Editorial Policy

Upgrading to a better cash-back card

Eva Norlyk Smith Ph.D.

December 16, 2013

QHi Eva,

I presently have a Discover card, which I got from Wal-Mart. I would like a card that has no yearly fee. Also I never pay interest, my card is always paid off, and I do not carry a balance. My problem is that not everyone takes Discover. Which card would be best? Also I'd like to make payments throughout the month, not just on the due date. — Karen
ADear Karen,

The Wal-Mart Discover card is a strange hybrid. It is co-branded with Discover, but the card is issued and underwritten by GE Capital, which is a separate bank, and not by Discover. This means that there are some unique terms and conditions that are good to be aware of.

Indeed, apart from the fact that Discover cards are not accepted everywhere, the Wal-Mart Discover card has several drawbacks. First of all, while it is a cash-back credit card, the terms are less favorable than for regular Discover cards. The Discover “it” card, for example, lets you earn 1 percent cash back on purchases. However, with the Wal-Mart Discover card, you don't get 1 percent cash back until you've spent $3,000 each year.Ask Eva

And watch out for those promotional 0 percent APR financing offers. As with many retail cards, the Wal-Mart Discover waives interest on purchases for a certain period of time, if the balance is paid in full by the end of the promotional period. If it isn't, interest will be imposed retroactively to the date of purchase at the card's normal interest rate — 22.90 percent. Fine-print terms  such as these are  easy to overlook. Because you're paying the balance off in full each month, this is not a concern for you, but it is something to be aware of.

The Wal-Mart Discover card does not feature an annual fee, so that is one thing you don't have to worry about. But given the above drawbacks, plus the fact that Discover cards are not accepted everywhere, you might consider adding another credit card with better terms to your portfolio. Because your card doesn't have an annual fee, don't rush to close it. Instead, hold on to it and use it occasionally to contribute to your credit history.

In terms of which card to get, there are several no-annual-fee cash-back credit cards that will let you earn a regular 1 percent back on all purchases, and perhaps a bit more (2 or 3 percent) on gas and groceries.

Whether you can get those cards depends on your credit. If you have excellent credit (a FICO score in the mid-700s or above), check out the Blue Cash Everyday from American Express, which earns you 3 percent cash back at supermarkets for up to $6,000 per year in purchases, 2 percent at U.S. gas stations and select department stores, and 1 percent on other purchases. A similar card is the BankAmericard Cash Rewards credit card, which gives you 2 percent cash back on groceries, 3 percent on gas and 1 percent on everything else.

If your credit is less than excellent, the options are fewer, but check out the Capital One Quicksilver Cash Rewards credit card, which offers 1.5 percent cash back per dollar spent on all purchases, or the Barclaycard Rewards MasterCard, which lets you earn 2 rewards points per dollar spent on gas, grocery and utility purchases and 1 point per dollar everywhere else.

In regards to paying your card more than once a month, the easiest way to do that is to sign up for an online account at the card issuer's website. It's simple to do, and once the account is linked to a bank account, you can log in to make payments as often as your issuer allows. Some card issuers limit payments to a certain number per month or day, so that is one thing to check up on.

Based on how you've treated your Wal-Mart card, it seems that you have great credit habits already. Assuming you've been as responsible with other credit agreements (such as loans), you should be able to find a rewards card that returns the favor.

Got a question for Eva? Send her an email.