Prepaid card with 2% rewards if balance >$5,000 - good deal?

[khh]

I have a Perkstreet prepaid card that I use for most of my purchases. If you have a balance under $5K, you get 1% cash back on all non-PIN transactions. For balances above 5K, it's 2% back. Let's say you spend 10K per year on qualified purchases and you're at the 30% marginal tax rate.

Wouldn't a 2% reduction in expenses be the equivalent of earning 2.86% interest on that 10K? Is there any reason I shouldn't keep the balance > 5K?

Edit - Should add that there are no fees with this card, at least the way I use it.

[Liquid]

You may want to consider the opportunity cost of having $5000 dollars tied up on this card at all times "earning" negative interest secondary to inflation.

[tfb]

Is there any reason I shouldn't keep the balance > 5K?

Some cards give 2% rewards without requiring any balance at all. Your $5k can earn another 4% or so elsewhere.

[Sheepdog]

Is there any reason I shouldn't keep the balance > 5K?

Some cards give 2% rewards without requiring any balance at all. Your $5k can earn another 4% or so elsewhere.

Priceline Visa is one which gives 2% rewards on everything with no annual fees and no rewards limit. http://www.priceline.com/rewards/
Why would you want to tie up $5000?
Jim

[midareff]

Your $5K would be earning .95% in an Ally MM account. The FIDO AMEX credit card pays 2% cash back on everything. Their VISA is 1.5%The AMEX Blue Cash Preferred pays 6% back on first $6K of groceries annually. The PenFed Cash Gas Card pays 5% back on all gas purchases.

You may have a good deal but I can think of lots that are much better.

[jeffyscott]

Let's say I spend $2000 per month with this card. To get 2% rewards, let's suppose I'd start the month with $7000 and end it with $5000 stored on the prepaid card. For doing this I would get 2% of $2000...$40 per month, $480 per year.

If instead, I had an average balance of $6000 in a 1% savings account (eg. Barclays), that would earn $60 for the year. To get $480, I'd need to get $420 in rewards or 1.75% on my $2000 per month spending.

[bigb]

if you want to tie up $5000 monthly, why not use the mango prepaid card that pays 6% on the $5000? it only has a $5 monthly fee which gives it a 4.8% effective yield on the money you have deposited, not what you spend.

Chase