You may think you’re pretty smart leaning on that debit card to avoid getting into massive credit card debt. But you're actually screwing yourself out of the sweet benefits of a rewards credit card—including cash back, free flights and hotel stays, and other perks—that are 100 percent free.
The trick here is to avoid cards with annual fees, like the Bank of America Premium Rewards card (for $95 a year) or the American Express Platinum (which costs a whopping $550 a year). While those cards have loads of perks, you’re starting from a deficit because you typically have to spend thousands of dollars before you can enjoy them.
The prospect of credit card debt may scare the crap out of you—possibly more than the grim reaper, according to this survey. But instead of letting terror take over, apply some logic to the situation. As long as you pay off your monthly balance in full and use a card with no annual fee, paying for purchases with a credit card actually saves you money—in some cases up to five percent off whatever you buy.
Just remember never to charge more than you can afford in the first place. That means setting a monthly limit on your purchases and only going over it if you’ve already got the money in the bank. To figure out how much you can afford, start tracking your expenses and see how much you typically spend each month. Credit cards also have better fraud protection than debit cards—another big money saver.
With that in mind, here are five credit cards with no annual fee that are worth looking into:
American Express Blue Cash Everyday earns three percent cash back on groceries, two percent for gas and retail purchases, and one percent on everything else. After you've spent $1,000, you also get gives you $150, provided you make the purchases in the first three months. To avoid the temptation to spend more money just to get the bonus, open the card right before you are already planning a big spend and charge it on your new plastic.
Capital One VentureOne, recommended by CreditCards.com senior industry analyst Matt Schulz, gives you 1.25 miles for every dollar you spend. You can also earn 20,000 miles if you spend $1,000 during the first three months of opening the card. Other perks include free rental car insurance, no transaction fees on foreign purchases, and extended warranties of items bought with the card.
Chase Freedom offers five percent (or $75) cash back on purchases up to $1,500 per quarter on rotating categories like groceries, gas, Lyft and more. From July through September, your five percent cash back applies to gas, Lyft and Walgreens purchases. Check here for the calendar. You get one percent cash back on everything else. Sweet.
Citi Double Cash, recommended by CreditCards.com, delivers one percent cash back when you make a purchase and one percent after pay for it, for a total of two percent back on everything. The card also lets you miss one payment without charging a late fee, but interest still accrues so be careful with that perk.
Discover It Cash Back, also recommended by CreditCards.com, earns five percent (or $75) cash back on up to $1,500 in purchases of gas, groceries, and other items each quarter. For July through September, that’s restaurants, but the categories rotate quarterly. You earn one percent cash back on everything else and Discover matches your earnings the first year.
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