We all know 2% cash back credit cards exist, and rotating 5% cash back categories are also widely available, though annoying because they’re capped and only good for three months.
Maybe that’s why USAA is introducing something even better – a credit card that earns 2.5% cash back on every purchase. It’s apparently in beta right now and being sent out as a targeted offer to certain customers.
It’s clearly a better deal if you’re currently earning 2% or less on your credit card purchases, but there are some strings attached.
USAA Limitless 2.5% Cash Back Requires Direct Deposit
For one, it only appears to be available in four states at the moment, including Idaho, Kansas, Louisiana, and New Mexico.
Secondly, you have to be a member of USAA with a checking account that brings in at least $1,000 per month via direct deposit from your employer, the government, or an external financial institution.
So in that sense, you might be losing out on interest if the money has to stay with USAA earning a lower yield.
I don’t know what the APY is for their checking account, but I doubt it’s as good as the 1% or more you can earn in so-called high-yield savings accounts.
I suppose you could just transfer your paychecks right out and into a high yield account each month, so it’s not a huge negative.
And if for some reason you can’t muster the recurring direct deposit, your cash back will fall to 1.5% on every purchase, which is still pretty competitive.
What Is Another 0.5% Cash Back Worth?
Now let’s get down to brass tacks and determine if you should apply for this new limitless credit card from USAA.
If you already have a 2% cash back credit card, this would give you another 0.5% cash back per purchase.
Let’s just pretend that you spend $5,000 a month using the card. I chose a large amount to illustrate the potential earnings, or lack thereof.
That $5,000 per month multiplied by 0.5% is just $25. Doesn’t sound as great now does it?
Now that’s assume you don’t charge $5,000 a month on the card because you’re a normal human being and you’ve got multiple credit cards you use for a variety of different category bonuses.
Let’s say you put a more reasonable $2,000 on the USAA Limitless Cashback Rewards credit card each month instead. That’s an extra $10 per month.
Now it’s getting way less exciting. Throw in the fact that you’ve got to maintain a direct deposit and a checking account, and likely shuffle money to a higher yielding savings account to avoid missing out on interest and it’s a lot less compelling.
One could also argue to just go after a sign-up bonus instead that gives you a couple hundred bucks for making a few hundred dollars in purchases. Or a bank account bonus that does the same.
The upside to this USAA credit card is that there’s no annual fee, and no limit to how much cash back you can earn.
Per the terms and conditions, you get 90 days from account opening to make your initial direct deposit to qualify for the 2.5% cash back.
Additionally, you can redeem the cash back for a statement credit or deposit it straight into your checking account. So redemption seems to be a breeze.
Still, as demonstrated above, you might just be better off going after credit card sign-up bonuses and/or bank account bonuses. Both would probably yield more value with similar/less work.