The Best Credit Card

The Best Credit Card

A common question people ask about credit cards is “what is the best credit card?” I have never felt like there is a “best” or “#1” credit card, because every person is different, with different spending, and different aspects of spend they are optimizing. So my #1 could be very different from your #1.

In this post I want to go over the questions to ask to determine your “best” card, and how I got to my #1 card. The tangential question this blog should also answer is “If I could only have 1 credit card, what would it be?” If you are a passionate traveller, then a multi-card setup is more optimal, but will save that for another post.

Team Cash Back vs Team Points/Miles

The first question is whether you prefer cash back or points/miles. A credit card has multipliers on spend, (1%, 2%, 3%, etc) and you receive the appropriate amount back. For example, if you make a $100 purchase and the credit card has 2% cash back, then you’ll receive 200 cents ($2) back. If the card earns points/miles then you’ll typically see that as 2X back, so in our previous example, that would mean 200 points back.

I will have a post in the future to breakdown the pros and cons between the two setups. However, I am biased, and I am on Team Points/Miles all the way because there is SIGNIFICANTLY more upside.

Cash Back

If you are team Cash Back, then the next question is determining what categories you spend the most on, and identifying cards that meet that spending. For example, listing a few cards below:

• Amazon Prime Card: 5% on Amazon & Whole Foods
• Citi Custom Cash: 5% back on highest eligible spend category up to $500/month
• BOA Custom Cash: 3% back on category of choice up to $1500/quarter
• Citi Double Cash: 2% back on everything

Team Cash Back should always be looking for a minimum 2% return, because the Double Cash always earns 2% on every purchase. Check my post for more information about cash back credit cards. Overall, cash back cards are straightforward, and the value is easily measurable.

Points & Miles Basics

Points and miles are where things are lucrative and there’s a game to play (Did I mention I stayed at Park Hyatt NYC for New Years?).

To get this section started, let’s get some definitions out of the way.

• Annual Fee: The annual cost of having the credit card
• Effective Annual Fee: The annual cost of the credit card after accounting for the benefits
• Sign Up Bonus: The initial bonus a credit card has when you apply. Usually involves a spend component and time duration (e.g. Spend $4000 in the first 3 months)
• Spend Multipliers: The multiplier received on certain spend categories
• Transfer Partners: Airline and hotel partners that allow credit card holders to transfer their credit cards points to the currency/loyalty program of the respective airline/hotel.
• Flexible currency: Points that can be transferred to multiple transfer partners. Transfers are one-way, meaning that once the flexible currency is converted to the currency of the airline/hotel it cannot be converted back. There are five major flexible currencies, one from each major issuer: Ultimate Rewards (UR — Chase), Membership Rewards (MR-Amex), ThankYou Points (Citi), Bilt Points, and Capital One Miles
• Floor Value: The minimum value of return for a point or mile.
• Auxiliary Benefits: Additional benefits the credit card provides. Often times can offset the annual fee

Let’s apply these definitions to the American Express Gold (data on April 1, 2023).

• Annual Fee: $250
• Effective Annual Fee: $10 (see Auxiliary Benefits below)
• Sign Up Bonus: 75,000 Membership Rewards Points for $4,000 spend in the first 3 months
• Spend Multipliers: 4x Dining & US Supermarkets, 3x Travel, 1x everything else
• Transfer Partners: Delta Airlines, Singapore Airlines, ANA, Aeroplan, Cathay Pacific, Hilton Honors, etc.
• Floor Value: 0.006 cents/point — the cash redemption of MR points (this is pretty bad tbh)
• Auxiliary Benefits: $10/month in Uber Credit, $10/month in dining credit, Purchase Protection, Extended Warranty, etc

There are many points/miles credit cards that do not earn flexible currency. For example, the Hilton credit cards earn Hilton points and the earned points can only be used at Hilton properties. United Airlines has a set of credit cards that only earn United miles. This is where the rabbit hole of credit cards begins as there are so many credit cards across every single airline, hotel group, and bank. It becomes intimidating real quick.

For the context of this discussion, we shouldn’t even consider a non-flexible currency credit card.

• Flexibility is a mandatory requirement to be a #1 card.
• We shouldn’t put too much weight on Sign Up Bonuses. For the most part, every credit card has a massive Sign Up Bonus when you first apply, so it’s guaranteed that there will be positive value in the first year.

Narrowing The Search

Given we’ve narrowed the discussion to flexible currency credit cards, the search becomes significantly easier, since issuers only have a few flexible currency cards.

Table 1: Breakdown of Major Flexible Currency Credit Cards

Your first thought might be “Ohh the Platinum is amazing! I might as well get that cause I’ll for sure come out ahead.” To this, my response would be to read my thoughts on the Platinum and specifically why I decided to get rid of it (even the people of Reddit agree). On paper it looks like the best card, but in practice it’s a coupon book with a bunch of rules and restrictions on how the credits can be used. When I was considering canceling the Platinum, the Centurion lounges were so overcrowded that I needed to add my name to a waitlist every time in order to get in. For $700, I was doing more work trying to break even than actually benefiting. More importantly, I would caution against Amex in general because Membership Rewards points are difficult to use for the average use-case (another blog post one-day).

