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Are credit card rewards worth it if you're getting hit with a 3% surcharge on a big purchase? (This question has been edited for clarity and brevity.)
Most credit card purchases earn 1% to 2% in rewards, unless the transaction falls into a specific bonus category, such as gas, groceries, travel or dining. Even those bonus categories can have caps or other restrictions.
As such, it's generally not worth it to pay with your credit card if there's an additional charge, which can be the case if you want to use your credit card to pay for utilities, daycare, contractors or certain small businesses.
However, the math changes if you're trying to qualify for a big welcome bonus by meeting a minimum requirement — or in cases where surcharge fees are lower.
When does paying a credit card surcharge make sense?
Earning a welcome bonus
Most of the best credit cards offer large intro bonuses to entice you to apply, and the most valuable bonuses can be worth upward of $1,000. However, you rarely receive a bonus just by getting approved for a card; you typically have to spend a certain amount within the first three to six months after account opening.
Depending on the card, the purchases you make to earn a welcome bonus can earn 10% back or more — effectively making a 3% surcharge worth it. For example, the Chase Sapphire Preferred® Card (see rates and fees) has a welcome offer worth 75,000 points after you spend $5,000 on purchases in the first three months from account opening. You'll earn at least 5,000 points on the purchases you make to earn the bonus for a for a total of 80,000 points. Those points are worth $800 when redeemed for a statement credit and potentially more when redeemed for eligible travel.
That represents a return of at least 16% on the required $5,000 in spending ($800 in rewards ÷ $5,000 spent). That kind of return can more than offset a typical 3% surcharge.
The Chase Sapphire Preferred® Card packs a punch for a $95 annual fee card, offering annual travel credits, comprehensive travel protections, flexible rewards and more.
- You can transfer rewards to all of Chase's travel partners including World of Hyatt, Southwest Rapid Rewards and many more
- Long list of travel and shopping protections
- Annual Chase Travel hotel credit
- Has an annual fee
- Requires a high credit score
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select's editorial staff.
- Earn 75,000 bonus points after you spend $5,000 on purchases in the first 3 months from account opening.
- Enjoy benefits such as 5x on travel purchased through Chase TravelSM, 3x on dining, 3x on vacation homes, 3x on gas & EV charging, 3x on top streaming services and online groceries (excluding Walmart, Target, and wholesale clubs), 2x on all other travel purchases, 1x on all other purchases
- Earn up to $100 in statement credits each account anniversary year for hotel stays through Chase Travel
- Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Emergency Evacuation and Transportation and more
- Get a year of complimentary Apple TV when activated by December 31, 2026 - a value of $156.
- Complimentary DashPass which unlocks $0 delivery fees & lower service fees for 12 months when you activate by 12/31/27. Plus, a $10 promo each month on non-restaurant orders.
- Receive one statement credit of up to $120 every four years as reimbursement for the application fee charged to your card for a Global Entry, TSA Precheck® or NEXUS application.
- Transfer points to leading airline and hotel loyalty programs
- Member FDIC
Balance transfer fee
Either $5 or 5% of the amount of each transfer, whichever is greater
While paying credit card surcharges can make sense when working toward a big welcome bonus, there's an important caveat: It's typically only advisable if you wouldn't otherwise be able to meet the spending requirement.
To earn the Sapphire Preferred's welcome bonus, you'll need to spend an average of $1,667 a month for three months. If you already spend that much on a credit card without taking the extra step of paying a surcharge, it's usually not worth paying the fee.
Paying taxes with a credit card
Paying taxes with a credit card is another notable exception, since the surcharge is often lower. You can pay federal taxes through designated payment processors for as low as 1.75% with a $2.50 minimum. Many cash back credit cards earn 2% back, which means you can make a small profit paying taxes even if you aren't earning an intro bonus.
This is an especially useful way for small business owners and independent contractors to hit spending requirements since they typically pay estimated taxes throughout the year. Cards like the Wells Fargo Active Cash® Card, Citi Double Cash® Card and Signify Business Cash℠ Card by Wells Fargo are all strong options for this strategy.
What makes the Citi Double Cash® Card special is that it sits near the top of its class in several categories. It is an excellent option if you want flat-rate rewards, a balance transfer intro-APR or no annual fee.
- Balance transfers get a long intro APR
- Generous flat-rate cash-back rewards structure
- Earns transferable rewards
- No annual fee
- It has a foreign transaction fee
- Intro APR only applies to balance transfer
- Points transfer ratios are reduced compared to premium cards
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select's editorial staff.
- Earn $200 cash back after you spend $1,500 on purchases in the first 6 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® Points, which can be redeemed for $200 cash back.
- Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, pay at least the minimum due on time. Plus, earn 5% total cash back on hotel, car rentals and attractions booked with Citi Travel.
- Balance Transfer Only Offer: 0% intro APR on Balance Transfers for 18 months. After that, the variable APR will be 18.49% - 28.74%, based on your creditworthiness.
- Balance Transfers do not earn cash back. Intro APR does not apply to purchases.
- If you transfer a balance, interest will be charged on your purchases unless you pay your entire balance (including balance transfers) by the due date each month.
- There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
Balance transfer fee
There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. A balance transfer fee of 5% of each transfer ($5 minimum) applies if completed after 4 months of account opening.
Foreign transaction fee
3%
The Wells Fargo Active Cash® Card is great if you want simplicity thanks to its flat-rate 2% unlimited cash rewards on purchases and $0 annual fee.
- High, unlimited flat-rate return on purchases
- Intro APR on purchases and qualifying balance transfers
- Lower introductory balance transfer fee
- Up to $600 of cell phone protection against damage or theft (subject to a $25 deductible)
- Charges a 3% foreign transaction fee
- Balance transfer fee increases to 5% of each transfer (minimum $5) after 120 days
- Limited redemption options unless you pair it with a Wells Fargo card that allows point transfers
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select's editorial staff.
- Apply Now to take advantage of this offer and learn more about product features, terms and conditions.
- Earn a $100 cash rewards bonus after spending $500 in purchases in the first 3 months.
- Earn unlimited 2% cash rewards on purchases.
- 0% intro APR for 12 months from account opening on purchases and qualifying balance transfers. 18.74%, 24.74%, or 28.74% variable APR thereafter; balance transfers made within 120 days qualify for the intro rate and fee of 3% then a BT fee of up to 5%, min: $5.
- $0 annual fee.
- No categories to track or remember and cash rewards don't expire as long as your account remains open.
- Find tickets to top sports and entertainment events, book travel, make dinner reservations and more with your complimentary 24/7 Visa Signature® Concierge.
- Up to $600 of cell phone protection against damage or theft. Subject to a $25 deductible.
Balance Transfer Fee
3% intro for 120 days from account opening, then up to 5%, min: $5
Foreign Transaction Fee
3%
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