The Three Credit Cards I Actually Use
I only use three credit cards. With these cards I always earn at least 2% back on whatever I buy, none of them have an annual fee, and combined they cover every major category I spend money in. This is the setup I have landed on after a couple years of refining, and it is simple enough that I do not have to think about which card to pull out at the register.
Here are the three cards, what each one is for, the math on why they work together, and a few things to know before you copy this setup.
Citi Custom Cash for Dining
The Citi Custom Cash earns 5% cash back on your top eligible spending category each billing cycle, up to the first $500 spent in that category. After that, the rate drops to 1%. The 5% applies to your highest category automatically. You do not pick the category ahead of time. Citi looks at your spending each cycle and gives you the 5% wherever you spent the most.
I use this card exclusively for dining. That keeps restaurants as my top category every billing cycle, which keeps the 5% locked in there. If I used the card for other things, my top category could shift to whatever I bought the most of that month, and the 5% would follow. Locking it to one category is the cleanest way to get predictable behavior.
One important detail: the 5% only applies to Citi’s list of eligible categories, which includes restaurants, gas stations, grocery stores, drugstores, select travel, select transit, select streaming, home improvement stores, fitness clubs, and live entertainment. If your top spending is somewhere not on that list (like Walmart, which codes as a discount retailer), you get 1% no matter how much you spent there. Picking a category that is actually eligible for the 5% is the whole game.
The sign-up bonus is $200 cash back after spending $1,500 in the first six months. That may be hard to hit if you are only using the card for dining out, so to hit the sign-up bonus I put a few trips to Walmart and gas fill-ups on it. No annual fee. One thing to flag: there is a 3% foreign transaction fee, so do not use this one abroad.
The Citi app is a little clunky compared to the others. The cash back redemption flow takes a few extra taps to find the first time, and the way they show your top category and progress toward the $500 cap is not as clean as it could be. You figure it out after a billing cycle or two. Not a deal breaker, just worth knowing if you like a clean interface.
AAA Daily Advantage for Groceries and Gas
The AAA Daily Advantage Visa Signature earns 5% on grocery stores, 3% on gas and EV charging, wholesale clubs, streaming, pharmacy, and AAA purchases, and 1% on everything else. No annual fee. No foreign transaction fees. The sign-up bonus is a $100 statement credit when you spend $1,000 in the first 90 days.
I use this for weekly Kroger runs and for every gas fill-up. A heads-up on groceries: AAA recently dropped stores like Walmart and Target from the grocery category, so the 5% only applies at actual grocery stores now. If your “grocery” shopping happens at Walmart or Target, this card will give you 1%, not 5%, on those purchases.
The cap is worth understanding. The 5% and 3% bonus categories are capped at $500 in combined cash back per calendar year, which is what you would hit at $10,000 of grocery-only spending (5% of $10,000 is $500). After the cap, everything in those categories drops to 1% for the rest of the year. Pharmacy and streaming both stay at 3% and do not count toward the cap, which is a quiet detail that adds up.
For me, $10,000 a year on groceries is more than I spend, so the cap does not matter. For a family of four hitting $200 a week at the grocery store, you are at about $10,400 a year and you would max out the cap around December. Worth knowing if you are feeding more people than I am.
One quirk: you have to make your first payment manually before you can set up autopay. After that the autopay works fine.
Fidelity Rewards Visa for Everything Else
The Fidelity Rewards Visa Signature earns an unlimited 2% on every purchase, with no caps and no categories. The catch: you have to redeem your rewards into an eligible Fidelity account (brokerage, IRA, HSA, 529, etc.) to get the full 2%. If you already use Fidelity, this is a non-issue. If you do not, you have to open a Fidelity account, which is pretty easy.
The benefits on this card are quietly excellent for a no-annual-fee card. No foreign transaction fees, so this is the card I take overseas. Up to $100 in reimbursement every four years to cover the Global Entry or TSA PreCheck application fee. Auto rental collision damage waiver as secondary coverage. None of these are headline features, but together they are a strong package for a card that costs nothing to hold.
The 2% is the workhorse. Whenever I am not buying food, gas, or eating out, this is the card I reach for. Mainly for things like travel, Amazon purchases, and clothes.
How the Math Works Out
The quickest way to see the value is to plug in my own monthly credit card spending. Roughly:
- Dining: $90/month, or about $1,080/year
- Groceries: $450/month, or about $5,400/year
- Gas: $50/month, or $600/year (short commute)
- Everything else: $400/month, or $4,800/year (travel, gifts, car maintenance, clothes, insurance, phone)
That is about $11,900 a year going through these cards. Run that through the rates and the cash back comes out like this:
| Category | Annual spend | Card | Rate | Cash back |
|---|---|---|---|---|
| Dining | $1,080 | Citi Custom Cash | 5% | $54 |
| Groceries | $5,400 | AAA Daily Advantage | 5% | $270 |
| Gas | $600 | AAA Daily Advantage | 3% | $18 |
| Everything else | $4,800 | Fidelity | 2% | $96 |
| Total | $11,880 | $438 |
Compare that to two alternatives:
- A flat 1.5% card on the same spend earns $178/year. The three-card wallet earns $260 more.
