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Author: Claire Dickey
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Everything 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.
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. 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.
— Priya Malani, Founding Partner Stash Wealth
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.
Interest rates
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 2 %, 1% when you buy and 1% as you make payments for those purchases.
Your takeaway
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 |
2016 |
2017 |
| Once a month or more |
15% |
24% |
| A few times a year |
30% |
32% |
| Once a year or less |
20% |
25% |
| Infrequently or never |
35% |
19% |
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.
Your takeaway
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 Christenson, CFA, Portfolio Manager & Financial Advisor at Phillip James Financial
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; activation required. 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.
— Douglas A. Boneparth, CFP®, President of Bone Fide Wealth, LLC
Bankrate’s top cash back credit cards
What we love:
- Earn 1.5% cash back on all purchases with no limit on how much cash back you can earn
- $150 sign-up bonus when you spend $500 in your first three months
- 15-month 0% introductory offer on purchases and balance transfers (16.24% – 26.24% variable APR thereafter)
- No annual fee
This card isn’t for you if: You’re looking for a high-earning cash back card.
Bottom line: The Quicksilver from Capital One is a great starter cash back card for earning rewards on everyday purchases.
What we love:
- 3% cash back offer for your first year on all purchases (up to $20,000, then 1.5%)
- Redeem for cash back, travel, gift cards or shop with points on Amazon.com
- 15-month 0% introductory APR offer on purchases and balance transfers (17.24% – 25.99% variable APR thereafter)
- No annual fee
This card isn’t for you if: You prefer a cash back welcome offer.
Bottom line: The Freedom Unlimited is a solid no annual fee cash back card with flexible redemption options.
What we love:
- Unlimited 3% cash back on dining and entertainment, 2% on grocery stores and 1% on everything else
- Earn $150 when you spend $500 in your first three months
- 15-month 0% introductory APR offer on purchases and balance transfers (16.24% – 26.24% variable APR thereafter)
- No foreign transaction fees
- No annual fee
This card isn’t for you if: You don’t regularly spend on entertainment and eating out.
Bottom line: The SavorOne by Capital One is a great no annual fee cash back card for earning unlimited rewards.
What we love:
- Enroll to earn 5% cash back at different places every quarter (up to $1,500 per quarter) and 1% on everything else
- Discover will automatically match all of the cash back you’ve earned at the end of your first year
- 14-month 0% introductory APR offer on purchases and balance transfers (14.24% to 25.24% variable APR thereafter)
- Your first late payment fee is waived (up to $39 thereafter)
- No foreign transaction fees
- No annual fee
This card isn’t for you if: You have trouble remembering to activate bonus categories.
Bottom line: The Discover it Cash Back’s welcome bonus is an excellent way to double your cash back earnings for your first year.
What we love:
- Get an unlimited 4% cash back on dining and entertainment, 2% at grocery stores and 1% on everything else
- $300 cash bonus when you spend $3,000 in your first three months
- $95 annual fee waived your first year
- No foreign transaction fees
This card isn’t for you if: You don’t get out often.
Bottom line: As the sibling to the SavorOne, the Savor card is a stellar way to earn a high level of cash back rewards on your dining and entertainment purchases.
What we love:
- Earn an unlimited 1% on every purchase as you buy and another 1% when you pay off your purchase.
- 18-month 0% introductory APR offer on balance transfers (15.74% – 25.74% variable APR thereafter)
- The Lost Wallet® Service will replace your lost card within 24 hours
- No annual fee
This card isn’t for you if: You have the ability to spend more, especially in specific categories.
Bottom line: The Double Cash card is a great tool for keeping practicing healthy card habits due to its 1% cash back incentive after paying off a purchase.
What we love:
- Get 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate and 1% on everything else
- $150 cash bonus when you spend $500 in your first three months
- 15-month 0% introductory APR offer on purchases and balance transfers (17.24%- 25.99% variable)
- No annual fee
This card isn’t for you if: You frequently travel abroad, due to the 3% foreign transaction fee.
Bottom line: With the Chase Freedom, you’ll have the flexibility to choose where you earn your cash back rewards — all with no annual fee.
What we love:
- Earn 3% cash back at U.S. supermarkets (up to $6,000 per year, then 1%), 2% at U.S. gas stations and select U.S. department stores and 1% on everything else.
- The Plan It® feature allows you to split up big purchases over time with no interest, plus a fixed monthly fee
- $150 welcome bonus when you spend $1,000 within your first three months
- 15-month 0% introductory APR on purchases and balance transfers (15.24% – 26.24% variable APR thereafter)
- No annual fee
This card isn’t for you if: You don’t spend much on gas and groceries.
Bottom line: The Blue Cash Everyday is a great low-maintenance card option for busy families; it doesn’t require bonus category activation and offers and an easily attainable welcome bonus.
What we love:
- Get 2X points at supermarkets and gas stations (up to $6,000 per year, then 1X) and 1X points on everything else
- Citi rounds up each purchase to the nearest 10 points with no cap
- Earn 10% of your points back for the first 100,000 ThankYou® Points you redeem each year
- No annual fee
This card isn’t for you if: You’re looking to make a balance transfer. The introductory 0% APR period for balance transfers is only 15 months (15.74% – 25.74% variable APR thereafter) and includes either a $5 or 3% fee, whichever is greater.
Bottom line: The Citi Rewards+ is a great cash back card option for small purchases thanks to its roundup feature. For example, a $2 coffee could earn you 10 points.
What we love:
- Pick two out of 12 categories each quarter to earn 5% cash back in (up to $2,000 in combined purchases per quarter) and one out of three categories to earn an unlimited 2% cash back in. You’ll earn 1% on all other purchases.
- Redeem your cash back for statement credit, direct deposit into your U.S. Bank checking/savings account or as a rewards card
- No annual fee
This card isn’t for you if: You want a simple, cash back card without category caps.
Bottom line: The U.S. Bank Cash+ card was made to give cardholders a say in where they earn rewards, but you must remember to log in and select your category choices.
Additional reviews and research
For more information on the best cash back credit cards for, read our expert reviews on individual cards.
