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Author: Claire Dickey
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Bankrate helps you cash in on cash back credit cards
Looking to earn cash back on credit card purchases? We can help you pick the right card for it. 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?
Just as the name says, this kind of card lets you earn cash back rewards on eligible purchases. For every $1 spent on those purchases, you earn a percentage back.
For example, a 3% cash back rate means 3 cents for every dollar in eligible spending. For a cardholder with a $4,000 annual grocery bill, earning 3% at the supermarket could mean up to $120 in cash back rewards.
Cash back cards are different from other types of rewards cards, like those that offer points or miles for travel purchases. Instead of complicated redemption programs, a cash back card typically offers a few simple ways to redeem your rewards, including:
- Statement credits
- Check payable to you
- Direct deposits into one of your bank accounts
- Gift cards
Depending on the card and the issuer, you also may be able to donate your cash back rewards to charity. Some travel cards allow charitable donations of points or miles, as well.
How can a cash back card save you money?
Cash back is essentially a discount on eligible purchases. You may not see it immediately at the register, but the payoff comes when you redeem your rewards.
Rewards rates: Flat, tiered and rotating bonus categories
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.
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
Flat-rate cash back cards offer the same rewards rate for each eligible 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 prime 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
Tiered cash back cards earn you more cash back the more you spend — or in some cases, 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
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.
Also, 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 rotating categories when you activate and enroll, but it caps the bonus rate earnings at $1,500 in purchases per quarter. After that, you’ll earn an unlimited 1%.
Figuring out which card is right 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 earn rewards on most any kind of eligible purchase.
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 out your bonus categories if they aren’t relevant to your lifestyle.
Things to watch out for with cash back cards
With a cash back card, the amount you accrue is simple and easy to follow — it’s essentially a rebate on everything you spend. However, owning any kind of credit card means being aware of some potential pitfalls.
APR that cancels out rewards
When you run a large balance on your credit card, APR (annual percentage rate) could cancel out the rewards you’ve earned.
As long as you consistently pay off your balance each month, you can avoid paying these interest charges. But if you tend to carry a balance, your top priority when researching cash back cards should be looking for cards that offer lower APR or a pass on your first late payment.
Overspending for a bonus
Many cards offer sign-up bonuses that require you to spend a specific amount of money within a specific time-frame. You might feel tempted to sign up for a card just for the welcome offer, but be careful. By acting impulsively, you could overspend to qualify for the offer and end up carrying a balance.
Make sure the spending requirement is in line with how much you normally spend with a credit card. Running up a balance you can’t pay off in time could subject you to high APR, potentially making the sign-up bonus a net loss.
Letting your points expire
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.
A number of cards offer rewards that don’t expire, but don’t assume every card does. Check the fine print and keep an eye on the rewards you’ve earned. If you have a big purchase planned, consider stockpiling your rewards for a while.
| 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% |
Source: 2017 TSYS U.S. Consumer Payment Study
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 bonus categories
Let’s break down how you can get the most out of rotating bonus categories using the Discover it® Cash Back as an example. You can try a similar strategy with any card as long as it matches up with the respective rewards structure.
Enroll/activate each quarter
Rotating category cards typically require you to enroll or activate (the language varies) the bonus categories for the upcoming quarter to earn the higher bonus rate. If you don’t, you’ll earn the standard rate.
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.
Target your spending
In order to get the most out of a bonus category, try to max out the spending limit for the quarter. Depending on the card, it could be in the neighborhood of $3,000. After you reach the limit, the rewards rate typically returns to the standard percentage.
Be aware that it may be difficult to maximize your rewards if the bonus category covers the kind of purchases you don’t normally spend a lot of money on.
Discover’s 2019 bonus categories include grocery stores, gas stations, Uber, Lyft, Paypal, restaurants, Amazon.com, Target and Walmart.com. 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.
Consider combining cards
A combination of cards might serve you best. Some rewards credit cards offered by the same issuer let you use different cards to suit your needs and combine points.
Consider the Chase Freedom®, Chase Sapphire Reserve and Ink Business Preferred Credit Card. Consumers who spend across a wide variety of categories can pick up this combination of cards and combine Chase Ultimate Rewards® points when they’re ready to redeem. By having all three cards, consumers can utilize bonus categories efficiently to maximize rewards for the year.
You can try the same kind of strategy with cards that earn American Express Membership Rewards or Citi ThankYou Points. The key is, once again, choosing cards that make sense with your regular spending patterns so you can maximize the rewards you earn.
Explore the card’s ‘online mall’
Some card issuers feature online shopping portals that offer cash back incentives, discounts or both. Examples include Chase Ultimate Rewards® and Barclaycard RewardsBoost.
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 picks for cash back credit cards
Capital One® Quicksilver® Cash Rewards Credit Card
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.
Read the full review and apply on Capital One’s secure website.
Chase Freedom Unlimited®
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.
Read the full review and apply on Chase’s secure website.
Capital One® Savor One℠ Cash Rewards Credit Card
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.
Read the full review and apply on Capital One’s secure website.
Discover it® Cash Back
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.
Read the full review and apply on Discover’s secure website.
Capital One® Savor® Cash Rewards Credit Card
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.
Read the full review and apply on Capital One’s secure website.
Citi® Double Cash Card
What we love:
- Earn an unlimited 1% on every purchase as you buy and another 1% as 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.
Read the full review and apply on Citi’s secure website.
Chase Freedom®
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.
Read the full review and apply on Chase’s secure website.
Blue Cash Everyday® Card from American Express
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.
Read the full review and apply on the American Express secure website.
Citi Rewards+℠ Card
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.
Read the full review and apply on Citi’s secure website.
U.S. Bank Cash+™ Visa Signature® Card
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.
Read the full review and apply on U.S. Bank’s secure website.
Additional reviews and research
For more information on the best cash back credit cards for, read our expert reviews on individual cards.
