In a typical world, many a credit cardholder enjoys using hard-earned credit card points for travel rewards. But today’s COVID-19 world is anything but typical!
Unfortunately, most elite credit cards offer terrible cash back options, effectively strong-arming cardmembers into using points for travel rewards. But notice we said most and not all! Thankfully, there are still premium cards for those who prefer to redeem points for cash back without having to compromise on the benefits and services of a top-notch credit card.
Let’s say you spend $200,000 per year on your credit card and want to cash out your points at the end of the year. Depending on which card you use, you’ll bank as much as $4,000 and as low as $1000 come year’s close. Here, we examine the various cash back options for today’s luxury credit cards to see how they stack up in a time when, once again, cash is king.
What is a typical cash back rate in the premium credit card market?
1% cash back is the most common rate in the luxury credit card market, a redemption value offered by Chase Sapphire Preferred®, Chase Sapphire Reserve®, Mastercard® Titanium Card™, and U.S. Bank Altitude Reserve Visa Infinite® Card.
Cash back on the Chase cards and the MasterCard Titanium Card can be redeemed in the form of a statement credit or direct deposit to a checking account while the U.S. Bank card’s cash back must be redeemed as a statement credit. At 1%, 200,000 points equates to $2000.
Are there elite credit cards with good cash back rates?
Indeed, there are. The Mastercard® Gold Card™ is the clear frontrunner for cash back redemption value in the elite credit card market. Points are redeemed at a value of 2% and cashed out in the form of a statement credit or direct deposit to a checking account. Going off our previous example, you spend 200,000 per year and earn 200,000 points. A 200,000-point redemption with this card equates to $4,000 cash back. Compared to its principal highest-of-high-end competitors, this is double the redemption value of the Chase Sapphire Reserve and more than 3 times that of The Platinum Card® from American Express.
In second place is the Mastercard® Black Card™, which allows points to be redeemed at a value of 1.5% and cashed out in the form of a statement credit or direct deposit to a checking account. In this case, 200,000 points equates to $3000 cash back. Compared to its principal competitors in the affluent market, this is 1.5 times the redemption value of the Chase Sapphire Preferred, more than double that offered by The Platinum Card from American Express and the American Express Gold Card, and triple that of the Citi Prestige® Card.
Which cards are no-go’s for cash back on credit card purchases?
American Express’ Membership Rewards® are great for many things, but cash back isn’t one of them. American Express’ Platinum and Gold cards offer the option of statement credits in the form of purchase erasers at a value of 0.6 on your Membership Rewards points. At this 0.6% cash back redemption rate, 200,000 points translates to a purchase eraser of just $1200.
Even worse is the Citi Prestige Card, which returns just a half-percent when opting for a statement credit. Erasing a $50 purchase of your choice requires 10,000 Citi ThankYou® Rewards. At this 0.5% cash back redemption rate, 200,000 points translates to a value of $1000. Ouch!
In normal times, depending on how much you value some of these cards’ other perks and the rate of return on travel rewards, it may be worth it to forgo a few grand. However, many of these premium benefits are currently restricted or nonexistent. Access to The Centurion Lounge airport lounge network with The Platinum Card by American Express? Not happening during social distancing. Bonus points for travel and restaurant purchases with the Chase Sapphire cards? Nobody’s booking travel or eating lavish restaurant meals right now.
All this to say, if you’re looking to keep the perks of a top card (e.g., concierge services, prestige, implicit insurances) but want the most risk-averse return on your points, it may be time to reconsider what’s in your wallet.