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In the buffet line of travel rewards credit cards, there are many different dishes from which to choose. Some offer flexibility by allowing transfers to partners, while others include perks with a given airline or hotel chain and still others provide fixed-value redemptions. By leveraging these cards and utilizing bonus categories, you can quickly build up your award balances towards travel, cash back or a variety of other rewards. But what if you just want a new primary credit card? How rewarding can a single credit card be in just one year?
Today I’ll continue my series that attempts to answer that very question. Earlier analyses looked at popular cards like the Platinum Card® from American Express, Citi Premier Card and Ink Business Unlimited Credit Card, but today I’ll focus on a simpler card that just underwent a significant refresh as we consider just how much value you can get in the first year of carrying the Capital One Savor Cash Rewards Credit Card in your wallet.
Welcome Bonus and Benefits
The Capital One Savor card is currently offering a sign-up bonus of $300 in bonus cash back after spending $3,000 in purchases in the first three months after opening the account (though make sure you’re aware of the issuer’s application restrictions before applying). The aforementioned refresh actually enhanced the earning rates on the card: you’ll earn 4% cash back on dining and entertainment purchases, 2% cash back at grocery stores and 1% cash back on all other purchases. All of these categories are unlimited, a feature that stands in sharp contrast to a card like the Chase Freedom, which caps its 5% quarterly bonuses at $1,500 in combined purchases. While you won’t pay foreign transaction fees on the Savor card, it does incur a $95 annual fee, though it’s waived for the first year.
So if you open the Capital One Savor, earn the sign-up bonus and use the card exclusively for the first year, where does that leave you? Obviously the answer depends on your spending patterns, so for this analysis I used consumer-expenditure data from the Bureau of Labor Statistics for the most recent year available (2016) to estimate what an “average” household would spend (and thus earn) on the Reserve in one year.
In doing so, I made the following assumptions:
- Only the “Other lodging” category under “Shelter” can easily be paid with a credit card (since you’ll pay a fee for paying most mortgage and rent payments with credit cards), and these transactions earn 3x points as travel purchases.
- The “Vehicle purchases” category under “Transportation” can’t be paid with a credit card, but all other transportation expenses can.
- All “Personal insurance and pensions” expenditures can’t be paid with a credit card.
- All other expenses (including “Education”) can be paid with a credit card.
Again, your situation may differ substantially, so feel free to adjust these assumptions in order to calculate your own earning potential.
Here’s a quick table that shows how these spending patterns in the first year of cardmembership translate to rewards on the Capital One Savor:
|Category||Spending||Earning Rate||Cash Back|
|Food at home||$4,049||2%||$80.98|
|Food away from home||$3,154||4%||$126.16|
|Housing (other lodging)||$798||1%||$7.98|
|Utilities, fuels and public services||$3,884||1%||$38.84|
|Household furnishings and equipment||$1,829||1%||$18.29|
|Apparel and services||$1,803||1%||$18.03|
|Other vehicle expenses||$2,884||1%||$28.84|
|Public and other transportation||$623||1%||$6.23|
|All other expenses||$3,450||1%||$34.50|
As you can see, the “average” American consumer would earn over $800 in cash-back rewards in the first year alone. Not bad!
What do these earnings get you?
Many travel rewards credit cards require you to know a lot to redeem your hard-earned points for maximum value. Fortunately, this isn’t the case for the Capital One Savor. As it’s a simple fixed-value card, you can redeem your earnings for statement credits or as a check that you can deposit right into your bank account. When you factor in the welcome bonus and the “average” spending patterns above, you’re looking at an overall return of 3.32% in the first year. That’s a fantastic value, especially since the annual fee is waived in year one.
So what does that get you? In a sense, $866.86 worth of anything you want.
That’s the power of a rewarding cash-back card. You don’t need to spend hours searching award availability online to find a flight that has open award seats, nor do you need to crunch the numbers and make sure that you’re getting at least as much value as TPG’s valuations. If you want to spend the money on a flight, go for it. If you’d rather book a fancy hotel for a long weekend trip, feel free! Or maybe you want to use the cash back for an experience like concert tickets. The world is your oyster!
As an alternative, you could do what at least two of my friends do with their cash-back credit cards: set the earnings aside into a college fund for their kids. This allows them to harness the power of compound interest. It may not cover much at the rate college tuition is increasing, but it’s still a start!
The Capital One Savor Cash Rewards Credit Card doesn’t have the same ability to unlock premium class award flights or luxurious free hotel rooms, but its recent refresh has made it a compelling choice for those interested in cash-back rewards. After a year’s worth of “average” use, you’re looking at over $800 back in your pocket! Just be sure to crunch the numbers to make sure it’s worth keeping in your wallet once the $95 annual fee kicks in; if your yearly spending on dining and entertainment is less than $9,500, you’ll likely be better off with the Capital One SavorOne Cash Rewards Credit Card, which offers 3% back in these categories but carries no annual fee.
Bear in mind too that this calculation may be a bit too conservative:
- The calculation assumes that you’re an average consumer. If you typically spend more in a year, then your earnings will be even higher.
- The calculation assumes that you don’t make any purchases through an online shopping portal. While there’s no Capital One-specific portal, you can use cash-back sites like Ebates or airline-affiliated portals like the AAdvantage eShopping site to boost your earnings even more.
- The calculation assumes that you only open one card. Other travel rewards credit cards (like the Citi Premier Card or the Alaska Airlines Visa Signature credit card) can be opened and used right alongside the Capital One Savor for even more earning potential.
Regardless of these last points, I certainly hope that this analysis has shown just how lucrative a new card like the Capital One Savor Cash Rewards Credit Card can be in just the first year of cardmembership!
Know before you go.
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This cash back card has a focus on dining and entertainment where you can earn unlimited 4% cash back in those spending categories. You can also earn 2% cash back at grocery stores and 1% cash back on all other purchases.
- Earn a one-time $300 cash bonus after you spend $3000 on purchases within the first 3 months from account opening
- Earn unlimited 4% cash back on dining and entertainment, 2% at grocery stores and 1% on all other purchases. Plus, earn 8% cash back on tickets at Vivid Seats through May 2020.
- Receive a monthly statement credit for a Postmates Unlimited monthly membership through Dec. 2019 with the Capital One Savor Card
- No rotating categories or sign-ups needed to earn cash rewards; plus cash back won't expire for the life of the account and there's no limit to how much you can earn
- No foreign transaction fees
- Capital One cardholders get access to premium experiences in dining, entertainment and more
- $0 intro annual fee for the first year, $95 after that