Money Blue Book

So you want to be a millionaire? Well you know what? Me too – and I’m determined to get there in the near future. At this very moment, despite the current state of the economy and the deteriorated condition of the credit markets, instead of just sitting on my hands and wishing upon a star, I’m taking active steps right now to make it all possible someday. While having a financial net worth of a million dollars isn’t what it used to be because of the negative effects of inflation, it’s still the measuring stick we use today to delineate the dreamers from the ones who have financially made it.

I know it’s not an unfathomable dream to have because I’ve seen the system work firsthand. The possibility is not just reserved for celebrities or the elite, but is very real and plausible for ordinary people as well. One of my close childhood friends is a multi-millionaire. And he’s only 30 years old. He’s not a self made millionaire as he inherited the vast bulk of his fortune from his parents, but it was his parents who put forth the gears of financial practice many years ago that brought their finances to what it is today. From the time my friend’s parents married, they lived a very frugal life. While they were by no means cheap, they avoided the peer pressures and temptations of living lavishly, opting instead for a humble home they could afford and limiting pricey expenditures like dining out to only rare occasions. They drove affordable American made cars and stayed away from buying expensive electronics and gadgets. However, at the same time, they by no means avoided the use of debt financing. Instead, they embraced its responsible use, viewing credit cards and balance transfer offers as the means to generate free credit card arbitrage income. Through the use of airline credit cards, they were able to finance family vacations and trips with free frequent flyer mile bonuses, and with business credit cards, they took advantage of high credit limit card financing and business spending rewards to earn cash back income. Quite a few years ago, the American Automobile Association (AAA) permitted its AAA credit card holders to enjoy interest and transaction free traveler’s checks charged as purchases to their credit cards. My friend’s parents frequently took advantage of this perk by depositing those checks into high interest money market accounts and high yield savings to earn free money – the early beginnings of what many now today call 0% balance transfer arbitrage (the ability to make money and generate net profit from a temporary price differential between two markets). However, despite their frequent strategic use of credit, they always made sure that they paid off their non-0% balances every month, thus avoiding high interest payments and late fees.

From their humble dual income paycheck beginnings, my friend’s parents loyally and consistently squirreled away the bulk of their wages into their high yield savings accounts, while always making sure they took full advantage of their respective employer’s tax deferred 401K retirement plans and matching programs. Every year, they maxed out their Roth IRA’s and their traditional IRA accounts as needed, while steadily plowing money into their stock market portfolio. Over the years and through the decades, in good times and in bad, they continued to invest, dollar cost averaging down as the markets dipped but continuing to strategically seek attractive investment opportunities as the markets rose. Their stock and bond portfolio consisted primarily of long horizon mutual funds and index funds, but they also purchased large positions in individual stocks as well. Instead of chasing performance or trying to time the volatility of stock prices, they patiently and wisely sought out long term positions in blue chip, value brands like Coca Cola, McDonalds, Disney, and even Berkshire Hathaway.

With their excess money, they purchased real estate. What started out as a single home, eventually blossomed into a housing portfolio comprised of several million dollar houses and a few very valuable condominium properties. As home values ebbed and flowed with the real estate market over the decades, they rented them out to help pay for their multiple mortgages. With the luxury of time and fiscal discipline, all of their multiple home mortgages have now been fully paid off.

While my friend clearly benefited from the wise financial decisions his parents made, he has also learned to embrace their frugal financial practices for himself. Today, despite his tremendous wealth, my long time friend remains one of the most frugal and unassuming people I know. I often joke that he is the “poorest rich person I know” due to his incredible frugality and disdain for excessive spending. He truly is the millionaire next door as one can’t possibly guess simply by looking at him that he has such vast wealth at his disposal. Meanwhile, though he lives a life of comparative comfort today, he continues to actively practice the financial wisdom of his parents – always looking for ways to broaden his income streams and constantly trying to find new and improved ways to invest his savings.

The Process Of Becoming A Millionaire Is Not A Get Rich Quick Scheme, But A Patient and Systematic Approach To Earning, Saving, and Investing Money

The whole point of this long story about my friend and his parents is to show that with some concerted fiscal discipline through personal finance education and a dedication towards building long term investment positions, anyone can truly become a millionaire. Given enough time, and in his parent’s case – several decades, the amazing power of compound interest can grow any small sum of money and turn it into a significant amount. It is a grossly overstated myth and fallacy that only those who inherited their money, won the lottery, or developed a successful small business can acquire wealth and become a millionaire. While having a very high income, striking it big in the stock market, riding the housing boom to the top, or acquiring riches through the passing of wealthy relatives can certainly speed up the process, even for the rest of us white collar or even blue collar workers who collect weekly paychecks have the potential to reach the promised land of financial independence.

Becoming a millionaire is not an overnight process and there are no gimmicks, scams, get rich quick secrets, or infomercial packages you can buy or learn to turn you into an overnight millionaire. Please stay away from those trashy midnight get rich quick TV commercials. With their flashy salesman approaches to convince you to part with your money, all they will do is lead you further into debt as you spend large sums of money buying their pointless tapes and useless DVD’s. While a tiny portion do manage to offer some substance with their flair, the vast majority of these televised get rich quick programs are basically scams and repackaged junk. There are occasional real money making, wealth building secrets out there in the market, but chances are you won’t find much information when these temporary arbitrage opportunities do crop up. Remember the old adage – “those who can, do – and those who can’t, teach.” It is very true. I personally invest and dabble in several very lucrative income generating businesses, both online and through my legal practice. However I would never reveal the secret and crux of my approaches and methods, at least while the going remains good. Only after I have personally tapped out the financial gold mine opportunities would I contemplate sharing those supposed secrets with others. And only then would I start writing and selling how-to guidebooks to supposedly sell my secret method.

The 10 Automatic Steps To Becoming A Millionaire

Below are the basic ten steps to start you down the road to becoming a millionaire. Every journey begins with a series of fundamental steps. If you truly want to become financially liberated one day, it’s time to start making the commitment to educate yourself and start thinking like a millionaire. Remember, there is no gimmick and it’s a long, steady process, but these steps will put you towards reaching that goal someday.

Earn Money and Seek Out Opportunities To Save:

The 10 basic steps to becoming a millionaire are broken down into two primary categories. The first main series of steps (1 thru 5) involve making money and preserving it. The second series of steps (6 thru 10) involve pursuing income producing investment opportunities:

1) Educate Yourself In Personal Finance, and Develop The Drive To Learn - A few common traits that are almost universally found in full fledge billionaires, and bona fide millionaires is that they are all driven to learn and succeed, and are willing to put their ambitions into action to make things happen. Border line cocky and very confident, self made millionaires operate with a plan and are highly motivated. Most are extremely pro-active and driven to constantly improve their financial lives and earning potential, whether it be through the pursuit of advanced degrees or the taking on of a calculated business venture risk. In my case, I graduated from law school and worked as an attorney for numerous years before I eventually made the decision to get out of that profession. The work was terribly unsatisfying and so I made the affirmative decision to become self employed and start my own online business. The decision was  fraught with greater risk, but the move ultimately reaped much greater rewards.

