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There are plenty of 2% cashback cards on the market. But the 3% cashback cards come and go. There’s a good reason for that. For the issuers, 3% cashback is not sustainable long-term and leads to losses. Recently, AOD FCU, which offered a 3% cashback with no annual fee, nixed the credit card.
One way to benefit from 3% cashback cards is to sign up for one and use it until the cashback is reduced, and then move on to the next 3% or highest-earning cashback card at the time. But this can be frustrating. You will need to stay informed on the credit cards that offer high cashback so you can switch to them if your 3% cashback card reduces its cashback.
The US Bank Altitude Reserve card ( 3% cashback, 4.5% if you use it for travel)
But there is a better way to earn 3% or higher cashback. The US Bank Altitude Reserve card offers 3% cashback (as points but convertible to cash) on mobile wallet purchases. If you redeem the cashback for travel purchases, you can get 1.5x or 4.5% cashback. But there is a catch. The card has a $400 annual fee but it offers $325 dining and travel credits, which reduces its net annual fee to $75.
Let’s do some math to ensure the card makes sense for your level of spending and the cashback uplift you get relative to other cards. Let’s say that your other card is a 2% cashback card.
- You must spend at least $7,500 in mobile wallet spending such as Google Pay or Apple pay to break even ($75 divided by the additional 1% the US Bank Altitude Reserve gives you). You can earn 3% on everything beyond the $7,500 in annual spending.
- If you spend your cashback on travel, you could get an additional 2.5% (4.5% vs 2%). In this case, the breakeven is only $3,000, which is easily achievable for most people. You can earn 3% on everything beyond the $3,000 in annual spending.
Most fast food restaurants accept mobile wallet payments. Stores such as Costco, Target, and Best Buy accept Google Pay or Apple Pay. Mobile wallet payments are only going to increase in the future, which will make it easier to recoup the net $75 fee on the US Bank Altitude Reserve card.
Other credit card options to get more than 2% cashback
Bank Of America(R) Unlimited Cash Rewards Credit Card – 2.625% cashback
If you have $100,000in deposits with Bank of America or Merrill Lynch, you can earn 2.65% cashback with the Bank Of America Unlimited Cash Rewards Credit Card. An easy way to earn 2.625% cash back is to have a brokerage account with Merrill Edge with $100K in assets. The card has no annual fee but has a 3% foreign transaction fee.
Alliant Cash Back Visa Signature card – 2.5% cashback
Alliant Cash Back Visa Signature card gives you 2.5% cashback on the first $10,000 in spending every month. You will need to have an Alliant High-Rate Checking Account and maintain a balance of $1,000. You should also have a monthly direct deposit set up with the bank and enroll in eStatements. The card has no annual fee and no foreign transaction fee.
Things to be aware of when you sign up for a high cash back card
- Paying a high cashback requires the issuer to cut other benefits to keep the card profitable. So they skimp on other card benefits.
- Geofencing – The issuer may require the cardholder to live in a certain area or belong to a certain credit union
- Temporary high cashback – You may get a high cashback rate in the first year, then the cashback drops to 2% or lower
- Low monthly caps – There may be monthly caps for the high cashback rate, cashback then drops to a lower rate
- Banks may require monthly minimums in checking accounts
My Money Planet has partnered with CardRatings for our coverage of credit card products. My Money Planet and CardRatings may receive a commission from card issuers.