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Author: Claire Dickey
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What you need to know about cash back credit cards
Looking to earn cash back on your spending? We can help you do so. Before you make your decision, take a look at what you need to know about cash back credit cards.
How we review cards
When researching cash back card offers, we take everything into account – from the rewards rate and sign-up bonus to extra fees and general benefits. Our Bankrate Score takes all this into account while weighing specific factors more heavily based on the card.
- Cash back rate: Cash back rates are one of the most important factors when choosing a cash back card. Expect to earn 1% or more on purchases that don’t fall within a bonus category and even more within those categories. When we review cards, we examine cash back rates in the context of spending categories, redemption systems and more.
- Sign-up bonus: Most cash back cards offer sign-up bonuses to draw in new cardholders. Sign-up bonuses usually start at $150 and require a minimum purchase threshold before receiving the bonus. Our experts evaluate these bonuses in conjunction with the purchase threshold and overall rewards rate in order to fully judge their value.
- Annual fee: We evaluate the annual fees of cash back cards to give you an idea of what you need to spend to overcome the yearly charge.
Bankrate’s picks for the best cash back credit cards of 2019
|Capital One® Quicksilver® Cash Rewards Credit Card
||Your first cash back credit card
|Chase Freedom Unlimited®
||1.5% cash back on everything
|Capital One® SavorOne℠ Cash Rewards Credit Card
||No annual fee
|Discover it® Cash Back
||Cash back bonus
|Capital One® Savor® Cash Rewards Credit Card
||Dining and entertainment
|Citi® Double Cash Card
||Flat-rate cash back
||Rotating cash back categories
|Blue Cash Everyday® Card from American Express
||Gas and groceries
|Citi Rewards+℠ Card
||Small everyday purchases
|U.S. Bank Cash+™ Visa Signature® Card
||Personalized cash back rewards
What is a cash back credit card?
Simply put, a cash back credit card rewards you for your spending with cash rewards. They’re often more simple than rewards cards, which boast complicated points redemption structures.
Cash back cards come in a variety of forms. Flat-rate cash back cards, for example, give you the same rewards rate on every purchase. Cards with rotating categories or tiered cash back cards have categories that offer more cash back within certain spending groups (such as restaurants and gas stations).
Cards like the Discover it® Cash Back have rotating bonus categories that take a bit of effort to navigate in part because of the required quarterly sign-up. But with these cards, you’ll have the chance to earn a high level of rewards in a variety of categories throughout the year. On the other hand, cards like the Citi Double Cash card have flat-rate bonus categories that allow you to swipe your card everywhere you want and forget about it. With tiered rewards, you earn a set amount year-round for specific categories, such as 6% at U.S. supermarkets (on up to $6,000 annually, then 1%) with the Blue Cash Preferred® Card from American Express.
Pick a card that’s aligned with how you spend money. Some cards give you 2% cash back on all purchases while others may provide 5% cash back in rotating categories (like restaurants or travel) and 1% on everything else. Find the card that will give you the maximum benefit based on which categories you tend to spend the most amount of money in each month.
Stash Wealth — Priya Malani, Founding Partner
Pros of owning a cash back card:
- Most cash back cards offer an unlimited 1% cash back on purchases outside of bonus categories.
- Many offer cash back bonuses for hitting certain spending requirements within a time period.
- You can normally redeem your cash back for things like merchandise, airfare, hotel stays, statement credits and more.
Cons of owning a cash back card:
- Some cards require enrollment to receive a high level of cash back each quarter.
- It’s not unusual for issuers to put a cap on how much you can earn within higher rewards categories.
- You may have trouble maxing your bonus categories if they aren’t relevant to your lifestyle.
How a cash back card can save you money
Credit card rewards come in all shapes and sizes, from airline miles to points to cash back. With a cash back card, the amount you accrue is simple and easy to follow – it’s essentially a rebate on everything you spend.
One thing to keep in mind with a cash back card is interest rates. The APR offered by a card for purchases and balance transfers can potentially cancel out any rewards you’ve earned throughout the year if you aren’t careful.
