The 15 most rewarding credit cards

With the right cards, you can earn good rebates or free travel, or add money to a savings account. But which cards get you the most freebies? Here’s a list from the experts.

The thrill of a credit card rewards program is so fleeting.

Yes, it’s wonderful to get free stuff — travel, cash back, money for college — just by using your credit card.

But with so many rewards programs out there, it’s hard not to second-guess your choice. Have you got the best card? Are you using it to its best advantage? Could you get more from a different one?

I could comfort you by repeating the usual advice that there is no single best card for everyone, that the right card for you depends on the kind of rewards you want and how much you charge, yadda yadda yadda.

But the fact is that some rewards programs are better — much better — than others.

To sniff out the best ones, I asked five credit card industry experts — Curtis Arnold of CardRatings.com, Bill Hardekopf of LowCards.com, Ron Lieber of FiLife, Justin McHenry of IndexCreditCards.com and Ben Woolsey of CreditCards.com — and frequent-flier guru Randy Petersen of WebFlyer to nominate their favorite plastic in three rewards categories:

Travel programs. These generally offer the richest returns but only if you get the right card and know how to use it. If you’re an infrequent traveler or not looking for upgrades, a different card might be a better fit.

Cash-back programs. These are a good, simple choice for many, and the best rebate 1.5% or more of your purchases.

Savings programs. This category encompasses a variety of cards that help you put aside money in an investment plan, pay down your mortgage or get discounts on major purchases such as cars.

I also asked the experts to reveal which cards they use for their own spending. Interestingly, two of the six were taking advantage of special offers not widely available to the public — as if you needed anything more to fuel your paranoia that you weren’t getting the best deals. More on that here.

I broke the results down into winners, runners-up and worthy alternatives. In each case, the winner and the runner-up are almost interchangeable; either choice will put you in good stead. The alternatives aren’t exactly also-rans, but they typically trail the best in the ease of earning or redeeming rewards.

And the winners are:

Travel
The winner: Starwood American Express.

The runner-up: Diners Club MasterCard.

Worthy alternatives: American Airlines AAdvantage MasterCard, United Mileage Plus Visa, Choice Privileges Visa, Citi PremierPass Elite MasterCard.

Starwood is a hotel company that runs the Sheraton, W and Westin chains, among others, but its branded credit card gives you a lot more options for redeeming points than just hotel stays. That array of options, plus a better-than-average “earn” rate, is what propels it to the top of the heap.

What travelers love about the Starwood card is that you can dump your rewards into most airlines’ frequent-flier plans and do so at a good exchange rate. That means you’re not tied to one airline for free tickets and upgrades, or stuck with the weird routes, lack of upgrades and limits on ticket value that come with some non-airline travel-rewards programs.

Video: The coolest credit card perks

You earn one “Starpoint” for each dollar spent (and you get 10,000 points for signing up). The $30 annual fee is waived for the first year. Every time you convert 20,000 points into airline miles, you get a 5,000-point bonus, “which means you’re really earning 1.25 miles per dollar on most every carrier, better earning than any other card,” WebFlyer’s Petersen said.

You can, of course, redeem your points for Starwood hotel rooms across the globe, with a redemption rate that typically translates into 2 to 4 cents per point, an enviable exchange rate for any rewards program.

There are two main drawbacks to the card:

This is not the card to use for flying United. That airline requires you to give up two Starpoints for every frequent-flier mile, which makes the airline’s own co-branded card a better bet for dedicated United fliers.

This is not a card that’s accepted everywhere. Visa and MasterCard are accepted by more than 6 million merchants each, American Express by about 4 million.

If you want a flexible travel program without the acceptance issue, pick Diners Club. Now that the card has partnered with MasterCard, it’s accepted virtually everywhere you can use a credit card.

With Diners Club, you earn one point per dollar spent, and each point translates into one frequent-flier mile that can be used in any of 21 airline programs. Or you can choose to allocate your points to one of seven hotel frequent-guest programs, including those run by Hilton, Marriott and Starwood. You also can use your points to pay for travel expenses, including flights on any airline or rooms in any hotel, that have been charged to your Diners Club card.

The real kicker, for Petersen anyway, is that Diners Club offers primary insurance coverage on rental cars. Most other cards give you coverage that kicks in only after your own insurance carrier has paid most of the bill; with Diners Club, your insurer doesn’t even have to know if you’ve had an accident. The annual fee is $95, steep for today’s rewards cards, but one that’s generally offset by sign-up bonuses and the richness of the program.

Continued: Cash-back and savings cards

Cash back
The winner: American Express Blue Cash.

The runner-up: Chase Freedom Visa.

