August 17 2007
By MoneyBlueBook

I don't carry around much cash but instead prefer credit cards, specifically credit cards that offer great rewards for using them. I believe in fully maximizing one's money potential. If you are going to pump that gas or buy groceries, why not get 3% or even 6% cash back while you're at it? Why not be able to redeem a percentage of your daily purchases towards gift cards? It's just smart money in my opinion.

Of course, carrying and using credit cards to make all of your purchases has its own risks. There is always the the matter of the large balance that remains to be paid off when your credit cards become due each month. However, if you're a responsible credit user and can budget wisely, then credit cards are the way to go.

Find the right credit card for you

What type of card do you want?

Low Interest Cash Back Low Intro Rate Balance Transfer Gas Rewards Credit Card Deals Miles/Points Student Credit Cards Business Credit Cards Bad Credit

How much do you charge per month?

• More than $2,500
• Less than $2,500

Do you carry a balance?

• Always
• Sometimes
• Never

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Here Are My Top 3 Favorite Reward Credit Cards and 1 Other Optional Worthy Mention:

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1) Citi Driver's Edge Mastercard - Get up to 6% back on gas, groceries, and drugstores for the first 12 months, and 1% on everything else.

After 12 months you'll get 3% back for purchases in those categories. You'll also receive points for driving your vehicle based on mileage accrued. Just send in periodic mileage updates whenever you perform automobile maintenance work and you'll get reward points for the mileage driven. As a driver, you'll have the edge! :) The rebates must either be redeemed for car-related repairs (tires, oil change) or via the Citi Thank You Network. Thank You Points can be redeemed for gift cards, cash towards student loans, or statement credits. There is no annual fee.

2) Citi mtvU Platinum Select Visa card - Get up to 5 Citi ThankYou Network Points for every dollar you spend at restaurants, bookstores, record stores, movie theaters, and video rental stores (equivalent to 5% back).

This includes Starbucks and Amazon.com! This is a credit card for students that offers reward benefits not found in other "grown up credit cards". The rewards offered by this card would be equivalent to a 5% rewards card if the points were later converted into gift cards or other merchandise. Since this is a student card, it also offers you 250 to 2,000 Thank You Points twice a year for maintaining a good G.P.A. You'll also receive 25 Thank You Points a month for paying your bill on time and not going over your credit limit. So if you maintain a 4.0 and pay your bills, you'll receive an extra $43 for free every year. There is no annual fee.

You Have To Be a Verifiable Student To Qualify - The company will request that you send in a copy of your tuition bill and a copy of your student ID with your active semester sticker attached. You may or may not get asked. It also doesn't matter if you're a college or graduate student. Any type of student status will qualify. But if you can qualify for the card, go for it! I obtained the Citi mtvU card a while back and have been using it as my primary restaurant reward card. I eat out often so it's great to be getting 5% back on every restaurant purchase. If you do not qualify for this card, then substitute this card with the optional Chase Freedom Card, reviewed below.

3) Fidelity Investment Rewards Signature Visa - Get 1.5% cash back on every purchase.This excellent card pays you 1.5% cash back on all your purchases. You accrue 1 Word Point for every $1 you spend. When you have accrued 5,000 points, you can convert them into a $75 credit payable towards your Fidelity Brokerage Account.

The Fidelity Investment Rewards card is the best rewards card of its kind. Most rewards cards pay 3% or 5% for purchases made at certain categories as grocery stores, drug stores, convenience stores, or at restaurants, but only 1% towards everything else. The Fidelity Investment Rewards card is the only one that offers 1.5% for everything else, such as eBay, health care premiums, parking tickets, etc.

Note: You must have a Fidelity Brokerage account to convert the World Points into cash. You'll need $2,500 minimum to open the Fidelity account, but you can simply take the money out after opening it. There is no annual fee.

If You Can't Get the Citi mtvU Card Because You're Not a Student, Here's An Alternative:

4) Chase Freedom Signature Visa Card - Get 3% cash back each month for every $1 spent on the first $600 in eligible purchases in your top 3 spending categories (out of a pre-defined set of 15).After the first $600, you continue to earn 1% cash back for every thing else.

This card is a great substitute for the mtvU card if you don't qualify for it. It offers 3% cash back for many categories of purchases not normally covered by other cards, such as utilities and cell phone bills. When you have accrued $50 in cash back rewards, you can cash out immediately, or if you're patient, you can wait until you have accrued $200 in rewards to get an extra $50 bonus, for a total of $250 cash back. That makes the (3% / 1%) card more like a (3.75% / 1.25%) card. Unfortunately, this card doesn't offer extra cash back for ordinary restaurants (it only covers fast food joints). If you want more than 1% cash back for restaurants, you'll need to qualify for the Citi mtvU.