- A debit card or cash earns nothing. The three-card wallet earns the full $438 more.
That is recurring every year. Over a decade, the difference between the three-card wallet and a 1.5% flat card is $2,600. Over the same decade compared to no rewards at all, it is $4,380. And the tax treatment makes both numbers go further (more on that below).
There is also a quiet compounding effect worth noting. For example, the Fidelity cash back goes directly into a brokerage account, which means it is not just sitting in cash. It can easily be invested and compound alongside the rest of your portfolio. The $96 a year I earn on the Fidelity card, invested at a conservative 7% real return, turns into about $1,400 over a decade instead of $960. Over 30 years it is closer to $9,800.
The Citi and AAA cash back are most often used as a statement credit, which reduces what you owe on the card. This frees up more cash that can be spent and invested.
The sign-up bonuses are a one-time bonus on top of that. Citi gives you $200 for spending $1,500 in six months. AAA gives you $100 for spending $1,000 in 90 days. Fidelity’s bonus changes from time to time, so check the current offer before applying. That is roughly $300 of extra cash in the first six months just for getting set up.
A Word on Taxes
Cash back from credit card spending is not taxed. The IRS treats it as a rebate on your purchases, not as income. If you spend $100 and get $2 back, the IRS treats it as if you paid $98 for the thing. No 1099, no line on your tax return, no quarterly estimated payments. This is the kind of detail that does not feel like it should be legal, but it is.
The same rule applies to sign-up bonuses with a spending requirement. The $200 from Citi and the $100 from AAA are also rebates, not income, because you had to spend money to earn them. The narrow exception is sign-up bonuses with no spending requirement (e.g. “open an account and get $50”) and referral bonuses, which the IRS can treat as taxable income. None of the bonuses for the three cards I use fall into that category.
To put it in perspective: $438 a year of untaxed cash would require roughly $580 of pre-tax wages to match, depending on your bracket. The tax treatment is a quiet but meaningful part of why this works.
A Few Things to Know Before You Copy This
Autopay is non-negotiable. Every card I use is set up for autopay-full-balance from my checking account. If you carry a balance, the interest rates on these cards (and most cash back cards) wipe out any rewards you earn many times over. The whole strategy depends on paying the full statement balance every month. If you are not confident you can do that, the most rewarding card in your wallet is the debit card.
Three cards is enough for me. I have looked at adding a fourth (something with bonus categories on travel or retail shopping) and the math has never been worth it for my spending. Each additional card adds complexity to which one to pull out at the register, and the marginal cash back from a fourth card is usually small. The three above cover my major spend categories well.
That said, depending on where your money actually goes, other cards can be worth applying for:
- If you shop a lot at Amazon, the Amazon Prime Visa earns 5% at Amazon and Whole Foods with no annual fee on the card itself (though it requires a Prime membership, which costs $139 a year). For households that already pay for Prime and spend regularly on Amazon, this is the cleanest 5% you can find. It also has no foreign transaction fees.
- If you shop a lot at Walmart, the current Walmart card is the OnePay CashRewards Card (Capital One’s Walmart card was discontinued in 2024). It earns 5% at Walmart if you have a Walmart+ membership ($98 a year) or 3% if you do not. The math works out best if you are already paying for Walmart+ for other reasons.
- If you already pay for Robinhood Gold, the Robinhood Gold Card earns a flat 3% on everything. The card itself has no annual fee, but it requires a Robinhood Gold subscription ($5/month or $50/year), and you have to redeem cash back into a Robinhood brokerage account. For high spenders this is genuinely a better card than Fidelity’s. At $20,000 of annual spend, the extra 1% pays for Gold three times over. Below about $6,000 of annual spend, the membership fee eats the difference.
The pattern with all three of these: they only make sense if you are already in the ecosystem they require. Otherwise the math is probably not in your favor.
Do your own research. This is the setup that works for me. If you are a big traveler, a Chase Sapphire or Capital One Venture might earn you more than Fidelity 2% on flights and hotels. If you spend a lot at Costco or Sam’s Club, an Amex Blue Cash Preferred or a Costco-branded card might beat the AAA card on warehouse spending. The big takeaway: look at where your money actually goes for a couple months before applying for anything. The right card depends on your spending mix.
Sign-up bonuses are not enough reason to apply. The bonus is nice, but the card has to make sense for you for the years after the bonus is gone. All three above are zero annual fee, which means there is no ongoing cost to keeping them once you have them.
The whole setup takes a little while to set up and then runs with very minimal effort. Cash back compounds quietly. The tax treatment is generous. Card benefits become available. And it can be as simple as three cards.