Flat-rate cash back cards vs. bonus category cash back cards

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When it comes to finding a cash back credit card that suits your needs, you’ll find almost too many options. Not only will you find cards with different earning structures, but welcome bonuses and cardholder benefits also vary significantly. From there, you’ll notice that all the major card issuers have at least one cash back credit card on offer, and that some issuers, such as Chase and American Express, feature several different cash back credit cards.

That said, one major difference in the top cash back credit cards comes in the way you earn rewards. Are you better off earning a flat rate of cash back on all purchases, or would you prefer a card with cash back categories that give you more than the regular rewards rate?

You’ll have to do the research to figure out how to choose the best cash back credit card for yourself.

Flat-rate cash back vs. bonus categories: The basics

How does cash back work? It depends.

Cash back credit cards run the gamut, but some prefer to keep their rewards rates simple. With a flat-rate cash back credit card, you’ll earn the exact same amount of cash back on every purchase you make. Generally, flat-rate cards typically dole out between 1 percent and 1.5 percent back on all purchases. The best flat-rate cash back cards earn 2 percent cash back on all purchases, but there are a few flat-rate cards with potentially higher rates that aren’t as accessible.

For example, you’ll have to be an Alliant Credit Union member to take advantage of the Alliant Cashback Visa® Signature Credit Card and its 2.5 percent flat-rate cash back, but that rate is limited to $10,000 in purchases and $250 in rewards each billing cycle. The Bank of America® Unlimited Cash Rewards credit card could offer an even higher flat cash back rate, 2.62 percent, but you’d have to be a Preferred Rewards member with a whopping $100,000 minimum average balance across your Bank of America accounts.

Conversely, you’ll find cash back credit cards with bonus categories that let you earn more rewards on specific purchases. Some cash back categories can remain the same for as long as you have your card, while others might rotate every quarter. Cash back categories tend to fall in areas where consumers spend a lot of money, such as dining, groceries, travel or transportation.

Depending on your card’s category structure, bonus categories commonly offer anywhere from 2 to 5 percent cash back on purchases that fall within the card’s designated merchant category codes—a four-digit code used by your card’s network to categorize purchases. Some cards may even offer higher rates on certain category purchases for a limited time. Several Capital One credit cards carry an 8 percent cash back category for Vivid Seats purchases through January 2023, for instance.

Pros and cons of flat-rate cash back cards

Cash back cards that offer a flat rate of rewards for every dollar you spend come with advantages and disadvantages to be aware of. The factors below are worth keeping in mind as you decide between the top cards.

Perks:

  • You don’t have to keep track of which credit card to use for each purchase. With a flat rate of rewards for each dollar you spend, you never have to juggle cards or worry if you’re maximizing your cash back rewards.
  • Flat-rate rewards credit cards often offer a higher rate of rewards for regular spending. Where most cards with bonus categories only offer 1 percent back on regular non-bonus spending, flat-rate credit cards frequently offer as much as 1.5 percent back or 2 percent back on general purchases.

Drawbacks:

  • You won’t be able to maximize rewards with bonus category spending. With no cash back categories to take advantage of, you’ll only be able to earn more rewards by spending more with your credit card.

Pros and cons of bonus category cash back cards

Cash back credit cards with bonus categories can be a good choice, yet there are still some considerations to keep in mind before you sign up for one. Here are the main advantages and disadvantages.

Perks:

  • You get the chance to maximize your cash back rewards on specific purchases. Credit card rotating categories can help you earn more rewards over the course of a year.
  • You can pair different cards and earn more rewards in each one’s bonus category. If you have a few different cards with bonus categories, you can use them strategically to earn more rewards on different types of purchases.

Drawbacks:

  • Some rewards cards with cash back categories set caps on the amount of bonus rewards you can earn. Many cash back credit cards with bonus categories only offer more points up to a specific amount of spending, often $1,500 in a quarter. These caps can dramatically limit the benefit of bonus rewards categories.
  • You’ll probably only earn 1 percent back on non-bonus spending. Cash back credit cards with bonus categories tend to offer lower than the market rate in rewards on regular purchases.

Which type of cash back card is right for you?

If you’re struggling to decide on the type of cash back card to sign up for, it can help to take a look at your regular spending habits. If you spend a lot of money in a few different categories like groceries or gas, then it’s possible a card with bonus rewards categories could leave you better off. However, a flat-rate cash back card may be a better deal if you tend to spend in a lot of different categories rather than in a select few, your biggest expenses aren’t covered by typical categories (like bill payments) or you typically spend well beyond bonus category spending limits.

