New survey puts credit cards to the test
October 04, 2012
If you avoid credit cards that carry an annual fee, you may be missing out on some of the best in the industry, according to a new analysis conducted by the Consumer Reports Money Lab.
The survey, which is featured in the November issue of Consumer Reports, looked at 53 credit cards and identified the best cash rewards, travel and balance transfer/low interest cards. The top cards chosen by the report suggest that consumers shouldn't avoid a card simply because it has an annual fee. Particularly for those who pay off their balances each month, the perks of some rewards credit cards outweigh their costs, the report found.
The report named its best three cards in each category. The results of the Money Lab analysis used the terms offered to those with high credit scores, so consumers may receive different terms based upon their credit history and other factors. In addition, credit card issuers may change program terms at any time.
Best cash-rewards credit cards
For credit cards that offer cash back, the analysis based its findings upon monthly spending that includes $400 on gas, $600 on groceries and $1,000 elsewhere. The following are the top three cards in the category:
- Blue Cash Preferred Card from American Express
- Fidelity Rewards American Express
- Capital One Cash Rewards
The top card in the category, Blue Cash Preferred Card from American Express, comes with a $75 annual fee, but the report also estimated it offers the potential to accumulate cash rewards of $770 over 12 months and $2,010 over three years. The rewards figures take into account upfront bonuses as well as the cost of the annual fee.
Top travel cards
To score travel cards, the report assumed the same monthly spending as with cash rewards cards. For travel cards, top rankings went to the following three cards:
- Chase Sapphire Preferred
- Blue Sky Preferred from American Express
- Capital One Venture Rewards
All three of the best travel cards charge an annual fee, although Chase and Capital One currently offer an introductory annual fee of $0 the first year. A no-annual fee version of each card is also available, but they pay lower rewards.
Rewards for Chase Sapphire Preferred, the highest in the category, were estimated at $850 for one year and $1,560 over a three-year period. However, frequent travelers may find travel cards come with other perks that offer value that can't be priced, such as priority boarding, access to member-only sky club lounges and expedited security clearance.
Best balance transfer cards
The analysis of balance transfer/low-interest cards measured the results of a $10,000 balance transfer and found the best cards came from these issuers:
- Slate from Chase
- Citi Diamond Preferred Card
- PenFed Promise Visa
For those who are able to pay off their balance quickly, the report indicated that the Chase Slate card offers the best value, with introductory offer of no interest for 15 months and introductory offer no balance transfer fee for transfers made within 60 days of the card's opening.
However, for those who could take two years or more to pay off their balance, the PenFed Promise Visa is a better value, according to the report. Although it lacks the 0 percent introductory rate of the Chase and Citi cards, the three-year cost of interest and fees is only $1,500, compared to $2,110 for the other two cards. Consumers must join the Pentagon Federal Credit Union before applying for the PenFed Promise Visa, but it's possible to do so through a number of means, which are detailed on PenFed's website at penfed.org.