20 credit cards that pay you back

Cash back

The winner: American Express Blue Cash.

Once again, American Express Blue Cash leads the pack with its 5% rebate on "everyday purchases" at supermarkets, gas stations and drugstores, and its 1.5% rebate everywhere else. Unlike many other cash-back cards, there is no cap on the rebates you can earn. The trick is that you have to spend at least $6,500 annually to get this rate of return; until you hit that magic level, your rebate is 1% on "everyday" purchases and 0.5% on everything else.

Given normal spending patterns, you'd probably have to charge $2,500 a month before the card made more financial sense than its fellow top picks. But for big card users, that could happen.

The bennies are so good that two of the four experts carry Blue Cash from American Express, and a third is considering switching.

"They have not tinkered with their reward structure, and, at last check, my wife and I were getting an overall average rebate percentage of 2%," Arnold said. "Saving 2% off of every purchase we make ain't too shabby in the midst of the tough economy and the credit crunch that we are all experiencing."

Hardekopf agreed.

"I have Blue Cash from American Express because I like getting the cold, hard cash back in my hands," he said. The rebate rate "is hard to beat for somebody who pays their balance every month."

Actually, McHenry is currently getting better rewards, but he doesn't expect them to last, and he's considering Blue Cash as one of his alternatives.

"I am still using two cards not currently offered to new customers: an Orchard Bank 2% rebate card and a Chase Rewards card that offers 5% rebates on gas, grocery and drugstore purchases plus 1% back everywhere else," McHenry said. "However, both are expiring this year, and I would be surprised if either one is offered to me under these terms again."

If he does lose his rich rewards, McHenry said, "I will likely go for the Blue Cash card but would also consider the Fidelity 529 card as I have two small children who will no doubt choose the most expensive colleges one day."

As for Woolsey, the card he had used -- a Citi Cash Rewards card -- was compromised in the recent Heartland data breach.

"So I have closed that account," he said, "and am currently considering a Capital One No Hassle Cash Rewards Card, which offers the highest rewards for my spending patterns."

The Capital One No Hassle Cash Rewards Card offers 2% cash back on gas and grocery purchases, 1% on all other purchases, no caps on rebates, no expiration dates on rewards and no annual fee, Woolsey said.

Worthy alternatives:

• Discover More Card (5% to 20% cash back at select online retailers; up to 1% unlimited cash back on all other purchases; increased or double rewards when choosing gift cards as the redemption option; no annual fee).

• Chase Freedom Credit Card (3% cash back on gas, grocery and fast food purchases during the first six months; 1% on thereafter and on all other purchases; no earnings caps or reward expirations; no annual fee).

• Discover Open Road Card (5% cash back on gas and auto maintenance purchases; 5% to 20% cash back on select online purchases; up to 1% cash back on all other purchases; no caps or reward expirations; no annual fee).

The fine print

Before you apply for any of these, though, there are some basics you need to know about rewards cards:

• They're for "deadbeats." "Deadbeat" is the credit card industry's code word for people who pay their balances in full every month. If you carry a balance, you need to bypass rewards cards, which typically have high interest rates, and seek out the lowest-rate card you can find. Once you're in the habit of paying off your balance every month, you can switch to a rewards card.

• The deals change constantly. The better the rewards program, the more likely it is to get watered down over time. Credit card issuers will change how fast you earn rewards and how you're able to redeem them. Airlines will ratchet up how many miles you need for free tickets or upgrades. If you get a rewards card, you should monitor the program for changes; consider signing up for its e-mail newsletter and periodically visiting its Web site. Also, periodically check out the sites run by the experts -- CardRatings.com, LowCard$.com, Index Credit Cards and CreditCards.com -- to see if better deals have emerged.

• Don't lose your rewards. Because the deals are ever-changing, you should redeem your points or miles as quickly as you can. If you really want to save up for a special trip, make sure to opt for a rebate program with no expiration dates.

• Watch your scores. Applying for any new credit account can ding your credit scores, and the damage increases the more cards you add to your wallet. Don't apply for new cards if you're in the market for a major loan such as a mortgage or a car loan. Instead, wait until the loan closes before you get more plastic.

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Updated March 20, 2009

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