A Review of Consumer Reports’ Tool For Calculating Credit Card Rewards

Choosing the right rewards credit card is no easy task. First, you have to determine how much you spend each month, categorize your spending, and then sift through all the information out there to find the card that will give you the most bang for your buck. Fortunately, Consumer Reports has come up with a solution to this problem. Its Credit Card Adviser Comparison Tool uses your monthly spending habits to match you with the best rewards credit card — one that will give you the most cash back.

The main feature of Consumer Reports’ Credit Card Adviser Tool is the ability to customize your recommendations based on your monthly spending. The tool lets you break down your spending into five categories: Gas, Groceries, Restaurants, Travel, and Everything Else. The tool then calculates how much cash back you earn over the first year and the first three years, utilizing the categories from over 50 different rewards cards.

Let’s take a look at the top credit card recommendations based on three different budgets.

Budget 1: Carless and a Low Spender

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The first example is actually based on my budget. I don’t own a car and have minimal expenses aside from monthly bills and occasional eating out or travel. With this low monthly spending, it can be difficult to get a lot of cash back from a credit card. This is why I’m always looking for creative ways to maximize my cash back rewards.

In addition to finding ways to get more cash back rewards with your current spending, having the best credit card for your spending habits is half the battle. The Consumer Reports’ Credit Card Adviser Comparison Tool recommends these three top credit cards for someone with my monthly expenditures:

MasterCard – Titanium Card

  • 1% cash back on all purchases
  • $500 sign up bonus when you spend $1,000 in the first three months
  • $195 annual fee

American Express Blue Cash Preferred

  • 1% cash back on all purchases; 3% cash back on gas; 6% cash back for first $6,000 spent on groceries and then 1% on grocery purchases
  • $150 sign up bonus when you spend $1,000 in the first three months
  • $75 annual fee
  • Read more about this card here

Chase Freedom

  • 1% cash back on all purchases; rotating quarterly cash back rewards
  • $150 sign up bonus when you spend $500 in the first three months
  • No annual fee
  • Read more about this card here

Budget 2: Frequent Driver and Diner

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The average American spends about $2,000 per year, or $167 per month, on car fuel and on average $150 to $175 per month on dining out. Let’s say you drive and eat out a little more often than the average person, spending about $400 per month in each category. Here are the top three credit cards that Consumer Reports’ tool would recommend for you:

MasterCard – Titanium Card

  • 1% cash back on all purchases
  • $500 sign up bonus when you spend $1,000 in the first three months
  • $195 annual fee

PenFed Platinum Cash Rewards Plus Visa

Budget 3: Frequent Traveler

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Those who travel often are in luck when it comes to credit card rewards. There are plenty of programs that reward frequently travelers. Let’s say you’re someone whose expenses are pretty typical outside of travel. When it comes to travel, assume you spend about $1,000 per month between flights, hotels, and other travel-related items. Here are the top three credit cards the Adviser Comparison Tool would recommend for you:

Chase Sapphire Preferred

  • 1% cash back on all purchases; 2% cash back on travel; 2% cash back at restaurants
  • $500 sign up bonus when you spend $4,000 in the first three months
  • $95 annual fee, waived in the first year
  • Read more about this card here

Discover It Miles

MasterCard – Titanium Card

  • 1% cash back on all purchases
  • $500 sign up bonus when you spend $1,000 in the first three months
  • $195 annual fee

Pros

The main advantage of this tool is the ease of use, and the website is very user-friendly. All you have to do is input numbers and watch the tool go to work, churning out calculations for how much cash back you would earn in one year and in three years. As you change the values, the list of recommended credit cards will update in real time.

Another advantage of the tool is the fact that you can use it as a forecasting mechanism. For example, if you are planning on traveling more in the upcoming year, you can browse the recommended credit cards to see which ones would offer the most rewards. You can sort the recommended credit cards in alphabetical order as well and use the tool just to browse the offers that are out there.

Cons

The main disadvantage of this tool is the calculation limitation. Currently, the tool only shows cash back rewards. For credit cards that offer rewards in the form of miles or points, the tool converts those miles and points into a cash equivalent. Since the value of miles and points can vary so much, not being able to view the actual rewards is a disadvantage. The tool’s cash equivalent may not necessarily be the exact value you would get.

Another disadvantage of the tool is that the database of credit cards compared is not fully inclusive. For example, a few credit cards not currently listed in the tool include: Chase Freedom Unlimited, Capital One Venture Rewards, and Discover It® Cashback Match. Not having these key credit cards in the tool means that you could be missing out on an opportunity to get a card that offers you maximum rewards.

Wrapping Up

The concept of the Consumer Reports’ Credit Card Adviser Comparison Tool is one that is much needed in the personal finance world today. It isn’t perfect and could use some tweaking before I give it my full recommendation, though.