Aspiring millionaires need to take it upon themselves to fully educate themselves on the nuances of personal finance and strategic financial planning. Even those who ultimately deem it more cost and time efficient to outsource their tax preparation and financial planning work to a so-called expert, it’s still very important to develop a personal groundwork in finance and business concepts. Without a fundamental grasp of how compound interest works or an understanding of investment terminology like stocks, bonds, Roth IRA’s, and short selling, aspiring millionaires may never reach their full potential. As an aspiring millionaire myself, while I can currently afford to hire a tax accountant, I still choose to file my own taxes every year. Eventually as my tax situation grows more complex I may choose to hire a tax preparation expert to make better use of my limited time, but at least I will have already developed a good grasp of basic tax law and the the nuances of capital gain taxation and business deductions. When it comes to personal finance, always learn to do it yourself before hiring someone else to do it for you.

2) Invest In Higher Education, and Pursue Jobs and Professions With High Incomes – Certainly when it comes to becoming a millionaire, the most important entry level step is to develop a steady and predictable stream of income. Unless you have a fixed injection of fresh income on a continuous basis for a good period of time, you won’t have any investment capital to work with. While it has been shown on blogs and websites like CNN’s Millionaire in the Making series that reaching the one million dollar networth mark doesn’t require individuals or families to rake in a high 6 figure salary annually, it certainly doesn’t hurt. Clearly, the more money you make and the higher your annual salary, the sooner you are likely to reach your goal of becoming a millionaire.

When it comes to making more money, proper higher education is key. It’s no longer possible to get by in this ultra competitive world on a college degree alone. In almost all cases of professional advancement, a graduate or professional degree is paramount to future financial success. While a small portion strike it rich without the benefit of advanced degrees, the vast majority of successful millionaires have post graduate degrees. But it’s not just any random degree in higher education either. Certain advanced degrees simply have greater potential to lead to higher income jobs than others – professional graduate degrees like MBA’s, JD’s, MD’s, and advanced certifications in engineering just to name a few.

While it’s true that some jobs and professions are overrated with financial rewards that have been greatly exaggerated, on the whole, certain majors and professions simply have it easier than others when it comes to future income prospects. While many teachers, nurses, administrative assistants, and paralegals have the potential to make good money and live a decent life, their road to millionaire status, with all other things being equal, is significantly more difficult than that of big firm lawyers, doctors, financial planners, and successful small business owners. While I’m sure areas of study like English, music, theater, and history are incredibly rewarding in their own personal ways, the reality is that they aren’t the best majors to have when you have your sights set on becoming a millionaire someday. The professions that they lead to simply aren’t as lucrative as those related to business, health sciences, or computers. Probably the most financially lucrative fields of study can be found in finance and business, advanced health care, and engineering. Those who want to vastly jump start their road to millionaire-hood ought to pursue these specific types of study during their college and graduate school years. It’s where all the high income producing jobs ultimately are.

3) Save Money By Making Financial Sacrifices When It Comes To Small Daily Expenses – An important tenant of becoming wealthy is not only the ability to make money, but the ability to save money by cutting expenses as well. Even those with substantial streams of income can quickly waste away their money through shoddy investments and lack of proper saving habits. Just look at all the formerly wealthy celebrities with money troubles. An important step to becoming a millionaire is to simply spend less than you earn. The less you spend, the more you have to save, and the more money you save, the more money you have to invest and make your money work for you. Aspiring millionaires understood fully, that an affordable sacrifice today will ultimately pay off in the future through the power of compound interest and the passage of time. Along with putting your money towards the building of an emergency fund, there has to be a systematic habit of saving and investing. For some, this requires setting up an automated savings plan that automatically transfers money from your primary checking account into a high interest savings account or makes regular contributions to a mutual fund. For others it means learning to save by cutting back on common expenses – swapping that manicure or new video game, for more interest generating money in your bank account.

Of course, this doesn’t mean you ought to sell your beautiful home or car, and start living in a canvas tent or resort to eating just one meal a day to save money, but you should most definitely live within your means and learn to make some sacrifices in your life. It’s important to recognize that the vast majority of your income is probably discretionary and non essential – probably more than 50%. If you are like most people, you enjoy spending your hard earned money by treating yourself to dinners at fancy restaurants, going to the movie theater, enjoying that daily Starbucks coffee, buying the latest expensive designer clothes, or constantly upgrading your cars and electronic gadgets for the latest model. But by choosing to spend and waste your money on such frivolous and fleeting common luxuries, you are taking money away from your future. There is no need to incessantly pinch pennies like a miser, but try cutting some of these non essential perks and you’ll be amazed at the amount of money saved. That $5 cup of premium coffee everyday may not seem like a lot, but multiply that by 365 days a year and multiply that by the frequency of other luxuries in your life and the amount quickly adds up into the thousands of dollars. Remember, because money saved has already been taxed, money saved is worth much more than money earned, which has yet to be taxed.

As a naturally frugal person, I refrain from chasing after the newest gadget releases. While fancy LCD and plasma high definition televisions have already come out for some time and prices have dropped significantly, I’m perfectly happy with my old bulky CRT television set. Unless my television set gets damaged in the near future, I don’t see the pressing need to upgrade to a flat screen anytime soon. Like TV sets, cars also have a tendency to rapidly depreciate in value within a short period of time. While I can easily afford to buy a fancy, expensive sports car or luxury performance vehicle, I’m quite happy with my modest fuel efficient Honda Accord. I just don’t see the need to upgrade. It’s just a frugal, cost savings mentality that I’ve always had, and a positive trait that I believe will one day help turn me into a millionaire.

4) Seek Out Free Money Offers, Sales, Discounts, and the Highest Interest Earning Opportunities – Aspiring millionaires ought to constantly hunger for savings and finding cheaper and more cost efficient ways of doing things. After all, a fundamental trait of becoming rich is the ability to make and save more than you ultimately spend. Even when you spend money, oftentimes there are ways to structure your actions to end up with a significantly lower net loss. For example, why pay full price for a pair of nice jeans or a new pair of shoes when you can order the exact same item online at a discounted price by using promotional discount codes and by shopping through an online cash back shopping site like Ebates or Fatwallet? Why not stop by your local mall or visit the desired store to try out the product you want, but order the item from your home computer to take advantage of online promo codes and Internet discounts when it comes time to buying. Surely you can wait a few days for shipping and handling for such non essential items. One time savings may not seem like much, but multiply that a few hundred times or even a few thousand times over multiple years, and the money rapidly adds up. These days, it’s significantly cheaper to order most things online, especially when it comes to electronics.

For those with good credit and the ability to properly manage debt obligations, I recommend the use of cashback credit cards to make all of your purchases. By using your reward credit cards as you would otherwise use cash to make purchases, you are able to earn free rewards and cashback savings that you would otherwise not enjoy. So long as your credit cards don’t unnecessarily encourage you to shell out more money than you would ordinarily spend, you’ll accrue attractive rewards and free money in the process. By ensuring that you always pay off your credit card balances every month, you’ll avoid any extraneous finance charges as well.

Savings should never be left idling in a low interest checking account. When not invested, excess money should always be placed into a high yield savings account or CD ladder to garner the highest annual percentage yield possible. While you don’t necessarily have to be a rabid bank interest rate chaser like yours truly, it doesn’t hurt to know where to find the best online savings banks and where to find the top high interest rate offers.