Similarly, I think Chase Sapphire Reserve is overrated. For a $550 annual fee, you’re only getting $300 back, so in order to cover the $250 difference you have to spend $8,333+ (assuming a floor value of 1 cent/point and purely travel spend) to break even. Which I think is ridiculous considering the Venture X offers Priority Pass Lounge Access and it has an effective annual fee of $0. A similar analysis can be applied to the Chase Sapphire Preferred as well.

There are two wrinkles I want to address before moving forward. If you value DashPass at its whole ($96/year), then the math changes a little bit, and there’s a better argument for the Chase Sapphire Preferred. The other is with Chase’s 1.5x and 1.25x multipliers on the CSR/CSP respectively. When you use your Chase points to book via Chase’s travel portal, you receive a 1.5x/1.25x multipliers on your points. For example, if a booking is $100, then it would only cost 8,000 points with the CSP (instead of 10,000 points). I think travel portals are the absolute worst way to book travel.

When you book airfare with a travel portal, cancellation becomes a pain in the ass. Because it’s not directly with the airline you have to deal with the travel portal to cancel the itinerary, then you receive flight credit that can be later redeemed but has an expiry you need to track, and there might be cancellation fees. It’s a nightmare to change your itinerary, so in my opinion the multiplier doesn’t mean anything. (More on this later)

Alignment

With the remaining cards, the effective annual fee of all of the cards is $0 ( or effectively to $0). So this is where alignment with lifestyle becomes important, and two questions have to be asked:

• How important is lounge access when I travel?
• What category do I spend the most money on every year?

If lounge access is the most important thing, then clearly the card that makes the most sense is the Venture X. However, if rent is your largest expense, then I’d argue going with Bilt Rewards. However, if you don’t value lounge access and don’t really spend much on rent (i.e. have a mortgage), then an equal argument can be made for the Citi Premier (or the Amex Gold — more on this in a bit).

Remember when I said “travel portals are the absolute worst way to book travel?” Well, just like the English language, there is an exception to every rule. The exception is IF the hotel is a non-alliance property, meaning, the hotel is not part of Hilton, Marriott, or Hyatt, then leveraging the 10X from the Venture X (or CSP) is very optimal and makes sense. Also, Amex, Chase, and Capital One’s travel portals have their own luxury hotel collection, and booking through the portal provides additional benefits during your stay.

For my case, I love Bilt Rewards. Rent has always been my largest expense, so to finally be able to capitalize on rent payments feels empowering. Plus, dining and travel are my second and third largest expenses. When looking for hotels, I predominately try to stay at Hyatt hotels, because the redemptions are usually north of 2 cents/point, and their quality + customer service is top notch. Since I am not reserving with cash, the added benefits of a travel portal booking don’t matter to me. At $0 annual fee, the card just makes sense, it’s a no brainer. Even though the Bilt card doesn’t have a Sign Up Bonus, the fact that I earn points on rent provides year-over-year consistent value — whereas a sign up bonus is only once. Checkout my other posts on the Bilt Card.

Transfer Partners

Now that it’s clear we aren’t going to use an issuer’s travel portal, how do we actually use the points and miles we earn? This is where transfer partners come in. Each issuer has its own set of airline and hotel partners that let you convert your earned points to the currency of the airline/hotel partner. I strongly prefer transferring my points to a travel partner, and then making my reservation.

For example, I typically fly United Airlines when visiting my family in Virginia (SFO — IAD). I’ll transfer points from Chase or Bilt to my United account and then make the reservation with United miles. My redemptions will range from 1.20–2 cents/point. Many in the community will argue that “that’s horrible value, you should get 1.25x minimum.” However, that extra difference is totally worth it when it comes to canceling or modifying my itinerary. So many times, I’ve moved my flight or my plans change at the last minute and I’ve had to cancel everything and rebook a different itinerary. With itineraries booked with points, the points are immediately credited back to the account (no flight credit BS) and no cancellation fees.

The other super power of booking with points is access to alliances. For the most part, airlines are part of alliances that typically code-share flights with each other. For example, when booking with points you can book a Turkish Airlines flight via United, without actually going through Turkish Airlines for the reservation. The whole alliance thing could be a book on its own, so not going to dive too deep into this right now. For this discussion, it’s important to pick a credit card that has transfer partners you’d actually benefit from. If you fly exclusively on Southwest, then the only cards that make sense are the Chase cards.

This is where going with an Amex card could be smart. If Amex’s travel partners align with the travel you are looking for, then by all means go for an Amex card (the effective annual fee of the Amex Gold is $10). For example, if you fly economy Delta or are looking for business/first class on ANA then Amex makes sense (keep in mind its not trivial finding availability for business/first class).

For my case, I mostly fly United and occasionally Alaska. The reason I like Bilt so much is that I can book Alaska flights on American because they are both part of the same alliance. (Bilt is the only issuer that has American as a direct transfer partner — pretty cool imo). Moreover, it’s the only issuer with two of the three major US carriers.

I added the chart above to go over the different combinations between airlines, alliances, and issuers. In theory, the Bonvoy program is a flexible currency, but it’s only for people who like to trade $3 for $1 (if you do, then shoot me a message — would love to connect).

Closing Thoughts

There’s no such thing as a “best” credit card. The criteria for each person is going to be different, so the most important thing is how the card complements your spending and lifestyle. For me, it’s so clearly the Bilt card and for you it might be something else.

Hope you found this breakdown helpful!