The Secret Behind Credit Cards with Tiered Rewards Programs | CreditShout

The Secret Behind Credit Cards with Tiered Rewards Programs

By Dawn Allcot / September 16, 2010

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What you see isn't always what you get with credit card rewards programs. That's why it's so important to always read the fine print and terms and conditions when you select a credit card, peruse review sites like CreditShout.com, and talk to other users.

Many users rank the American Express Blue Cash card as the number one cash back rewards card on the market. It offers 5% cash back, with no limit, on gas, grocery and drugstore purchases, and up to 1.5% back on all other purchases.

But there is a catch. You earn 1% on gas, groceries, and drugstore purchases and 1/2% on everything else until you spend $6,500 for the calendar year... then you'll begin to receive your 5% cash back rewards on for gas, groceries and drugstore purchases, and 1.5% on all other purchases.

Doing the Math with the American Express Blue Cash Card

When you do the math, $6,500 for the year adds up to about $540 per month. But, ideally, you want to reach the 5% tier long before the end of the year to make this card worthwhile. Otherwise, you might be better off considering a card like Discover More or Chase Freedom, which offers 5% cash back in rotating categories.

The people at Creditcardforum did the more complicated math for us, and tell us that the American Express Blue Cash card makes sense if you charge approximately $1,500 per month on the card. At that point, you'll reach the $6,500 minimum long before the mid-point of the calendar year and your rewards will average out to a far better percentage than any other card on the market.

If you spend about $100 per week on groceries (the national average), you can reach $1,600 per month on groceries alone. If you have a few prescriptions that you refill monthly, your spendings -- and rewards -- will really add up fast.

If you are a family with two cars, and each driver spends $50 per week on gas, you've easily doubled the $1,500 per month you want to earn. You'll reach your 5% rewards tier in just two months and begin earning 5% cash back on all those groceries, gas and drug store purchases.

Making Choices About a Cash Back Rewards Card

Shopping for a cash back rewards credit card can get confusing, especially with cards offering bonus rewards for specific purchase categories that change each month, tiered rewards programs and more.

When you're shopping around for rewards cards, it makes sense to look at your spending habits, how you use your credit cards, and how much you charge per month before making a decision.

The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone.Additionally, the opinions of the commenters are not necessarily the opinions of this site

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