5) Become An Entrepreneur and Run Your Own Small Business – Many millionaires are both entrepreneurs and owners of their own small business. These days, small businesses are the primary drivers of wealth in the United States, and not inheritance. Oftentimes, great financial success comes from the effort and financial gamble of starting one’s own business. While the risks are very real and the stresses of managing your own business operations can be daunting, the financial payoff is potentially much greater than that of working for someone else for the rest of your life. When you work for someone else, you are at the whim of another person’s directive, and as such the fruits of your own labor are not truly your own. Your efforts and talents are used to benefit the company, which is owned and controlled by another, and thus the bulk of the financial rewards do not fully trickle down to you. However, when you run your own business, while the risks are fully attributed to you and your partners, the full tally of benefits are delivered as well. In most cases, becoming a self made entrepreneur requires the assumption of a calculated risk or initial upfront financial investment. However, success sometimes graces people who are simply able to find new and improved way of doing things.

Oftentimes, the best way to become a self made entrepreneur is to take whatever you are good at in your current job and turn it into a self run business. For example, I have a friend who used to work at a landscape company as a manual laborer. After receiving significant exposure to the business of landscaping and the administrative aspects of running such an operation, he ultimately chose to start up his own landscaping company, eventually earning decent profits in the process. As the Internet expands and online commerce grows in popularity, many entrepreneurs such as myself are turning to the web to find ways to make money online. Whether it’s making money on eBay, or generating pay per click and affiliate income with my personal finance or health and fitness blog, aspiring millionaires ought to find ways to break the traditional 9-5 cycle of forever working for someone else. The key to expedited financial independence is to someday get out of the perpetual trading hours for dollars cycle – through self employment and the diversification of alternative income streams.

Make Your Money Work For You:

After generating income and making smart financial decisions based on frugality, the second main series of steps to becoming a millionaire is to take your savings and make them work for you:

6) Start Saving and Investing As Early As Possible – When it comes to saving, the best time to start was yesterday. The second best time to start saving is today. For those set on starting down the path of becoming a wealthy millionaire one day, not only must you continuously enhance and refine your money making potential, you must also find better ways to save that money. Those that want to become rich must make saving money an extremely important priority in their lives and not allow the saving mentality to drift into an afterthought.

As is often mentioned in the lingo of personal finance writers, aspiring millionaires must always “pay themselves first”. Instead of paying down the daily and monthly expenses, and then somehow scrounge up whatever income is left to put into savings, savvy savers must approach savings the right way. The designated amount that you plan to save up each month must be thought of as an expense or bill that must be paid off first. If you wish to save $1,00, $1000, or even $10,000 a month, you must shift those amounts from your daily checking account into your high yield savings bank or your CD ladder savings account immediately before you start withdrawing money to pay off bills or use the money on discretionary expenses like trips to the hairstylist, shopping sprees, or family vacations.

If you can afford to purchase material things and spend your money on life’s little luxuries like your daily coffee or after-work trip to the bar, you most certainly can afford to pay yourself first and save a planned chunk of money as soon as you receive that regular pay check. The key to saving is to make it a systematic practice based on your understanding that delayed material gratification today will beget greater riches in the future as your saved income grows through the magic of compound interest. Remember, frugality and the saving spirit are two lifelong traits of a savvy aspiring millionaire and should never be abandoned.

7) Learn To Manage Debt Responsibly, and Don’t Be Afraid Of Credit - If you genuinely aspire to become a millionaire, you must learn to handle debt instruments responsibly, both long term loans like home mortgages and revolving debt like credit cards. Those who are millionaires are almost always proven users of credit cards and home mortgages – with excellent FICO credit scores to match.

It’s very important to adopt good credit usage habits early on before the bad habits set in. Oftentimes, initial exposure to debt for most people occurs during the early college years in the form of student credit card usage or the taking on of student loans. While these early years are often precarious times for most young people as credit card temptations abound, these are also critical times in a young person’s life when the seeds of fiscal responsibility towards credit and debt are sown. Adults and college students alike, especially those that aspire to become millionaires, must learn to habitually pay off their credit cards in full every month and avoid carrying high interest balances.

Only after you have developed the ability to manage your debt obligations and handle basic credit card usage should you engage in more advanced money making strategies – like the arbitrage use of credit card rewards and cashback programs. Those that know how to use credit cards responsibility should learn to use high reward earning credit cards for all of their purchases, like using a designated grocery credit card at the supermarket, a designated dining out credit card for restaurants and coffee shops, and travel reward credit cards for hotel and airline expenses. Those of you who are able to properly manage your use of credit cards and aspire for millionaire status must develop the continuous and active drive to seek out the best deals and highest free money savings in whatever you do. Millionaires are frequently good negotiators and have developed skills for getting the most bang for their buck. Instead of paying cash for everything and not receiving a single cash back reward or discount in the process, why not use credit cards to make your purchases and earn free cashback bonuses, frequent flyer miles, and reward points without any real significant effort? While it may not make you rich, the credit card rewards can be tremendous – in my case, it’s almost $2,000-$3,000 a year.

The added benefit of active credit card usage is the extra boost it can potentially give to your FICO credit score when used properly. With a higher credit score, you’ll be able to qualify for significantly lower interest rates should you ever decide to take on home mortgage loans or apply for additional credit card offers. While I’m an active participant of balance transfer credit card arbitrage, and have applied for a tremendous number of credit cards over the years, my current FICO credit score is absolutely pristine at 802 (the FICO credit score officially ranges from 300 to a high of 850). This was made possible due to my perfect credit card payment history and my strategic understanding of how credit scores are calculated, as well as my knowledge of what it takes to keep my FICO permanently high.

8) Take Full Advantage Of Tax Deferred Retirement Accounts – If your current employer or employment organization offers employees like you a 401K or 403(b) retirement plan with contribution matching up to a certain percentage of your income, you absolutely must take full advantage. Tax deferred retirement plans like the 401K allow employees to make pre-tax contributions to their special retirement accounts by taking portions of their wages and deferring them into their 401K investments. The great benefit of such retirement accounts is that oftentimes contributions are itself tax deferred as the amounts are taken from your wages pre-tax, and the earnings from your 401K account over its long life are completely tax free when held for the proper period of time.

Within the tax deferred retirement account, participants usually have the ability to invest their account money into a variety of designated stocks, bonds, and mutual fund investments until the time of their retirement. Especially if your employer has a matching 401K where your contributions are equally matched to certain levels by your employer, not taking advantage or making regular contributions to your plan is essentially giving up free money. For typical working class folks, the matching 401K plan is how many of them save and invest significant amounts of money for their retirement. Your goal should be to save up and contribute as much as reasonably possible to such accounts. While retirement may seem so far away in the minds of many young people, the earlier that one starts to save and invest, the better.

Those who are self employed or who do not have 401K’s through their employer but who still want to take full advantage of tax deferred retirement plans should invest in a Traditional IRA (Investment Retirement Account) or open a Roth IRA. These plans enjoy very similar tax benefits as 401K accounts but usually with lower annual contribution limits. In certain cases, those who contribute to a traditional IRA can even enjoy special tax breaks and tax deductions for their contributions, thus lowering their overall tax liability. For most people, the Roth IRA is most advantageous as withdraws in retirement along with the decades of compounded earnings are tax free.

