Hi, I checked the FAQ and tried to search the archives without luck.Wells Fargo is offering 1% cash back on credit card purchases. (I wonder, do other banks offer more?) I pay $60/yr to a credit card company for receiving one mile per dollar now on my airline of choice. Roughly pre-tax those equate (1000 miles is worth about $10, though for some tickets a mile might be worth more than a cent).Do I owe taxes on the airline miles? If not they are clearly the better deal. The cash back must be taxable.
To answer part of my question, yes some banks do offer more. This page says National City gives up to 2%, capped at $1000/yr cash back.http://www.creditcards.com/credit-cards/cash-back/
Do I owe taxes on the airline miles?No.If not they are clearly the better deal. The cash back must be taxable. Oddly enough it isn't. This falls in the category of nontaxable rebates. See IRS Publication 525.Phil MartiVITA Volunteer
Thank you, pmarti. I must be behind the times and will look into the fine print on some higher rebate cash back cards. Patti Smith said it thirty years ago: that's free money.http://www.beatgeneration.republika.pl/PattiSmith/teksty/freemony.htm
Wells Fargo is offering 1% cash back on credit card purchases.If you're shopping for a new credit card, you may want to look at the TMF credit card. It comes in three versions: (1) low rate, (2) cash back, and (3) WorldPoints. You can get more info by clicking on the icon on TMF's home page.I urge caution with airline frequent flyer miles. In the current economic environment, the airlines seem to be increasing the miles needed to claim rewards, and when airlines fold, their frequent flyer programs often fold with them.David JacobsTMFDj111
In my shopping around I have concluded that 1% cash back beats any mile card I have found. This is how I look at it:1) Most airlines require 25,000 miles for a flight.2) Just about any flight nowadays (lowest fare class) is between $200-$300.3) Often, Miles can only be used for the lowest fare class seats. I often cannot uses miles for any weekend travel (no "miles" seats left) even when purchased in advance. I can choose to pay 50,000 miles to avoid some limitations, however.4) Therefore, I put a cash value on a mile by saying that typically 25,000 miles gets me a ticket worth $250, or 1 cent a mile. So I need to purchase $25,000 dollars on my mile card to get a flight.But 1% cash back gets me the same thing. $25,000 dollars charged on a card earns me $250, which I can use to buy an airline ticket. OR I can use it for other things. Since it is cash, it my decision.And yes, since airlines ARE changing their miles programs, I have only found that it takes more mile to go where you want, and there are more limitation, making it harder to actually use the miles to fly when I want. Additionally, there are very few no-annual-fee miles cards.So given all of this, I stick with a 1% cash back discover.
True on all points, just a couple things I'd point out...First, cash back cards are typically tiered rewards, so you have to spend a certain amount to get their highest published rates (Or even carry a balance, but that's another topic). Typically though, 1% back is not hard to obtain.However, Airline miles are even easier in my opinion... I'll talk about American Express Gold Delta right now. Right off the bat you are thinking yearly fee. Yes, there is one. But if you are a new customer, talk to the CSR, they will waive it for you if you have good credit. And anyway, as you'll see below the $85 maximum fee ($30 if you have another AMEX card and waived through various promotions) is well worth it for what you get. Back to the actual awards you get though.... First, you get 10,000 miles for just opening an account, and during some promotions that amount goes up to 25,000. 1.5% back is the minimum you get on all purchases. In other words, 1 mile per dollar is the minimum exchange rate and miles are generally considered to have a value of 1.5 cents (Although in the above example it is assumed 1 cent per mile, so even for argument sake we can assume that is true as well, although it mostly depends on where you want to fly). So, with 1 cent per mile, you're at a flat 1% return without having to meet any tier, plus the 10-25,000 miles up front. Then they have always double rewards for gas stations, groceries, post office, phone bill, etc. That pushes you up to 2% without doing a thing. Then they have double miles promotions on top of that at different times during the year, giving you 2% on everything and even more in some instances. Also, with the card you can get even more "bonus" miles for some purchases. Such as ATT phone bill, 5,000 bonus miles (one time) for using the card to pay your bill in addition to the 2% back. Really, I'm a bigger fan of rewards such as this. What do these miles get you? 25,000 is typically a round trip flight in lower 48 with some blackout dates, 50,000 miles removes the blackout, but just be flexible with when you travel and you'll be fine. If you can't be flexible, put the trip on your card, get the miles for the trip itself (You can easily get 5,000 miles for even a short flight since you'll get the 500 for flying, 1 mile per dollar, 2,000 bonus for ticketing online, and 1,000 bonus for signing in using their new e-kiosks everywhere (Promotions are added and changed all the time, check www.delta.com for the latest or frequent flyer sites for links to special promotions). Even better (In MHO) than using the miles to get full tickets is using 10,000 miles or so (Depends on length and route of flight) to upgrade to first class. It can get into a lot of miles, but upgrading to first class on an overseas flight is definitely a worthwhile expenditure in miles (6'2" people don't like coach, and I'm the shortest in my family besides my mom).And Airline miles aren't the only rewards. I got the BP Visa from BankOne and they give 3% on gas, 1% on everything else with other random promotions built in, including 6% back on gas and 2% back on everything else for the first 6 months. Once again, not a tiered reward and much better rates. True, the reward for this card comes in gas credit (They send you a $20 pre-paid card every time you reach the $20 rewards level), but that's something you buy anyway so in my view, it's as good as cash. If they sent you the reward in cheese or something you personally don't buy, then it wouldn't be worth it. But for anyone who flies or drives, my vote is on the rewards cards.-gapper
The highest cash back rate other than special rates for certain partners that I could find is the American Express Blue Cash Card.For accounts with total annual purchases between $6,001-$50,000 they pay 1.5% or 3%. No annual fee. They credit the rebate yearly. Purchases at supermarkets, gas stations, drugstores, and home improvement stores earn the higher "everyday" rate. For revolving accounts which I don't think anyone here would recommend, an additional 2% is computed for that part (that's where the "5%" comes from in their ads).Annual NonPurchases everyday Everyday_________ ________ ________$0-2000 0.25% 0.5%$2001-6000 0.5% 1%$6001-50000 1.5% 3%over $50000 0.50% 2%American Express has 1,000 different credit cards. The percents above are available if you call them and ask them to read you the "8 tier rebate chart." Every person I have ever talked to at American Express has given first rate customer service which, sadly, is not so true many places anymore.http://www.americanexpress.com/cards/
Annual NonPurchases everyday Everyday_________ ________ ________$0-2000 0.25% 0.5%$2001-6000 0.5% 1%$6001-50000 1.5% 3%over $50000 0.50% 2%
If I can offer one other cash back suggestion, look at Chase Stockback. It's a flat 1% (no tiers, no urge to spend more to get to the next tier) with some "bonuses". There are certain stores listed at stockback.com which give a higher percentage of cashback. Plus there's other rebate programs that Chase bundles in. If you do decide to apply I would recommend telling them you do not want any promotional offerings. Otherwise your mailbox will be flooded with junk and convenience checks.
If I can offer one other cash back suggestion, look at Chase Stockback. Chase Stockback especially for online shopping, does have excellent partner deals (though I decided on the simple 1.5% minimum anywhere).http://www.stockback.com/jsp/shop/shop.jspIf you do decide to apply I would recommend telling them you do not want any promotional offerings. Otherwise your mailbox will be flooded with junk and convenience checks. Thanks for the warning.
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