Worthy alternatives: Citi Professional Cash MasterCard, Discover Motiva.

American Express Blue Cash leads the pack with its 5% rebate on “everyday purchases” at supermarkets, gas stations and drugstores, and its 1.5% rebate everywhere else. Unlike many other cash-back cards, there is no cap on the rebates you can earn. The trick is that you have to spend at least $6,500 annually to get this rate of return; until you hit that magic level, your rebate is 1% on “everyday” purchases and 0.5% on everything else. Given normal spending patterns, you’d probably have to charge $2,500 a month before the card made more financial sense than its fellow top picks. But for big card users, that could happen.

If you’re not a big spender, though, check out the Chase Freedom Card, which allows you to automatically earn 3% back on purchases in the three categories where you spend the most each month, plus 1% everywhere else.

Video: The coolest credit card perks

“If this month you happen to spend more heavily at grocery stores, fast-food restaurants and the dry cleaners, your 3% rebate will come off those,” explains McHenry, of IndexCreditCards.com. “If next month your heavier spending is at gas stations, local utilities and the vet’s office, those purchases would get the 3% rebate, plus the 1% back on any purchases that didn’t fall into your top purchasing categories.”

In addition, said CardRatings.com’s Arnold, you can redeem every $200 you earn in awards for a $250 check. That $50 bonus makes for a 1.25% redemption rate.

Savings
The winner: Fidelity Investments 529 College Rewards American Express.

The runner-up: Citi UPromise MasterCard.

Worthy alternatives: Citi Home Rebate Platinum Select MasterCard, GM Flexible Earnings MasterCard, NestEggz Visa.

The best cards in this category are aimed at those who are saving for a child’s college education.

With 1.5% rebates, the Fidelity card is an excellent supplement for anyone with a Fidelity-managed 529 college savings plan. According to LowCards.com’s Hardekopf, you earn 1.5 points per $100 spent on retail purchases. One point is equal to one Fidelity 529 dollar, and points are automatically deposited into the Fidelity-managed 529 plan each time 50 points are accrued. There’s no annual fee, and the card has a 0% introductory rate for the first year.

An alternative, McHenry said, is Citi’s Upromise card, which offers 1% rebates on all spending, plus bigger rebates on some gas and grocery purchases. The card is affiliated with the free Upromise service, which offers rebates of 1% to 25% on purchases from partner merchants and companies.

“Using the card allows you to double up, getting rebates on the purchase via Upromise partner retailers and also getting the 1% rebate from the card,” McHenry said.

Your accumulated rebates can be deposited into one of 13 affiliated 529 college plans or used to pay down student loans.

If you don’t have kids but you do have a mortgage, check out the Citi Home Rebate card. According to CreditCards.com’s Woolsey, it offers a 6% rebate on utilities, cable or satellite TV service, Internet connections and telecommunications bills for six months, plus 1% for all other purchases. The rebate is applied automatically to your mortgage principal each year, and the program works with any mortgage. There is no cap or limit on the rebates you can accumulate, but the rate drops to 1% for all purchases after the first six months.

Another alternative: the NestEggz Visa, which works like the Upromise card but deposits your 1% rebate into the retirement account of your choice.

Or, if you’ll be in the market for a new car, consider the GM Flexible Earnings card. Your 1% cash-back rebate can be applied to any new-vehicle purchase, but your rewards are tripled if you use them for an eligible GM vehicle.

The fine print
Before you apply for any of these, though, there are some basics you need to know about rewards cards:

They’re for “deadbeats.” “Deadbeat” is the credit card industry’s code word for people who pay their balances in full every month. If you carry a balance, you need to bypass rewards cards, which typically have high interest rates, and seek out the lowest-rate card you can find. Once you’re in the habit of paying off your balance every month, you can switch to a rewards card.

The deals change constantly. The better the rewards program, the more likely it is to get watered down over time. Credit card issuers will change how fast you earn rewards and how you’re able to redeem them. Airlines will ratchet up how many miles you need for free tickets or upgrades. Last year, many hotels increased the number of points needed for free rooms, in some cases by as much as 30%. If you get a rewards card, you should monitor the program for changes; consider signing up for its e-mail newsletter and periodically visiting its Web site. Also, periodically check out the sites run by our experts — CardRatings.com, LowCards.com, FiLife, IndexCreditCards.com, CreditCards.com and WebFlyer.com — to see if a better deal has emerged.

Watch your scores. Applying for any new credit account can ding your credit scores, and the damage increases the more cards you add to your wallet. Don’t apply for new cards if you’re in the market for a major loan such as a mortgage or auto loans. Instead, wait until the loan closes before you get more plastic.