9) Invest in The Stock Market – The stock market is how many people generate significant amounts of money by making wise investment picks and holding for the long haul. In the short run, stock market prices can be volatile and totally unpredictable, but over the span of years and decades (with emphasis on decades), the stock market has historically brought about average annual returns of 8%. Of course, there are bound to be significant stock market crashes and unexpected bull and bear markets during the course of many years, but over a significant amount of time, the vast majority of long term investors have made money. During economic recessions, such as the current credit crisis and housing depression we are undergoing right now, stock prices will inevitably face retrenchment and huge dips. But as billionaire Warren Buffet once remarked, success in the stock market over the very long haul requires an understanding of the interplay between investment fear and greed. As such, it’s very important to continuously seek out bargains and investment opportunities even during the worst of times. It’s how many aspiring millionaires make their riches, by being greedy when the whole world is fearful, and making strategic long term bets during the absolute worst of times.

While stock market investors can participate in the purchase of stocks and options through their own low cost brokerage firms (view my list of the best discount online brokers), a great majority of investors get their primary exposure to stocks through their employer sponsored 401K retirement plans. Whatever the method of exposure, it’s important to invest for the long term. For those of you worried about unpredictable dips and spikes in the stock market, automatic investment plans, whether through your employer’s retirement plan or through automated bank to broker deposits into a mutual or index fund, the key is to keep investing continuously. Automatic investment plans have the added advantage of avoiding the mistakes of buying too much when stock market prices are high and not taking advantage of cheap prices when prices are low. Those that don’t want to deal with the hassle and risk of individual stocks should highly consider low cost no-load mutual funds or broadly diversified index funds that track major stock market indexes. As always, one should always adopt a diversified investment approach and never put all of one’s stock market investment eggs into one basket or company stock.

10) Buy A Home and Invest in Real Estate – While the housing market has been volatile lately, valuations have plummeted, and interest in real estate has waned as evidenced by the drop in house flipping shows on TV, in the long run, home prices have great potential to see positive returns. It’s during those gloomy housing depressions when opportunities and discounted bargains abound. Those that have wisely saved up their money will have the great opportunity to take advantage of such investments during down times through cheaper home prices and home foreclosure bargains. In such down times, it’s even more important to exercise your aspiring millionaire negotiation skills and work out real estate deals that provide for maximum gain. In addition to demanding low ball prices from home sellers, savvy buyers ought to demand significant financial concessions as well, so long as housing supply and demand permit. As always, your home will likely serve the dual purpose of shelter and investment, so you should still make sure you buy a home that fits your lifestyle. Buying too much home may result in the danger of payments that ultimately exceed your ability to pay depending on your mortgage plan.

While the financial and tax saving benefits of the home mortgage interest tax deduction have been greatly exaggerated and blown out of proportion over the years, it’s still an important way for high net worth investors and taxpayers to decrease their overall tax liability. You’re unlikely to find a millionaire who does not own his or her own home. Owning a condominium or a house has traditionally been one of the most proven ways for long term investors to increase their net worth. While in the short term of 10 years or so, home prices can rise and fall like the stock market, in the span of decades due to the finite supply nature of land, home prices inevitably will rise. Of course, the specifics of your real estate purchase strategy should depend on the length of your investment horizon and the remaining time you have left until retirement age.

Updated List Of The Best High Yield Online Savings Banks Below!

With the current flight to quality amidst the widespread economic meltdown, American consumers concerned about the safety of their money and investments are increasing turning to trusted online banks and high yield savings accounts for the FDIC insurance protection they afford. For those of you looking for the best online banks in terms of those that offer the highest interest rates for checking and savings accounts, you’ve come to the right place. The following compilation below is a short list and summarized review of what I believe to be the current top five online banks among the many banking choices in the market today. While most of the high interest banks found online offer similar banking features like direct deposit, online bill pay, automatic savings, and the ability to apply for new high yield savings accounts online, they are not all the same. Certain online banks clearly stand out from the pack in terms of proven high marks and rankings in reputation and customer support. Below, I’ve listed what I believe to be the top 5 online savings and checking banks. As an active high interest bank interest rate chaser, I intend to regularly update the list and my reviews to reflect major interest rate changes and shifts in reader preference.

As a reflection of the much lower overhead expenses that they enjoy, online savings banks tend to offer much better annual percentage yields (APY) for savings accounts, money market accounts, and CD’s than more familiar big banking names like Citibank, Bank of America, JP Morgan Chase, Wachovia, Wells Fargo, and Sun Trust. Even the ones that operate separate online banking divisions apart from their brick and mortar branches almost always reserve their best CD rates and best interest rate promotions for their banking websites. With the growing popularity of online banking and electronic transfer conveniences, high interest online banks like FNBO Direct, WT Direct, E-Trade, HSBC Direct, ING Direct, Countrywide, and Capital One Direct have rapidly surged in popularity. Online banks have certainly come a long way and with the much higher interest yields that they offer, many of the top online savings banks now rival the account management features and reputations of the larger commercial brick and mortar giants.

The following is a short list of the top 5 online banks that I believe provide the best mix of important banking support services and high yield savings rates. Not only do they all provide full FDIC insurance coverage limits for account deposits, all of them have been around and doing business for many years. While some of the online banks may have names that are unfamiliar to some people, you can rest assured that the ranked recommendations on my list have been personally tested and thoroughly reviewed. Without further ado, here is my quick and easy list of the best online banks followed by short reviews.

Reviews Of The Best Overall High Yield Savings Bank Offers In Terms Of Account Features and Interest Rate

1) EverBank – 3.01% APY -  EverBank Review – Highly Recommended!

In terms of high yield money market interest rate offers, EverBank Savings offers one of the highest, if not the highest interest rate deals available. Despite whatever rates have been promoted by other high savings banks, EverBank always seems to be one percentage ahead of the competition in terms of its introductory APY interest rate, which lasts for 3 months with another competitively high rate thereafter. This popular online savings bank has always held particular appeal to those seeking a safe and secure way to earn high interest income. Since its inception, EverBank has won numerous banking award accolades including high praise from CNN Money Magazine as one of its Top 3 Best Of Breed Online Banks. The other two best of breed ranked banks included E-Trade Bank and HSBC Direct. Along with its high interest money market account, EverBank also currently offers a very attractive high interest FreeNet checking account option as well (an attractive interest rate rarity when it comes to checking accounts). The company also offers extra savings options such as special foreign currency denominated deposit accounts for those looking to hedge against currency risk and to get more fancy with their online banking.

2) E-Trade Savings – 0.95% APY – Etrade Bank Review

For some people out there, E-Trade’s appearance on this list of the best online banks may come as a pleasant surprise. Better known for its online discount broker program, E-Trade also runs a traditional banking component as well, featuring high interest savings and checking accounts. For those who want true flexibility and transferability when it comes to moving their money between their E-Trade brokerage account and their online savings, E-Trade’s Complete Saving Account is a recommended choice. Frequently in other cases, the problem with splitting your online savings and your brokerage accounts among different companies is the multi-day lag time required for ACH transfers. With E-Trade, there is no such problem as internal electronic transfers between your E-Trade banking and trading accounts are nearly instantaneous.

3) FNBO Direct – 1.50% APY – FNBO Direct Review

The FNBO Direct high interest savings account is one of my personal favorite choices among the high interest bank offers available. As the online savings arm of the First National Bank of Omaha, FNBO Direct interest rates have always been one of the highest out there. With full FDIC insurance limit coverage for account deposits, and with a very long and reputable history in the banking business, FNBO Direct is one of the safest choices among the top online banks. Currently, FNBO Direct customers enjoy no monthly maintenance fees and no minimum account requirements to enjoy the highest APY rate on their savings account deposits. For the convenience of FNBO account holders, there is even an ATM card option for those who want live, in-person access to their money.

