Show me the (plastic) money

You can earn about $500/year more than you currently do from credit cards.  Actually far more than that, if you're willing to transfer balances and take advantage of new account bonuses.  Just as with cell phones though, your best credit card strategy depends on what kind of customer you are:


1. Minimum hassle: You want to deal with just 1 or 2 accounts (for convenience or to avoid identity theft) and you spend money evenly across many categories (e.g. not just travel)


If you hold only one credit card, hold one of these:

• Amex Starwood Preferred Guest: You don't earn cash, but you do earn valuable hotel points in the Starwood loyalty program that are not subject to blackout and (in my experience) effectively get you the equivalent of 2-4% cash back.  In fact, I just redeemed for a vacation that gave me about the equivalent of 11% cash back.  You can also convert the points into virtually any airline program.  If you travel, this is probably the best general-purpose card.  You can earn 25,000 bonus points for signing up.  No annual fee for the first year, $45 thereafter.  But let's face it, Amex is not everywhere you want to be, so you might need 2 cards...
• (update: Chase Freedom program changed so that categories rotate and no bonus for redeeming $200)Chase Freedom (Visa): This card pays you 3.75% cashback for the 3 categories (out of 15) you spend most every month.  The categories include the usual suspects (grocery, gas, drugstores) as well as department stores, salons/spas, pets, telecom, cable/internet, fast food, gym, utilities, dry cleaning, video rental, and movies.  You get 1.25% cashback on everything else.  They advertise as 3%/1% (instead of 3.75%/1.25%) cashback, but if you redeem in increments of 20000 points, you get $250.  There is a $100 bonus or $150 bonus (must spend $3000) for signing up.  No annual fee.
• (update: this card was bested by the Schwab InvestFirst card)Fidelity Investment Rewards (Visa): This card pays you 1.5% cash back on everything you buy, deposited into a Fidelity brokerage account every month.  No annual fee.
• Schwab InvestFirst: 2% back on everything

2. Maximum rewards: You spend a sizable amount, and you don't mind managing a couple of cards to earn an extra couple hundred dollars per year (tax free)

By holding 3-5 cards and knowing when to use each card, you can earn something like $500 of extra money (tax free) every year relative to the typical 1% cashback card.  This is what I do.  I think I average 3% (roughly) on everything I buy.  A typical family might earn an extra $500:

• Gas: $200 (assuming you have 2 cars @ 15K miles/year, 20mpg)
• Restaurants: $150 ($300/month in spending)
• Travel: $120 (one $3000 vacation/year)
• Cell phones: $60 (2 cell phones @ $60/month each)

The best category credit cards are:

• Amex SimplyCash: This card pays you 5% cashback for gas, office supplies (e.g. Staples), and cell phone bills.  And it's part of the OPEN network, which gives you an additional cashback from places like Hertz (5%), FedEx (5%), Delta (3%), Hyatt (3%), among others.  For example, if you go to Kinko's you get 10% cashback (5% from "office supplies" and 5% from FedEx).  Technically it's a small business card, but you can just use your name as your business when applying.  No annual fee and 0% on purchases for up to 1 year.
• Amex Costco TrueEarnings:  This card pays 3% cashback for restaurants, 2% for travel, and 1% for everything else.  Pretty good for travelers.
• Discover: This card pays you 5% cashback on categories that rotate quarterly such as restaurants, travel, and home improvement.  You can time your purchases to get some pretty attractive cashback.  Or you can opt for the Open Road card, which is 5% cashback on gas and maintenance.  $100 bonus (after $500 in purchases) for signing up by phone or online using code DAGZ.  No annual fee.
• Citi MTVu:  Only students can get this card, but it is very good.  Consider enrolling in community college.  It gives you 5% back (through Citi's ThankYou loyalty program) on restaurants, bookstores, and movies.

3. Bounty hunter: You don't spend much on cards but you want rewards anyway

Without spending a dime, you can still get paid for:

• Account opening bonuses that take the form of points or cash (e.g. 25,000 miles, $150)
• 0% offers: Either balance transfer or purchases for 0% for 6-12 months.  You can often just deposit your entire credit line into an interest-bearing account.  People who do this float upwards of $150,000 and earn over $6,000/year in extra income by investing in high-yield savings accounts.

The downside to this strategy is that it will (temporarily) hurt your credit report.  Plus it's a bit harder to implement this strategy, because you need to stay on top of the best account bonuses available at any given time.  There are some useful sites to help you do this like App-o-rama and MyRatePlan.  Here's a quick sampling of account bonuses (no annual fee for any of these for the first year):

Cash & airline/point offers:

• Amex Preferred Rewards Gold card: $100 after first charge
• Hilton card: up to 50,000 points
• Starwood Preferred Guest card: 25,000 Starpoints after first purchase
• Delta card: 15,000 Skymiles after first purchase
• United Mileage Plus: 21,000 mileage plus miles

Here's a sample of 0% offers:

• Fidelity Investment Rewards: 0% on balance transfers for 12 months
• Amex SimplyCash: 0% on purchases up to 12 months, also recommended for cashback (see above)
• Citi Premier Pass: 0% on balances up to 12 months, also $100 bonus after $300 in purchases
• Chase Visa Platinum: 0% on balance transfers and purchases up to 12 months