The good thing about this tool is how easy it is to predict the rewards you would receive based on your monthly spending. However, the fact that miles and points rewards are converted to cash equivalents leaves the end user with a lot more to consider. Will you redeem all of the points or miles in a given year to realize the cash equivalent? Are you better off getting a strictly cash back card to earn more money?

The Consumer Reports’ Credit Card Adviser Comparison Tool is a step in the right direction. I imagine that over time, it will become more robust and cater to the end users’ needs even more.

What do you think of this tool? Would you use it?


Ally CashBack Credit Card Review

In an exciting move, Ally Bank has introduced its very first credit card: the Ally CashBack. This new rewards-earner offers something for everyone and makes a good competitor when stacked against other cash back cards, right off the bat.

Before establishing their inaugural credit card, Ally Bank conducted a series of surveys to find out exactly what the market sought. Their findings?

Of credit card-users surveyed, 58% said they preferred a cash back option over travel rewards, gift cards, or even introductory interest rates. On top of that, 80% of respondents said that if rewards were earned, they would prefer to hold various financial products — such as loans, checking/savings accounts, and credit cards — with the same bank, rather than spread them out.

Ally took this information and created the Ally CashBack, which I expect to hold its own among other cash back offers out there. Here is a bit more about the card:

The Rewards

In an attempt to be beneficial to all cardholders, Ally eliminated rotating categories and gave its highest cash back rate (2%) to the categories that apply to pretty much everyone: gas and groceries.

While there are cards that offer higher percentages for either category, they are often rotating (such as 5% back with Discover it® and Chase Freedom® during those promotional quarters). The exception would be my personal favorite, the American Express Blue Cash Preferred — which offers up to 6% on groceries and 3% on gas — though that card also includes an annual fee.

For all purchases not involving gas or groceries, the Ally CashBack card gives 1% back. There is no limit on rewards and they do not expire as long as your account is in good standing.

Bonus — If you’re a customer with the bank, you’ll receive an additional 10% cash back when you deposit your rewards into an Ally non-IRA Online Savings, Interest Checking, or Money Market account. This convenience factor is similar to Fidelity’s Rewards Visa Signature® cash back card, though that one does not offer a bonus for redeeming into existing accounts, as you’ll get from Ally.

You can visit the Ally CashBack site to explore their cash back calculator. Enter your monthly spending on gas, groceries, and everything else, and it will tell you not only your annual rewards, but the potential bonus cash back for depositing in an Ally account.

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APR, Annual Fee, and Sign-up Bonus

In the quest to be as competitive as possible, Ally is also offering introductory APR for balance transfers: 0% for 12 months. There is no introductory rate for purchases and the standard APR is 13.24-23.24%, depending on creditworthiness.

The card comes with no annual fee, making its competitive edge just a bit sharper. Also, for a limited time, you will receive an initial spending bonus of $100 when you make $500 in purchases over the first 3 months of holding the card.

Other Extras

Ally was named the Best Online Bank of 2016 and the number of customer-friendly benefits they offer with their products spills over into the new credit card domain. Namely, these include 24/7 customer service, as well as online and mobile access to all of your accounts.

The Drawbacks

No card is perfect, and the Ally CashBack is no different. While it offers a 0% balance transfer APR for 12 months, it does not have a 0% purchase APR, like the Chase Slate® card or the Blue Cash Everyday® Card from American Express.

Its 2% cash back on groceries and gas is a solid offering, though other cards may offer more at times. For example, Chase Freedom® and Discover it® with CashBack Match™ both offer 5% back on both gas and groceries — the caveat being that those are rotating, quarterly categories (so, you don’t get that rate year round). For some, the Blue Cash Everyday® Card from American Express may be the best option, with 3% back all year on groceries and 2% all year on gas (all other categories get 1% back).

Whether the Ally CashBack is the card for you depends on where you spend your money, but it’s certainly worthy of consideration.

In Summary

There are cards out there that offer a higher percentage of cash back, though only a few of them have no annual fee. While this is Ally’s first foray into the credit card realm, they are off to a strong start with the Ally CashBack, offering:

  • 2% cash back on gas and groceries
  • 1% cash back on all other purchases
  • 10% cash back bonus for redeeming into certain Ally accounts
  • Introductory 0% APR for 12 months on balance transfers
  • $100 initial bonus for making $500 in purchases in your first 3 months
  • No annual fee
  • Benefits such as 24/7 customer service and online/mobile account access

It will be interesting to see how the new Ally card competes in the cash back arena, but my gut tells me it will be a strong contender right out of the gate.

You can apply for the card here.