4) HSBC Direct – 1.55% APY – HSBC Direct Review

With a wide international and national banking presence, HSBC Direct is one of the safest online banking choices out there. Not only do they have a growing network of banking branches all over the world, they’ve also been acknowledged and ranked by various reputable personal finance websites like Kiplingers as one of the best cyberbanks out there. HSBC Direct is widely touted for its great customer service, ATM debit card availability, online bill payment feature, and low minimum balance requirement to get the top APY interest rate – just $1.

5) Dollar Savings Direct – 2.00% APY – Dollar Savings Direct Review

Dollar Savings Direct is a newly acquired online banking division of Emigrant Bank, the same people who brought you the Emigrant Direct American Dream Savings Account. As the Internet banking component of Emigrant, Dollar Savings Direct is becoming a popular high interest savings account option for competitive interest rate chasers and those looking for the safety of FDIC insurance coverage. The new Dollar Savings Account is easy to open and offers deposit customers a high yield savings choice with no monthly fees or account maintenance minimums. However, to open a new  account, you’ll need an initial minimum deposit of $1,000, however thereafter, there is no obligation to maintain that amount. Any balance below $1,000 will only accrue interest at a rate of 1% APY.

6) ING Direct – 1.40% APY – ING Direct Review

If you read personal finance blogs or financial articles frequently, one thing that seems to be universally agreed upon is that ING Direct is a great online savings bank. ING Direct is well known and appreciated for its online simplicity and streamlined website interface that makes it easy for both advanced users and novice online banking customers to use. The company’s very popular Orange Savings Account is not only remarkably quick and painless to open, the high yield savings account also imposes no monthly fees or account balance minimums. ING Direct also makes it extremely easy for customers to create multiple sub-accounts to help them plan and manage savings goals and objectives in an efficient, paperless way. Another great bonus feature is that the bank is one of the few major online banks to offer customers the ability to earn free ING Direct referral money for sign ups.

7) WT Direct – 1.76% APY – WT Direct Review

Offering some of the highest APY interest rates for their top rated high yield savings accounts, it’s no wonder WT Direct is a popular option for those looking to get the highest interest rates for their life savings. While there is no requirement to have a linked checking account, and there are no monthly account fees or account balance minimums, a WT Direct savings account deposit balance of $10,000 or more is needed to get the highest top tier rate. This online bank option from Wilmington Trust Savings Bank is a highly recommended option for those with substantial assets. Currently, banking customers get to enjoy unlimited linked external accounts between WT Direct and their other financial institutions or online brokerages. This benefit affords WT Direct customers greater ACH transfer ease and account management convenience. As with all major online banks, WT Direct customers are fully FDIC insured from bank failure or loss within the insurance coverage limits.

In summation, I encourage readers to discuss their views and opinions about my short list of the top online banks that offer the best high yield savings accounts for deposits. Got a gripe or disagreement with my opinion or views? Feel free to vent. If you concur with my selections, I welcome your comments of agreement as well. If you have any further recommendations for those of us looking for the safest places to save or invest money, please feel free to share.

Whether we want to acknowledge the grim reality or not, the vast majority of the American public is undergoing a mental crisis at the moment during this difficult period of economic recession and housing depression. Indeed, this economic slowdown is causing many Americans to struggle financially, and the series of collapses of major commercial banks and investment brokers have led to a domino effect of pink slip closures and layoffs. With the bailout of major global insurance conglomerate AIG and the takeover of mortgage loan giants Fannie Mae and Freddie Mac by the spend-happy federal government using taxpayer money, significant numbers of shareholders and stakeholders have been financially wiped out in the process. Collapsing under the weight of bad mortgage debts and the loss of value in their subprime mortgage loans, major mortgage lenders like Countrywide and investment brokerage banks like Merrill Lynch and Lehman Brothers have had to engage in significant write offs and ultimately put themselves up for sale at bargain basement discounts.

With the FDIC shutdown of major thrifts and banks like IndyMac and Washington Mutual, as well as the shakeup at Wachovia, even historically secure commercial banks are starting to feel the credit crunch squeeze. With the recent bank safety scares hitting Wall Street and now Main Street, bank deposit customers have been sent reeling and scrambling to check FDIC insurance coverage limits – calling their banks to arrange their affairs for sufficient coverage. When FDIC insured bank consumers are feeling uncertain and fearful, you know the confidence of the American people in their banking and credit systems have been significantly shaken. Many people have been left unable to sleep soundly at night, as lingering concerns of bank safety and security have paralyzed the American economy and investment psyche. So what’s a savvy investor and account depositor to do in this brave new world of financial bailouts and bank closures?

To Survive The Credit Crunch, Financial Crisis, and Housing Market Collapse – Seek Out Security, Stay Optimistic, and Look For Opportunities

Without a doubt, the financial, stock, and housing markets remain volatile as the subprime mess has paralyzed lenders, halting the once liquid credit markets. However, whatever you do, it’s best to avoid the “irrational exuberance” (quoting former Federal Reserve Board Chairman Alan Greenspan’s catch phrase) and stay clear of the overly extreme sentiments of certain doom and gloom naysayers. Remember, the economy will survive and the financial system will be repaired in due time – have a little faith.

Take our current energy crisis and oil supply depletion situation for example. Yes, it’s true the world’s supply of crude oil is steadily dwindling and gas prices have skyrocketed recently – however this doesn’t mean the world is going to come to a screaming halt as supply of our beloved dinosaur juice runs low. Even now, the American and world governments are actively advocating and promoting the advancement of new alternative fuels and alternative power sources such as nuclear, clean coal technology, solar, wind, and all types of clean, green energy. Society is infinitely resilient in the long haul and will adapt to changing times and life will go on as usual. Whatever you do, don’t resort to taking up ridiculous survivalist activities such as building a bunker, withdrawing all of your money from banks, giving up credit card usage, or stocking up on food, guns, toilet paper, and supplies to ride out some silly apocalyptic fantasy future that you irrationally conjure up. Unless you are already doing so, there is no need to start making plans to live off the land, move onto homesteads, and start milking your own cows because you anticipate the need to defend your community from the hordes of starving crowds who did not prepare for the supposed eventuality. The world as we know it will not disappear, so discard those wacky conspiracy theories and economic Armageddon notions immediately. Don’t be a nut. Instead, starting planning for a brighter financial future today for yourself and your family by making smart banking and wealth investment decisions for the long haul. When this economic malaise blows over in a few years or even in a decade, your smart financial steps today will reap dividends in spades. It’s during tough economic times that counter-intuitive minded investors profit in the long run, and it’s how future millionaires get made.

Despite the current market sentiment, I strongly advocate long term investors to not overlook continued portfolio diversification opportunities in the stock market through mutual funds and indexes, and to not neglect true long term bargains in real estate and housing. The age old truism and expression in the world of investing is true – that the greater the risk, the greater the return. This mantra is also strongly tempered by another financial axiom of billionaire investor Warren Buffet and his views on the interplay between investment fear and greed – that the smart investor should seek to be fearful when others are greedy and greedy when others are fearful. It’s how savvy long term investors ultimately pay off in their steadfast investment decisions today. In fact, Warren Buffet, who has successfully made billions of dollars by taking advantage of opportunities during the worst of times, has been actively practicing what he preaches, buying up significant value minded investment positions in severely beat down companies like Wall Street investment giant Goldman Sachs for $5 billion and forking over $3 billion for positions in mega technology services provider General Electric. Of course, during these turbulent economic times and periods of extreme stock market volatility, it’s best not to be overly emotional or make hasty decisions based on short term swings. The world is filled with chicken littles and emotional lemmings so it’s all too easy too succumb to hysteria and Street panic. But those who want to survive this economic downturn and emerge from the recession and credit crisis in stronger financial positions than before must maintain their wits and stay focused for the long term, spreading their financial wealth around through diversified investments and continuing to seek out potential opportunities.

