Best Credit Cards: Why the Same 2 Credit Cards Keep Topping Best-of Lists
What's going on here?
The Chase Sapphire Reserve card — Chase’s super swanky credit card — rolled out in 2016 to get credit-wary millennials to start swiping plastic. The response was pretty frantic. People posted unboxing videos of opening up their credit cards in the mail (riveting footage, all). The somewhat backhanded Bloomberg headline at the time was “How Chase Made the Perfect High for Credit Card Junkies.”
More than two years have passed since then, and while more issuers started rolling out increasingly lux cards, none have come captured as much cache as the Reserve, which has topped Money’s rewards card ranking for the last two years on the back of its mammoth sign-up bonus, array of luxury airline partners, and sweeteners like free airport lounge access. On the cash back side, the repeat winner has also been around for a long time, the Citi Double Cash, which launched in 2014 (it’s also the main credit card I use).
It’s almost as if the “credit card wars” or “points wars” or whatever you want to call them have started to taper off. Or, at least, they they haven’t really generated as much innovation as we thought they would. Brian Karimzad, a founder of the personal finance site MagnifyMoney tells Inverse that this particular pair of cards is so hard to beat because they maintain industry standard benefits, but also because they are backed by big issuers which make them a little easier to get.
“The Double Cash set the standard for flat rate cash back. It can be effectively 2 percent after rounding,” Karimzad explains. “There isn’t anything else from a large issuer that gets you that kind of flat cash back in simple terms.”
I use the Double Cash, because I like the simplicity and don’t want to over-estimate my future self’s willingness to spend hours comparing and contrasting points redemption offers. But for people who are down to play the points game, the Sapphire is the way to go. They have the best partners, Karimzad says, and a strong incentive to keep perks nice to attract affluent young people to Chase’s wealth management business. At this year’s World Economic Forum, CEO Jamie Dimon said that though the Sapphire lost a lot of money in the short-term ($250 mil or so) he says the early returns are so encouraging he would have happily spent twice as much.
Karimzad said that the strength of Chase’s travel partnerships in particular boils down to relationships that stretch back at least a decade to the last financial crisis.
“The corporate investment side of Chase helped finance United Airlines,” he notes. “Basically, they were buying miles and handing them cash during the distressed period [of the financial crisis]. That was when banks really got entrenched, it goes back to those relationships.”
It seems unlikely that rewards trend will let up any time soon, Karimzad says. Consumers now have expectations for better credit cards and the market will have to answer them. But as more credit cards get better, the points will start to count for less (just like the value of money inflates when you print too much of it).
“It is inflation, absolutely, and you can’t invest this currency anywhere. It’s a depreciating currency,” Karimzad said.
It’s All About Your Sign-Up Bonus
If credit card points are experiencing inflation, that means you don’t really want to hoard them, you wanna get rid of them as quickly as possible before their value sinks further. It also gets more important to seek out arbitrage opportunities, for example promotions where your issuer’s points can stretch farther on certain flights or with certain travel partners.
“The best advice is if you have a good trip in mind, use your points as quickly as you can, and you don’t wanna blow them on buying an iPad or something like that,” he said. “Use them for travel, and try to shop around to try and find what it costs to use these points. Don’t just shop around on the Chase site, see what the trip costs in [for example] Southwest [Rapid Rewards points].”
In other words, while the points themselves may count for less and less, the fact that you can redeem them at more and more places counteracts this to some extent. The airlines are also under pressure to offer better flights.
Try a Two-Card Strategy
The increased payoffs of shopping around also means that you may see a bigger payoff looking for more niche cards.
“I would say to have multiple annual no fee cards. Get a base card that earns close to 2 percent with no fee, and then go after some of these new no-fee cards with the bonus category like the Uber Visa [or] the Costco Anywhere, that’ll get you 4 percent on gas.”
There’s a common theme here, which is that the more complicated and rewarding the landscape gets, the bigger the payoff for people who are willing to get strategic about offers. It’s also something of a relief to know that the two big dogs are still the way to go, even after a couple years of points inflation and competition.
If you’ve got another credit card that you like even more (or even better, if one of these fail-safes has let you down), I’d love to hear why. Email me email@example.com.