If you follow credit card offers like I do, you might have noticed that this past year was particularly exciting. Credit card issuers have been heavily marketing products in search of customers, spending more advertising dollars per customer than they have in recent years, and increasing rewards for the best customers. For individuals who have mastered their own financial situation, this has paid off with cash back incentives and free flights through travel rewards, while customers who have just begun the path to getting out of debt could use 0% APR balance transfer offers to save money.
Not everyone benefits from the best credit cards, however. It’s easy to fall into issuers’ traps. Don’t try to beat the credit card issuers at their games unless you’re prepared to lose.
2012 will be an interesting year. It’s impossible to predict specifically what will happen within the credit card industry, but you can be sure the issuers will continue to compete aggressively for new business and offer the best deals to customers with the best credit. If trends continue, here are the offers I expect to be the best credit cards of 2012.
The best balance transfer credit card of 2012
There are three things to evaluate when considering a card for balance transfers. First, look for an introductory rate of 0%. Next, look at the length of the introductory offer. Last, consider the balance transfer fee. The good news is that a few issuers have been occasionally testing offers that feature no balance transfer fees. Over the past couple of years, these fees have become more often — even expected — preventing borrowers from truly taking advantage of free use of issuers’ money. The Discover® More Card – No Balance Transfer Fee offer is leading the charge. It features a 0% APR on balance transfers for twelve months and no balance transfer fee for transfers occurring during the introductory period.
strong>Runner-up: With the Slate from Chase – No Balance Transfer Fee offer, qualified customers can receive a 0% introductory APR on balance transfers, without a fee, for 15 months. This offer, considering the lack of the balance transfer fee and the extra three months in the introductory period compared to the Discover More offer, this is a strong card for consideration.
Prediction for 2012: If Chase’s no balance transfer fee offer is successful, expect to see more issuers offering this. Issuers are highly competitive and often react to others’ offers within days. However, having a balance transfer fee is the new standard, at least for the next year. The Citi Simplicty Card is currently another strong choice in this category.
The best cash back credit card of 2012
Cash back is the most popular reward. Of course, it only makes sense to earn cash back on a card if you avoid paying interest and late fees. If you do not pay your bill in full every month, consider finding a low APR card and not a cash back card. With cash back, the primary criterion should be the highest potential cash back rate. There are only a few cards that offer 5% cash back, and those that do only offer this rate on select categories that rotate throughout the year.
With 5% cash back on select categories, and 1% cash back on all other purchases, the Chase Freedom card has my vote for best cash back. Right now, new cardholders can earn a bonus with the Chase Freedom Visa – $200 Bonus Cash Back offer if they meet the requirements. One detriment is the 5% cash back applies to only the first $1,500 spent in the appropriate categories each quarter, but this is still better than most other offers like Discover More and Capital One Cash Rewards.
Runner-up: Chase also is extending the Chase Freedom® Visa – $100 Bonus Cash Back offer to qualified applicants. This card offers a lower bonus than the above offer because it comes with an extra benefit: a 0% APR for an introductory period of 12 months for balance transfers and six months for purchases. All other aspects of the card are the same.
Prediction for 2012: Expect the 5% cash back programs to continue with the same restrictions, but fewer sign-up bonuses.
The best airline miles credit card of 2012
Choosing the best airline miles credit card comes down to the card associated with the airline that is most convenient for you. There are cards that offer points that can be converted to miles on a variety of airlines, but the best offers are often from co-branded cards.
I own the Continental Airlines OnePass® Plus Card as well as the United Airlines counterpart due to my proximity to the merged airline’s hub in Newark. Since most of my flights are cross-country to visit family, I like being able to use the miles for upgrade rewards. There is an annual fee of $95 for this card, but it is waived for the first year, and the benefits like free checked baggage and club room passes easily make the fee worthwhile for certain travelers. Right now, new customers can earn 40,000 bonus miles.
Prediction for 2012: The airline industry is still struggling. Unable to cut fares, airlines have turned to charging added fees when possible. Some airlines require a payment just to reserve a seat — any seat — in advance of checking in for the flight. In 2012, customers of credit cards will be able to avoid more of these hassles. In some cases, credit card holders will be treated more like frequent flyers, with preferred boarding and increased seating availability.
The best travel credit card for 2012
Right now, there is a 50,000 point bonus for new customers of the Chase Sapphire Preferred Card who meet certain conditions. These points are worth $625 in travel rewards. With this card, you earn a base reward of one point per dollar, but some purchases qualify for two points per dollar. A notable benefit for travelers is the lack of a foreign transaction fee, but a potential detriment is the $95 annual fee.
Prediction for 2012: Sign-up bonuses won’t last in this category, but companies in the travel industry will find more ways to reward loyalty, as airlines are attempting to do.
The best low ongoing APR credit card for 2012
If you carry a balance from month to month, forget about rewards and concentrate on getting your interest payments as low as possible. One way is to transfer your balance to a card with a low APR introductory offer, but this benefit relies on your ability to pay off the entire balance by the end of the introductory period. For ongoing credit card debt, after stopping to plan your strategy for getting out of debt, consider using a low APR credit card.