But there is a caveat for this long term sentiment. While I personally have 2-3 decades to go before I need to hatch my retirement nest egg, with plenty of time to build up long term investment positions, as well as continuous steady income coming in to continue dollar cost average investing and taking advantage of interest compounding, not everyone is in a similar position. For many millions of people, the money they have at this present time is all the significant amount of money they will ever have and at their age and current stage in life, they simply can’t afford to risk further loss. These types of individuals are focused on asset preservation rather than opportunistic investing and thus for these investors, they need investment security and deposit safety today. For some, it’s also the need to preserve their cash from loss due to the fact they are close to retirement, or saving up for a specific upcoming expense such as a down payment for a new home. Or perhaps they need to maintain a stash of cash to give them confidence and financial safety net courage to continue investing for the long term, while weathering financial emergencies.

For the asset preservation types who want to ensure their current deposits and investments are shielded from bank failures and investment loss, safety is the paramount concern when it comes to selecting the securest place to put their money. But for the conservative types, they also desire a certain degree of liquidity and convenient access to their money. But with the diminished risk of loss at safer places like bank savings and money market accounts comes substantially lower rates of return. Such deposit and investment sources as the ones listed below will offer you more security for your money, but they will not earn you a lot of interest, and oftentimes will just barely keep up with inflation. Keep that in mind as you evaluate your options and perform your due diligence. Furthermore, while being cautious and putting your money into safe and secure investments will preserve you from drops in the stock and financial markets, you run the very real risk of missing out on major market rebounds and valuable long term opportunities.

For those determined to ride out the volatile economic storm by seeking safety, the following options are the best choices when it comes to answering this question – “what is the safest investment for my money to avoid the risk of loss?”

List Of The Safest and Most Secure Places To Save and Invest Your Money During A Recession Or Economic Crisis:

1) Bank Savings and Checking Accounts – Of all the ideal places to store your money during the worst of times, other than in U.S. Treasuries, the best place is in a traditional bank account. While the rate of interest return on bank account deposits will never beat the long term rate of return on a properly diversified stock portfolio, depositing your cash in something like a high yield savings account is the easiest and most practical solution for those worried about the safety and security of their money. For those searching for the best high yield savings accounts offering the highest annual percentage yield (APY) interest rates, here are the best online savings banks out there (all of the following recommended high interest banks are fully FDIC insured, and all account deposits are protected under the FDIC insurance coverage limits):

1. FNBO Direct – 3.50% APY
2. WT Direct – 3.31% APY
   
3. E-Trade Savings – 3.30% APY
4. HSBC Direct – 3.25% APY
   
5. ING Direct – 3.00% APY

In terms of safety, reliability, and liquidity, putting your money in a bank account is the easiest and most straight forward savings option. Not only is your bank deposit earning interest, it’s FDIC insured and easily accessible. The Federal Deposit Insurance Corporation (FDIC) is a federal government run enterprise that provides insurance coverage and protection for the deposit accounts of participating member banks, guaranteeing their insured accounts from unexpected loss. While FDIC insurance coverage limits vary depending on the number and type of account ownership categories you have at each bank, the rule of thumb to remember is that for each individual, the FDIC protects up to $100,000 in deposits at each banking institution for each ownership category. This means that at each FDIC member banking institution such as Citibank or Bank of America for example, each individual may be insured up to $100,000 for a single account and get additional coverage – like a separate $100,000 coverage limit for a joint account with his or her spouse. Furthermore, for retirement accounts like IRA’s, Roth’s, SEP’s, and Keogh’s held in a member bank in the form of a bank deposit (as opposed to something like a mutual fund), there is also an extra but separate $250,000 FDIC insurance coverage limit.

While skeptical investors and chicken little depositors might cite the recent failures of major commercial banks and thrifts like IndyMac and Washington Mutual as reasons to be wary of the safety of commercial banks, the reality is that in all of the recent bank failure scenarios, all of the FDIC insured deposit accounts that fell within the coverage limits were fully protected from loss. Even amidst the current mortgage crisis and credit crunch, the great majority of commercial banks are considered well capitalized. The possibility of a bank failure and the probability of a sudden FDIC takeover is extremely remote. However, even in the event that a bank does happen to fail, consumers would continue to enjoy uninterrupted and easy access to their FDIC insured bank money.

It is also interesting to note that since the FDIC was established three quarters of a century ago after the Great Depression, no banking customer has ever lost a single penny of their FDIC insured deposit at any failed bank. Your commercial bank may go out of business or suddenly be unable to continue operating as a viable banking institution, but Uncle Sam, bolstered by the virtually unlimited financial resources of the federal government will back up your money in full, up to the guaranteed FDIC insurance coverage limit. Even in the event that allotted FDIC funds become tapped out, the federal government can always authorize itself and the U.S. Mint to print emergency money. It is almost inconceivable to me to even fathom the possibility of the FDIC failing or the FDIC funds to somehow go bankrupt. Such a dire failure would probably require that the United States federal government suddenly cease to exist or be in such horrible shape that losing your checking or savings account deposit would probably be the least of your concerns. At that point of Armageddon, you’d probably be better off investing your remaining money in guns, canned food, and a nuclear fallout bunker. There is a reason why the whole world turns to the U.S. for economic, political, and militarial stability and guidance – we have the most powerful, tried and true system in the world. It’s not perfect, but it’s extremely resilient and will ultimately overcome struggles in the long run.

2) Laddered Bank CD’s – While putting your money in a high interest savings account is your best bet in terms of account safety and liquidity, those who seek a slightly higher APY rate of return may want to consider dabbling in bank certificate of deposits (CD’s). CD’s can be found and purchased through commercial banks and certain deposit brokers (view my list of the best online brokers), and along with regular bank deposits, are both considered very safe investments. Like checking and savings accounts, certificate of deposits are also insured up to $100,000. However, do keep in mind that for each individual customer at each banking institution, checkings, savings, and CD’s are lumped into a single FDIC insurance category for coverage purposes.

While CD’s tend to offer fixed interest rates that exceed that offered by checking and savings accounts, the catch is that unlike the variable interest earning bank deposits, your CD deposit is locked into a fixed interest rate at the time of investment. When purchased, the CD account has a set maturity date such that if withdrawn too early, the CD funds will incur an expensive penalty. When you buy a CD via your bank, you invest a fixed sum of money for a fixed period of time €“ anywhere from six months, one year, five years, or longer. In exchange for your agreement to keep the money invested and locked for the pre-arranged period of time, the issuing bank pays you a high interest rate, typically at regular intervals throughout the year. When you cash in or redeem your CD, you receive the money you originally invested plus any accumulated interest. But if you withdraw prematurely, an early withdrawal penalty may cause you to forfeit a chunk of your original investment.

