For a credit card issued by American Express, the sign-up bonus and rewards from purchases will be in units of one of:
Of the three, cash back rewards are presumably the easiest to understand.
Nonetheless, like many of you I was locked down at home during most of 2020, so I created this page discussing cash back regardless.
When you make a purchase, you earn cash back.
Be sure to understand the terms and conditions of your card, but I have not personally seen a card where fees or balance transfers earned rewards.
Edge case: Barclays issued cards may require payment of the annual fee in addition to a minimum spend in order to be awarded a sign-up bonus.
American Express personal cash back cards:
The Cash Magnet card provides 1.5% cash back.
The Cash Magnet card is a perfectly fine card, but there are many non-American Express cards that provide the same or greater cash back.
From the American Express website in June of 2022:
The Blue Cash Everyday card provides 3% cash back on your first $6,000 spent at U.S. supermarkets, 2% cash back on U.S. gas stations, and 1% on other purchases.
Purchases at gas stations that are part of superstores, supermarkets, and warehouse clubs only earn 1%.
The Blue Cash Everyday is one of my favorite American Express issued cash back cards.
From the American Express website in June of 2022:
The Blue Cash Preferred earns 6% cash back on your first $6,000 spent at U.S. supermarkets, 6% on select streaming services, 3% on gas and transit services, and 1% on everything else.
I subscribe to a few video streaming services but even over the course of a year they do not add up to huge money.
For me, the major difference between the Blue Cash Everyday and the Blue Cash Preferred is the additional 3% at supermarkets.
$6,000 times the additional 3% cash back = $180
$180 incremental rewards minus the $95 annual fee for the Blue Cash Preferred = $85 net additional cash back for the Blue Cash Preferred over the Blue Cash Everyday.
For me, the prospect of potentially earning a net additional $85 over the course of a year is not worth the certainty of committing to paying a $95 fee.
If you have a large family you might spend the $6,000 fast enough that you decide it is worth the annual fee.
In contrast, if you are a student on a university meal plan the Blue Cash Preferred may make little sense for you.
The Plum card has a substantial $250 annual fee.
When I first created this page, I believe that the annual fee was waived for the first year.
That appears to no longer be the case.
In exchange for that annual fee, cardholders are given the option of either earning %1.5 cash back or having up to 60 days to pay without interest.
Later in the year I will be spinning off a corporate finance blog.
In that blog I am may or may not eventually discuss "synthetic securities".
Regardless of whether I do so or not, you can synthetically create a no annual fee card that combines both the either/or features of the American Express Plum card.
Now when making a purchase, put the purchase on whichever of the two cards whose statement closed most recently.
In addition to the cards noted above, American Express has had additional cash back cards that have been discontinued.
Regardless of units, credit cards can be a reverse Robin Hood: those people that carry balances subsidize the rewards of those that do not carry balances.
Should you find yourself habitually carrying a balance, you may be best served by ignoring rewards of any type and focusing on finding the lowest possible interest rate until your revolving credit accounts are paid off.
If you are carrying a balance then a card with a low interest rate and no rewards may be better than a card that offers rewards but charges a higher interest rate.