The best rates now you could possibly hope to qualify for, outside of introductory rates, are around 10.99%, and only people with the best quality of credit history will be approved for those rates. A few cards advertise these rates, but possible the best card for 2012 is Slate from Chase, a card that is offering a $75 statement credit and a 0% introductory APR for up to 15 months. The introductory APR combined with the low regular APR help establish this card as one of the best for people who carry balances from one month to the next.
Prediction for 2012: Interest rates are likely heading upwards. There’s a delicate balancing act; a thriving economy seems to depend on cheap availability of funds, but borrowing has already been inexpensive for those who qualify since the end of the credit crunch, and although the economy is technically expanding, people won’t be spending again until employment has improved. If that happens, and in an election year, it’s likely, expect interest rates to increase.
Best low introductory APR credit card for 2012
Card issuers are attracting new customers by offering introductory periods with special benefits. The most popular offer is a 0% APR, either on balance transfers, new purchases, or both. Right now, the Discover® More Card – 18 Month Promotional Balance Transfer is one of the most compelling offers. Discover and some other banks have been experimenting with longer introductory periods, such as this offer that is extended for 18 months for balance transfers. As a trade-off, cardholders will need to pay an additional fee for transferring a balance from another card. Any offer with an introductory period of longer than one year is notable.
Prediction for 2012: There will be more extended introductory periods. Introductory periods of 18 and 21 months will be present, but usually with a trade-off, like a transfer fee or a higher interest rate for purchases.
Read this first
Credit cards are financial tools, and are not inherently good or evil. As a result of using a credit card, one person might fall deeper into debt while another will organize his or her finances. Credit cards help the average consumer spend more money than he or she would spend with cash. It’s important to only seek credit card rewards if you do not have a tendency to spend more than you can afford. Being conscious about your spending choices is the only way to maximize the use of a credit card.
Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.
Updated February 12, 2012 and originally published December 28, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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{ 11 comments… read them below or add one }
Erm, Discover More also limits to the first $1,500, so it’s not “worse” than the Chase Freedom Visa there. I know last year it was less, but both have increased their limits.
What makes the Discover More Card worse than Chase Freedom in terms of cash back is that the first $3,000 you spend on Discover earns only 0.25% cash back. The 1% rate doesn’t kick in until after your initial $3,000. Chase doesn’t have that limitation.
Signed up for Chase when we had a $300 offer on the table a month ago. Have American Express Blue and BAC signed up for this year… Made great returns over the past year… probably north of $1000… on a money for nothing venture… Great in my mind.
We made the transition from Debit card to Credit card this year for the cash back only and made us an extra $1k… great deal if you ask me.
Why don’t you rate the Blue Cash Everyday Card from American Express – 3% cash back at supermarkets, 2% cash back at gas stations and department stores, and 1% cash back on all other purchases. No spend minimum and no enrollment fees?
The previous version of this card is even better (which I have and view as a prized possession). It pays 5% on gas/groceries/drugstores and 1.5% on all other purchases after spending $6500 on the card annually, and lower percentages before hitting $6500.
The Blue Cash Everyday Card is a great choice — I have that on my list of best cash back credit cards. Limiting the cash back category to just two is tough… but a smaller sign-up bonus and a likelihood of earning less throughout the year than with the other two cards held it back. But… add in the Blue Cash Preferred and its higher cash back rates (but an annual fee) and you have some nice competition.
It comes down to individual spending. Will 3% in supermarkets without a limit trump limited 5% in rotating categories? You’d have to run your own numbers to work out what’s best for you. In this article, I’m talking in generalities — and trying to think about which offers will stick around longer.
Another drawback to AmEx in this category is that its market penetration is lower than the others. AmEx just still isn’t accepted everywhere Visa and MasterCard are.
My card is the best. 6% groceries, 3% gas and department, and 1% everything else.
Sounds like a great deal!
The American Express Blue Cash Preferred is a pretty good card but it does carry an annual fee after the first year.
Jealous?
Of all the cards listed i’d say the Discover More is the best all around card. Almost tops on the cashback and half the 2012 year the 5% categories include gas; has a 0% introductory offer (Look around my wife got an offer for 12 months at 0% in the mail); and runner-up for low interest rate. My interest rate with Discover is actually lower than the 10.99% so good credit and payment history can drop that 10.99% even lower. Plus the $150 sign up bonus.
I have used a lot of different rewards cards myself. The problem with Amex and Discover is that half of the merchants do not accept them, so then you are not only losing out on the reward, but also need to pay a second bill off every month. How annoying!
I am currently using the Capital One Cash card, which gives 2% for gas and groceries, 1% for everything else. No limits, and the cash back is automatically credited to my account as soon as it hits $25. No effort makes me happy.
I would switch to Chase since it is the better deal, but I’m still holding a grudge against their terrible customer service from 2008 during the financial meltdown. They cancelled my card right before Christmas because “I didn’t use it in the last 3 months”, then basically said “oh well” when I called to say I needed it reinstated.