While CD’s enjoy higher interest rates than traditional savings accounts, the potential hassle with CD’s is that once locked in, their rates of return have a potential to lag behind and become surpassed by variable high yield savings accounts if those interest rates rise. The best way to get around this problem is to ladder your CD investments by purchasing CD’s with staggered maturity dates. For example, for those buying CD’s for a period of just a year, one could purchase multiple CD’s, maturing at dates of 1 month, 3 months, 5 months, 7 months, and so forth, thus ensuring that you will always have money coming in and cash on hand at set intervals. CD ladders are a good idea for those wary about locking up their money for long periods of time, but you have to choose the lengths and maturity dates you’re comfortable with, otherwise you’ll toss and turn at night and stress about your lack of liquidity in case of a financial emergency.

3) U.S. Treasury Bills and Bonds – U.S. Treasury Bills, or T-Bills as they are often called, are extremely secure debt instruments issued by the U.S. federal government. They are mostly notably used by large institutional investors and individuals with substantial assets during times of economic crisis and societal instability when there is an instinctual flight to quality. However, I tend to stay away from these bond instruments and rarely invest in them. Their fixed rates of return are terrible and simply too low for my liking. While they offer rock solid protection backed by the full faith and credit of the federal government, the interest rate yields for U.S. Treasuries are often low and based on auction driven demand. Because Treasury rates of return are based on bidding demand that’s heavily influenced by societal factors, during times of economic crisis or political instability, rates of return on U.S. Treasury Bills and Bonds can plummet. During major economic depressions and recessions, U.S. Treasury yields can sometimes even go negative, that is, investors are willing to accept a small destruction of their investment to guarantee no larger destruction.

While U.S. Treasuries generally provide almost laughingly low rates of return on investment, they provide near iron clad safety and protection for your money. Treasury Bills are essentially “IOU” debt instruments issued by the United States federal government to any consumer, business, or institutional investor willing to buy them, and they are used to pay off the U.S. government’s own maturing debt paper and to pay off its own bills. By issuing short term U.S. Treasury Bills, mid term Treasury Bonds, and long term Treasury Notes to consumers, buyers essentially lend the government money in exchange for a fixed rate of return and a solid promise by the U.S. government that the debt investment will be repaid back in full upon maturity due date. Along with FDIC protected banking assets, the world also regards U.S. Treasuries as credit risk proof – the perfect place to store money for the extremely risk adverse.

U.S. Treasuries range in maturation from a few weeks for the short term T-Bills to as long as 30 years for the Treasury Notes. Of course, the longer the maturation date, the higher the fixed interest rate the U.S. debt instrument pays out, same as the case with ordinary bank CD’s. Same as with CD’s, for those who want to inject greater liquidity into their Treasury investments, they may want to consider laddering their Treasuries as well, by purchasing multiple U.S. Treasuries simultaneously offering different maturity dates. The recommended way is to purchase multiple Treasury bills and notes that will expire at regular set intervals and have them automatically rolled over into newly issued Treasuries for continuous interest earning effect, but still maintain a semblance of liquidity.

The simplest way to purchase U.S. Treasuries is to go through the federal government’s Treasury Direct website. There you can follow the instructions to open a new account for individual investors by providing your personal and financial information such as name, mailing address, Social Security Number, bank deposit account, and bank routing number. You can purchase as little as $100 worth of U.S. Treasury “IOU’s” (the current minimum investment) or you can purchase millions of dollars worth. While there is a competitive bidding process of yield prices, most ordinary non-expert individual investors can opt for the non competitive process and simply agree to the current spot offering rate. As such, the service is probably more beneficial to extremely wealthy investors unable to find full protection under the FDIC limits and needing to preserve their millions of dollars in extremely safe lock box type of accounts. There is currently no limit to the amount of U.S. Treasuries that may be purchased and interest income derived are exempt from state and local taxes.

4) Money Market Funds – Money market funds are conservative mutual funds that invest in short term, stable debt instruments, high quality securities, and other forms of top rated short term commercial paper that can be easily sold, making the likelihood of any loss of principal extremely rare. Unlike traditional mutual funds and index funds, asset preservation minded money market mutual funds do not invest in stocks, which while lends itself to greater stability, also results in a much lower rate of return compared to their growth oriented counterparts. While most mutual funds, particularly those that invest in riskier stocks and investments are not all that safe and secure from investment loss as they ebb and flow with the economic cycle and the plight of underlying corporations, money market mutual funds tend to substantially more stable.

However, while money market mutual funds have been traditionally regarded as solid and reliable investments, they are not without a tinge of risk, depending on the composition of the money market fund’s portfolio. While the great majority of these funds have never lost money or failed, recent money market fund events in the news have sent a chill through the financial world. Recently, the Reserve Primary Fund, a giant money market mutual fund, announced its investors would lose money. Instead of each money market fund share being worth the customary $1, each would now be worth 97 cents, essentially “breaking the buck” in the process, forcing investors to eat a 3% loss. The loss was triggered by the fund’s purchase of debt securities issued by Lehman Brothers with a face value of $785 million that ultimately became worthless, as Lehman Brothers ultimately spiraled into bankruptcy and ended up on the chopping block for sale due to failed investments in subprime mortgages.

The moral of the story in terms of flight to quality is to seek out high yield bank accounts and U.S. Treasuries for safety first before seeking out money market funds. While money market funds are significantly more secure than stock based mutual funds and are generally still considered decently safe places to invest your money, in today’s dangerous and ever shifting credit markets, they simply do not offer the same 100% protection as that offered by savings accounts, CD’s, and U.S. Treasuries.

5) Gold Investments – This is most definitely not a recommendation but rather the raising of another interesting alternative way to hedge against economic risk, inflation, and the weakening dollar. I hesitated to even mention gold and such hedged investments against risk, but everytime the economic and credit markets head south, the subject of buying and investing in gold always comes up. Gold, silver, and other valuable commodities are tangible material investments that always skyrocket in value during difficult economic times. When there is political and social instability due to frozen credit markets or news of terrorist attacks that shake up the financial system, the housing market, or the stock market, the value of commodities not tied to a variable money system but that is instead linked to underlying rarity based on exchange driven supply and demand goes up.

But remember, buyers beware – one thing to keep in mind is that gold is just like any other investment – it’s still a bet against economic times and prices do fluctuate with great volatility. Like with any other educated bet, your gamble may pay off big or backfire significantly. While prices of gold are almost certain to remain high as the economy flirts with a full blown economic recession and the financial markets continue to flounder, prices of gold have the potential to decline significantly should there be signs of an economic recovery. Thus for the conservative investor who is seeking a flight to quality in his or her investments with pure asset preservation in mind during times of economic instability, I would recommend treading with great caution when it comes to investing in gold. Unless you have experience with gold investments, stick with Treasuries, high yield bank accounts, and CD’s instead.

Updated Selection Of The Top Credit Card Rewards For Each Spending Category

The economy may be struggling with higher gas prices and soaring food costs, and families may be reluctantly tightening their financial belts when it comes to spending money on vacations and even cutting back on basic necessities, but according to a Forbes personal finance article, many of us are under-utilizing a potential source of free money. This source of extra funds stems from loyalty programs, commonly in the form of credit card rewards programs that offer everything from frequent flyer miles for free airline tickets, to free gas and grocery discounts, to free gift cards and straight up cash incentives for everyday purchases. In exchange for becoming a loyal user of their reward credit card program, card issuers are very willing to dish out a large variety of attractive rebates and rewards in the form of free dollars, miles, and redeemable reward points.

