A number of major issuers of credit cards in the USA are offering no-annual-fee credit cards. These will allow consumers a 1.5% cash back on every purchase they make using these cards. Barclaycard (NYSE: BCS), Wells Fargo (NYSE: WFC), Capital One (NYSE: COF), U.S. Bank, and Chase (NYSE: JPM) all give their customers 1.5% cash back. Citi gives its customers even higher rewards. Its customers receive 1% cash back for every dollar they spend and an additional 1% for every dollar they repay against the card.
These schemes will bring a significant change to the credit card industry. It will allow you to earn hundreds of dollars in a year without spending extra to avail cash back offers.
In 2013, Capital One started offering 1.5% cash backs on their Quicksilver cards. Also, they did not charge any annual fees. It became a trend and more and more major issuers followed suit in the next three years. Soon the credit card industry had no-annual-fee credit cards such as the Barclaycard CashForward, Wells Fargo Cash Wise, Chase Freedom Unlimited, U.S. Bank Cash 365, and the Citi Double Cash. Although these issuers are offering the same cash back offers, they are slightly different in their redemption options, sign-up bonuses, and 0% APR periods.
Is 2% the future?
If all major issuers start offering a flat rate of 1.5%, you can be rest assured that someone is going to change something very soon. But putting your finger on that something is going to be difficult. Till now, there are only two issuers who provide customers with a 2% cash back – Citi and Fidelity. Users of the Fidelity Visa can get a reward of 2% if they deposit their earnings in their Fidelity accounts. It is, however, not the traditional idea of cash back.
These are the only examples. In fact, they can be considered as outliers. A credit card expert with NerdWallet, Sean McQuay believes majority of big issuers are going to stick with the standard 1.5%. Economically speaking, going above that 1.5% does not make much sense. He believes banks will have to provide their customers with a lot of other options and offers within this 1.5% category. Or else, it will become extremely difficult for the banks to stand out.
Consumers will have to think about the long term value when selecting between the numerous credit cards offering 1.5% cash back. Select the most generous card for yourself.