As long as you consistently pay off your balance each month, you can completely avoid paying a dime in interest. But if you tend to carry a balance, your top priority when researching cash back cards should be looking for cards with lower interest rates, like the Discover it® Cash Back’s 14.24% – 25.24% variable APR, and a pass on your first late payment, also offered by the Discover it® Cash Back.
0% offers are a good way to handle a large purchase or balance transfer. For example, the Blue Cash Everyday® Card from American Express offers a 15 month-long 0% introductory period on purchases and balance transfers (15.24% – 26.24% Variable APR thereafter).
Sign-up bonuses and more
Lastly, take sign-up bonuses into consideration. It’s important to avoid blindly signing up for a card just for the welcome offer. By doing so, you may overspend to receive the offer and end up carrying a balance. The Wells Fargo Cash Wise Visa® Card, for example, has a great sign-up bonus of $200 when you spend $1,000 within the first 3 months of account opening. This offer was boosted from $150 and is among the best sign-up offers for cards of its caliber.
There are other ways cash back cards can earn you money outside of sign-up bonus. For example, the Discover it® Cash Back will match all of the cash back you’ve earned at the end of your first year. Further, Citi® Double Cash Card doesn’t even offer a sign-up bonus, but does offer a great rewards rate of 1% cash back, then an additional 1% when you pay off your purchase.
Above all, remember to redeem your cash back. If you don’t, there’s no use in getting a cash back card in the first place. Take a look at how frequently cardholders redeem their cash back.
|How often cash back is redeemed
|Once a month or more
|A few times a year
|Once a year or less
|Infrequently or never
Based on 2017 Consumer Payment Study by TSYS U.S.
Typical rewards rates: bonus vs. flat-rate cash back
When deciding which type of cash back card is best for you, it’s important to know all of the options available to you.
Flat-rate bonus categories
Flat-rate cash back cards offer the same rewards rate for each and every purchase. These cards are great for those who aren’t keen on activating and tracking bonus categories each quarter. The Citi® Double Cash Card is a great example of a flat-rate cash back card, as it offers 1% cash back for every purchase and an additional 1% for paying of that purchase.
Tiered bonus categories
Tiered cash back cards earn you more cash back the more you spend or the more money you have available in your associated account. For example, the Bank of America® Premium Rewards® credit card offers higher rewards rates based on your Bank of America checking, savings or investment account value. If your account is worth $20,000-$49,999, you’ll get 2.5X points back on travel and dining and 1.875X on everything else, compared to the normal 2X on travel and dining and 1.5X on everything else. And it only goes up from there – you’ll earn 3.5X on travel and dining and 2.625X on everything else with an account value of $100,000 or more.
Rotating bonus categories
Determine if you’re willing to keep up with rotating bonus categories that some cards offer. With rotating categories, you’ll often get higher rewards rates, but a majority of these cards require enrollment in order to receive cash back in the category. This can be a problem for forgetful cardholders. Normally, if you forget to enroll, the issuer defaults your earnings in that category to 1% cash back.
Take category caps into consideration. Cards with rotating bonus categories tend to set caps on how much you can earn in high rewards categories. For example, the Discover it® Cash Back offers 5% cash back on select categories when you activate and enroll, but it caps at $1,500 in purchases per quarter. After that, you’ll earn an unlimited 1%.
Determine what’s best for you
Review your spending for the past few months to see which categories you purchased the most in, and make sure to have your credit score handy to know which cards you have a chance at being approved for.
A busy family of four would most likely benefit more from a card that offers greater rewards on gas and groceries, such as the 6% cash back at U.S. supermarkets (on up to $6,000 annually, then 1%) and 3% at U.S. gas stations offered by the Blue Cash Preferred® Card from American Express, than a cash back card focused on travel. Frequent warehouse shoppers may find that a co-branded card, such as the Costco Anywhere Visa® Card by Citi, would give them the most bang for the buck. If you can’t pinpoint an area where you spend the most in, go with a general-purpose cash back card that will get you rewards every time you swipe the card.