While I personally prefer cash back credit card rewards that require little to no redemption maintenance actions, those who want to earn the highest credit card rebates generally go with point rewards or airline mileage offers that provide higher earning opportunities. Of course, with the higher rebate rewards comes the extra work of redeeming and keeping track of bonus points and miles earned. But if you are savvy and don’t mind engaging in a little bit of periodic program micro-managing, you are bound to enjoy quite a bounty of credit card usage incentives.

Oftentimes, card holders are already earning and may already be sitting on a pile of unredeemed rewards that they are neglecting to use. By not taking advantage of already earned points and rewards, consumers are letting these tax-free windfall bonuses slip through their fingers. Make sure you take a good look at the programs you are already a member of. For those of you who are not members of any or wish to know which credit card reward programs are considered by financial experts and noted by authoritative sources like Forbes to be the best credit card offers available based on program flexibility, broad acceptance, and annual fee restrictions, read on. The following list of the best credit card rewards programs were selected by contributors from Forbes based on the following reward categories – airline travel, hotel rewards, restaurant rebates, entertainment rewards, grocery rebates, gas rewards, and your most basic cash back rewards. I offer my own opinionated tidbits as well.

Reviews Of The Top Credit Card Reward Programs Noted By Forbes and Its Credit Card Eggheads

Airlines

1) Miles By Discover – With the Discover Miles card, you get Double Miles on travel and restaurant purchases. One Mile for every dollar on all other purchases. You are free to earn unlimited mileage rewards and enjoy no expiration date limitation. The miles you accrue can be redeemed for free travel including free airline tickets, and for gift card rewards. There is also no annual fee to worry about.

2) Platinum Delta Skymiles® Amex Credit Card – With the popular American Express card for Delta Airlines, you earn 1 mile for every dollar spent on eligible purchases, good for future free flights. However, you get to earn double miles on every qualifying dollar spent at gas stations, supermarkets, drugstores, home improvement stores, and post offices. As an additional incentive, new sign ups get an instant 20,000 bonus miles after their first purchase. The miles earned never expire, and there is no cap limit to the total number of mileage rewards that can be earned. There is a $150 annual fee.

3) JetBlue Card From American Express – With the Jet Blue Airlines credit card, you earn 1 Award Dollar for every one dollar you spend with it. However, you get to earn double Award Dollars on purchases for travel, dining, entertainment, and leisure. With the conversion rate of 200 Award Dollars for 1 TrueBlue Point, and 100 TrueBlue points equating to one free round trip airline flight, cardholders can earn a free flight after spending $10,000 worth of purchases on double point category expenses. As a special signup card offer, new applicants earn an instant 50 TrueBlue points with their first purchase. The annual fee is $40.

4) Chase Travel Plus Visa Card – With the Chase Travel Plus, you can earn 1 mile per dollar spent on all purchases. Your purchase rebate miles can be redeemed for airline tickets, hotel stays, cruises and car rental rewards. You are free to decide on how you’d like to spend your loyalty credit card rewards. Your mileage rewards also enjoy no blackout date restrictions.

5) Capital One No Hassle Miles – With this popular card from Capital One, you earn 1.25 miles for each dollar spent on all purchases. With the mileage reward redemption, there are no blackout dates and no airline seating restrictions. There is no expiration date for the miles earned and no limit on the mileage rewards you can accrue. This Capital One card is a great choice for someone who plans to use the card often.

Hotels

1) Starwood Preferred® Guest (American Express) – The Starwood Preferred card is the Swiss army knife of frequent flyer and hotel loyalty reward cards. You get to earn 1 Starpoint for every dollar spent and double Starpoints at Starwood hotel properties and participating retailers. With the Starwood card, you can earn points for free night stays and upgrades at a huge number of Starwood hotels and international resorts. You can also transfer your Starpoint rewards to select frequent flier programs. The first year’s annual fee is waived, but it’s $45 thereafter. The annual fee after the first year is worth it if you love to travel and do so regularly.

2) Hilton HHonors® Platinum Credit Card – This is a nice Amex card to carry around if you are a frequenter of Hilton family luxury hotels (if you haven’t stayed at one before – let me tell you, they are really high class). With the Hilton credit card reward program, you earn 3 bonus points for each eligible dollar spent. You get more points – 5 points per dollar for money spent at Hilton hotels. There are no hotel blackout date restrictions and no annual fees.

Restaurants

1) True Earnings Costco Card From American Express – Most dining credit cards only cover fast food places, but the True Earnings Costco credit card covers all restaurant purchases. With the True Earnings rebate rewards card, you earn 3% for annual gasoline purchases of up to $3,000 (1% thereafter), 3% for restaurants, 2% for travel, 1% everywhere else, including Costco. There is no annual fee if combined with your paid Costco membership.

Entertainment

1) American Express® Gold Card – With this classy gold card from Amex, you earn 1 point for virtually every dollar spent, with no preset spending restriction or limit. This card was designed for cardholders who desire exclusivity and special access to unique Gold Card events like exclusive tickets for select concerts, entertainment shows, and sporting events (Super Bowl for example). Reward points can be redeemed for various travel, shopping and entertainment rewards. With the special sign up offer, applicants can earn 10,000 Membership Rewards(R) bonus points when you spend $500 in 3 months – redeemable for a $100 gift card. The first year’s annual fee is waived but it’s $125 thereafter.

2) Disney Rewards Visa Card from Chase – With this cute Disney reward credit card (there are multiple designs to choose from), you earn 1% in Disney Dream Reward Dollars for all purchases. With the Disney card, you are also eligible for discounts at Disney resorts and parks like Walt Disney World and Disneyland. This card has no annual fee.

Groceries

1) Capital One No Hassle Points Rewards – With this no hassle (pun very much intended), point based credit card from Capital One, you earn 2 points per dollar spent on purchases at grocery stores, gas stations, and drugstores. You also get 1 point for every dollar spent on everything else. There is no expiration date for your accrued reward points and no limit to the number of points you can earn.Gas

2) The Chase PerfectCard – With this perfect card (another silly pun for me), you earn 6% rebates on gas purchases made at any gas station for the first 90 days. Thereafter, you still get to earn 3% reward rebates for gas. For everything else, you earn 1% back. There is no annual fee.

Cash Back Rewards and Rebates

1) Blue Cash® from American Express – If you are a big credit card spender, the Blue Cash credit card was designed for you in mind. With this card, you have the potential to earn up to 5% cash back with unlimited cash reward earning potential. The rebate percentages are based on a tiered system so the more you spend, the more cash back you earn per dollar spent. Best of all, there is no annual fee. If instead of American Express this card was offered by Visa or MasterCard, it would indisputably be the very best credit card rewards program available.

2) Capital One No Hassle Cash Rewards – With this Capital One cash back credit card, you earn up to 3% cash back on purchases at gas stations and grocery stores as well as a full 1% cash back on everything else. There is no limit on cash back earnings, and your rebate rewards never expire – hence the “no hassle” moniker.

3) Chase Freedom (SM) – Who doesn’t like the ease of a cash back credit card? With this extremely popular Chase credit card offer, you get to earn 5% cash back offers in popular categories like gas, home improvement and department store.  Full 1% Cash Back on everything else – no spending tiers or caps on how much you can earn.  Up to an additional 20% cash back at select merchants when you shop online through Chase.