Maximizing PenFed Cards: 5% Cashback on Gas and Free Flights

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All too often, the best credit card deals are issued by the usual suspects: Chase, American Express and Citi. There are a bunch of other issuers, but most of the action is happening with the big three.

However, I’ve always heard about “PenFed” cards and recently sat next to a TPG reader on a flight who raved about his PenFed gas card. On top of this, several TPG readers have recently tweeted and emailed me with their positive experiences with PenFed, so I thought it was time to do some research of my own.

The Pentagon Federal Credit Union (PenFed) offers two main rewards cards: The Visa Platinum Gas/Cash Rewards Card and the Premium Travel Rewards American Express. The great thing is that once you are approved for one of them, you can call and have them create you the other card and it will be no additional credit inquiry – they’ll simply split your existing approved credit line for both cards and neither have an annual fee.

The main draw to the Visa Platinum Gas/Cash Rewards card is that they give you a whopping 5% cash back on all of your gas spend, up to $50,000 a year. The rebate even posts with your statement – so if you charge $100 in gas, it’ll only post to your bill as $95. In my opinion, the next best cards for gas purchases are the Ink Bold and Amex Premier Rewards Gold which both give 2 points per dollar, but even if you value those points at 2 cents a piece, you are only looking at a 4% rebate. If you value them more than that, it may make sense to use those cards instead.

The Premium Travel Rewards American Express has four key features:
1) Sign-up bonus of 20,000 points when you spend $650 within three months. Those points can’t be transferred to any airlines/hotels, but they can be used at about 1.5 cents a piece towards purchasing any airfare or at 1 cent a piece toward merchandise (like Bose in-ear headsets for 10,600 points). Airfare purchased using points will also earn miles and elite status.
2) No annual fee.
3) 5 points per dollar spent on airfare. Considering points can be used for 1.5 cents a piece when redeeming for airfare, this is like a 7.5% return spent on airfare – pretty nice.
4) No foreign transaction fee. This is one of the fee no annual fee cards that don’t have foreign transaction fees.

Also, if you are carrying balances on high-APR cards, it might make sense to move them to PenFed, because they are waiving any transfer fees through December 31, 2011, and granting a 4.99% promotional APR on balance transfer for 24 months. Obviously it’s ideal not to carry balances, but if you are paying crazy interest fees carrying a balance on another card (especially on charge cards) you should crunch the numbers and see if this deal makes sense for you.

Overall, these cards aren’t going to get you a ton of first class tickets around the world, but they can save you money on upcoming flights and get you a nice return on gasoline spend. These days every dollar counts!

Applying for these cards is free if you:
a) Are in the armed forces
b) Work for the government in some shape way or form
c) Belong to an association related to the government (there’s a drop down list of options like American Red Cross)
d) Have a relative or housemate who is eligible (armed forces, government worker, etc)
e) You live or work on a military base

Eligibility criteria.. they aren’t too picky

If none of the above, don’t worry. You can also open a savings account (and fund it with a points-earning credit card :-) ) with only a $5 deposit. They also give the option of joining Voices for America’s Troops for a one time fee of $15 (and you don’t need to stay a member) or National Military Family Association for a one time fee of $20.
I’m holding off on any new applications because I’m in the process of getting a mortgage, but I think I’ll get these when the dust settles. While I won’t shift much of my spend away from my workhorse cards (Sapphire Preferred and Premier Rewards Gold), at a very minimum getting these cards is like getting $300 towards travel and a permanent 5% discount on gas – not bad since there are no annual fees.

Feel free to share your experience with PenFed credit cards!

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