unemployment was at its lowest levels of the decade. But Healthcare Reform under then-President Bill Clinton had just belly-flopped spectacularly, and doctors were fuming that legislators had failed to fix the flawed Medicare physician payment formula or nationwide medical liability reform.

Flash forward to today: The economy is struggling to claw its way out of the deepest recession since the Great Depression, and long-term unemployment is a record levels. But health care reform under the Obama administration passed with great fanfare--yet we're still are no closer to fixing the flawed Medicare physician payment formula or nationwide medical liability reform nor have we addressed reimbursement issues for pharmacists.

In my 13 years as a senior editor and columnist for The Wall Street Journal Online, I witnessed entire industries adapt and change in response to advances in technology and the changing global economy. But rarely have I seen a profession undergo such a dramatic reversal in fortunes in such a short amount of time.

The tough decisions law makers continue to put off until tomorrow are today causing an alarming number of doctors--and other health care professionals--to put off retirement, close or limit their practices, or eschew primary care as a profession entirely. In addition to providing customized personal finance and financial planning advice, this new blog for Pharmacy Times will cover financial topics of concern to all pharmacists as well--and I will answer specific questions from pharmacists as they plan their personal financial futures.

Now, more than ever, all health care professionals need to focus on their financial health, and this includes pharmacists from every segment of the profession. As Managing Editor of Physician's Money Digest, I remain committed to bringing readers the latest in-depth news, personal financial advice, and investing information that directly impact your practice and your pocketbook. Please continue reading here for financial information that will help you in your personal and professional life.
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