Cash back vs. travel rewards
Cash back cards are the most basic version of a rewards card. Although the cash back rewards structure can vary greatly from card to card, they all ultimately give the same type of reward back: cash. But with travel rewards cards, there are a few ways to use the rewards you earn.
Some travel rewards cards give you the option to redeem points or miles for travel or cash back. With travel-specific cards, you’ll usually get the most value out of your rewards when redeeming for travel, such as booking flights for a spring break trip with your family.
Co-branded travel cards
There are a few types of travel rewards cards to know. Co-branded travel cards, for example, occur when a specific credit card issuer partners with an airline or hotel brand. These cards offer the most value to loyalists of the partnered airline or hotel brand, seeing as you’ll earn the most rewards by making purchases with said brand. For instance, an airline co-branded card will often earn higher rates of miles on purchases made with the airline, and most often offer travel perks like free checked bags or seat upgrades.
General travel cards
General travel cards help you earn no matter the brand of hotel or airline. For example, the Capital One® VentureOne® Rewards Credit Card will earn you 10X miles at thousands of hotels (you can see which of the many brands apply at hotels.com/venture) and 1.25X miles on everything else.
Determine what’s best for you
It’s important to compare cards based on aspects like fees. Annual fees, for example, can easily eat into the overall value of your card if you don’t fully utilize your rewards structure.
Just like cash back cards, the best travel rewards card for you depends on your lifestyle and spending habits. If you travel a handful of times a year, you’ll get less value out of a high annual fee travel rewards card than a jet-setting world traveler will. Check out how cash back and travel rewards are favored among cardholders:
Which type of rewards are most favored?
Based on 2017 Consumer Payment Study by TSYS U.S.
I have always chosen cash back credit cards over travel rewards cards for the one reason of simplicity. It is so much easier to know that for every $1,000 I spend I am getting $20 cash back (2%) rather than accumulating miles that have to be used to purchase a flight based on credit card companies’ conversion factors. If I want to travel, I can spend my cash back rewards on flight purchases, it’s so much simpler this way.
Phillip James Financial
— Phillip Christenson, CFA, Portfolio Manager & Financial Advisor at
How to maximize cash back cards
Let’s break down how you can maximize your cash back card using an examples:
Discover it® Cash Back
With the Discover it Cash Back, upon enrollment you’ll earn 5% cash back in quarterly, rotating bonus categories on up to $1,500 in purchases and an unlimited 1% cash back on everything else.
In order to get the most out of this card, try and max out the bonus category. Be aware that it may be difficult to do so each quarter if Discover chooses a category you don’t typically spend in.
For 2019, you’ll have the chance to earn at grocery stores, gas stations, Uber , Lyft, Paypal, restaurants, Amazon.com, Target, and Walmart. com. Additionally, you’ll double what you’ve earned in rewards at the end of your first year of card ownership with the Cashback Match™ feature. Thankfully, you won’t be charged an annual fee, so you won’t have to factor in how much cash back you’ll need to make up for the yearly charge.
By maxing out all four of the Discover it Cash Back bonus categories throughout the year (capped at $1,500 in spending each quarter), you’ll earn $300 in cash back – not including spending you’d do in the 1% cash back category. Say you spend an additional $500 each quarter on non-category spending; that’s an extra $20 in cash back for the year.
Finally, with the Cashback Match™ feature, Discover will double the $320 worth of cash back that you’ve earned at the end of your first year, meaning you’ll earn $640 for the year.
Make sure you understand what the terms are for receiving cash back, like which purchases are eligible and if you’re going to be paying an annual fee for the card. Don’t let attractive offers lead you into opening a credit card unnecessarily. It’s not worth damaging your credit simply to chase down rewards. Find what works best for you, be disciplined and stick with it.
CFP®, President of Bone Fide Wealth, LLC — Douglas A. Boneparth,
Additional reviews and research
For more information on the best cash back credit cards for Spring 2019, read our expert reviews for individual cards.