Change Is In The Air: How the AAdvantage Program Will Affect You

American Airlines is no stranger to the mileage rewards game. In fact, the AAdvantage frequent flier program is the largest and longest-running one around, and dates all the way back to 1981. Other airlines followed suit after its introduction, and a more competitive market of the sky was born.

The game has changed considerably since then. Airlines added expiration dates and fees to their rewards, redemption flights have become more miles-expensive, and elite tiers are even more difficult to climb. Now, American Airlines has rolled out even more changes to their program, which will affect every member of AAdvantage®.

Earn points based on what you paid, not how far you traveled

Until now, miles earned in the rewards program have been based on just that: the number of miles traveled. Beginning with flights on August 1, 2016, though, AAdvantage®  will begin awarding miles based on the actual cost paid for your travel.

This is either good or bad news, depending on what kind of traveler you may be. Flexible travelers and bargain shoppers (or CheapOair-frequenters, like myself) will be penalized by the new changes. These people are willing to alter their travel plans by hours or even days in order to save a buck, and typically plan ahead. They are often able to book long-haul travel for discounted prices, and their cost-to-distance ratio is the lowest.

Premium fliers and those willing to pay a bit more for their tickets will reap the most benefits. That includes most business travel, which tends to be last-minute or based on a rigid schedule. Price is less of a concern for these folks, who are willing to pay more for short-notice travel, particular flight schedules, and upgraded seating. As a result, they pay more per mile, and will enjoy greater benefits from the new AAdvantage® system.

For example, let’s take a discounted, $300 (base fare) round-trip flight from Washington, DC to Orlando. This flight covers 2724 miles of travel, which would have resulted in 2724 reward miles for a base level member. Under the new program, basic AAdvantage® members will receive 5 points for every dollar spent, which would result in 1,500 awarded miles for this same flight… a difference of -1,224 miles. That’s a substantial change.

If you’re a full-price flier, though, you may enjoy the new system. Take a short trip from Washington, DC to NYC, for instance. This 1,000 mile round-trip journey would have netted you 1,000 rewards miles with the old rules. Under the new program, though, a mid-week coach ticket (running about $350 base fare) now earns you 1,750 miles… a difference of +750 miles. This also doesn’t include any booking class or promotional bonus miles.

Depending on your elite status, you will earn more than 5 points per dollar spent. Here’s AA’s chart for travel rewards based on status:

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New elite level: Platinum Pro

If you spend a fair amount of time in the skies, chances are you’ve made your way up the elite level rungs. Well, now you have a new goal with the Platinum Pro tier. It lies between the Platinum and Executive Platinum tiers, and will be available beginning in 2017.

This shiny new level includes oneworld® Sapphire status, 9 reward miles/dollar spent (an 80% bonus), two free checked bags per flight, and complimentary flight upgrades within North America and between the US/Central America. Upgrades can also be confirmed as early as 72 hours before a flight, compared to 48 hours for Platinum and 100 hours for Executive Platinum.

To meet the requirement for this new elite status, or any of American Airlines’ status level, one will need to acquire a number of both elite-qualifying miles (EQMs) and now, also…

Elite-qualifying dollars (EQDs)

While AA isn’t the first to add a qualifying dollar amount (Delta and United have already done this), it’s not a very welcomed change. In addition to meeting mileage (EQM) and qualifying-segment (EQS) minimums, AAdvantage® members will now also need to spend minimum dollar amounts (EQD) before gaining elite status. Here’s the breakdown:aa2

The one perk to the change? AA will be removing their former requirement that 4 segments must be traveled on American/American Eagle throughout the qualifying year in order to gain elite status.

Taking your status level into account, AA.com will begin displaying earned miles for flights during the booking process, beginning in late June of this year.

Upgrade prioritization

Under the new system, upgraded flights will be prioritized based on both elite status and EQDs. This means that if there’s one upgraded seat available, and two equal-level members request that seat, the one who spent the most in qualifying dollars over the past 12 months wins the upgrade. The EQD total taken into consideration will be on a rolling 12-month basis, sorted by tier.

Overall

The new AAdvantage® changes follow suit with many of other frequent flier programs out there, shifting the focus from how much and how far their customers travel with them, to how much they spend. The almighty dollar wins out in the end, and while there will be some winners, most will find that their mileage earned will take a hit.

Business and luxury travelers will be the most enthused with these changes, earning a greater percentage of rewards miles based on their fare cost. Early planners and bargain fliers will find that their dollars don’t stretch quite as far when it comes to miles accrued. Those attempting to climb the elite status rungs may be irked to learn that they now have three qualifying minimums to meet, the newest based on their monetary expenditure with the airline (EQSs, EQMs, and now EQDs). Oh, how the times are changing.

What do you think about the AAdvantage®  program changes? How will it affect your frequent flier usage? Sound off below.