Either way, make sure to compare the top cash back credit cards with different types of rewards rates before you decide.

Flat-rate cash back cards to consider in 2021

Citi® Double Cash Card

The Citi® Double Cash Card offers a flat 2 percent back for each dollar you spend—1 percent when you make a purchase and another 1 percent when you pay it off. You can also qualify for an introductory 0 percent APR on balance transfers for 18 months, followed by a variable APR of 13.99 percent to 23.99 percent. There’s no annual fee, and you can redeem your rewards for a check, a statement credit or a credit to a linked account once your rewards balance reaches $25 or more.

Wells Fargo Active Cash℠ Card

Unless you need the longest intro balance transfer APR possible, the Wells Fargo Active Cash℠ Card is perhaps the best all-around flat-rate cash back card on the market. Its unlimited 2 percent cash back comes with no strings attached and a variety of redemption options, all for no annual fee. The Active Cash card also manages to pack an impressive number of features, including a 15-month 0 percent intro APR on purchases and qualifying balance transfers (then 14.99 percent to 24.99 percent variable), a respectable $200 cash rewards sign-up bonus (upon spending $1,000 within the first three months) and additional benefits like cellphone protection.

Chase Freedom Unlimited®

Although it’s no longer a traditional 1.5 percent flat-rate cash back card like it used to be, the no annual fee Chase Freedom Unlimited® fortifies its boosted 1.5 percent on all purchases with an array of bonus categories geared toward everyday spending: 5 percent on up to $12,000 spent at grocery stores (excluding Target and Walmart) during the first year, 5 percent on Lyft purchases (through March 2022), 5 percent on travel through Chase and 3 percent on dining and drugstore purchases. These rewards can then be pooled with premium Chase Ultimate Rewards cards for a higher value toward travel if you wish.

Besides its excellent rewards, the Chase Freedom Unlimited also conquers much of the competition with a solid $200 cash sign-up bonus (only requires spending $500 in the first three months), a generous 15-month 0 percent intro purchase and balance transfer APR (then 14.99 percent to 23.74 percent variable) plus stellar benefits that include trip interruption/trip cancellation insurance and other favorites.

Bank of America® Unlimited Cash Rewards credit card

Run-of-the-mill 1.5 percent flat-rate cash back cards like the Capital One Quicksilver Cash Rewards Credit Card and the American Express Cash Magnet® Card only have a few minor features that separate them, but Bank of America’s Preferred Rewards program could make its Unlimited Cash Rewards card a much stronger option for cardholders that already bank with this issuer. If your Bank of America account balances average out to at least $20,000, you can boost the card’s standard 1.5 percent rate by 25 percent to 1.87 percent back. Preferred Rewards members with Platinum Honors Status (at least a $100,000 average balance) can top the charts with unlimited 2.62 percent cash back on all purchases.

The Bank of America Unlimited Cash card also offers a 0 percent intro purchase and balance transfer APR for 15 billing cycles (then 13.99 percent to 23.99 percent variable), a $200 cash bonus for spending $1,000 within the first 90 days and a few issuer-specific perks like BankAmeriDeals.

Bonus category cash back cards to consider in 2021

Chase Freedom Flex℠

The Chase Freedom Flex℠ starts you off with a $200 cash bonus when you spend $500 within three months of account opening. You’ll also earn 5 percent back on activated bonus category purchases each quarter (up to $1,500, then 1 percent), 5 percent back on travel booked through Chase Ultimate Rewards, 5 percent cash back on Lyft rides (through March 2022), 3 percent back on dining and drugstore purchases and at least 1 percent back on everything else. There’s no annual fee to worry about, either.

Blue Cash Preferred® Card from American Express

The Blue Cash Preferred® Card from American Express offers 20% back on Amazon.com purchases on the Card within the first 6 months of Card Membership, up to $200 back. Plus, earn $150 back after you spend $3,000 in purchases on the Card within the first 6 months of Card Membership. You will receive cash back in the form of statement credits. You will also earn 6 percent back on the first $6,000 spent at U.S. supermarkets each year (then 1 percent), 6 percent back on select U.S. streaming services, 3 percent back on U.S. gas station purchases and transit and 1 percent back on other purchases.

The card also comes with an introductory 0 percent APR on purchases for 12 months, before flipping to a variable APR of 13.99 percent to 23.99 percent. There is a $95 annual fee, but it’s wiped to $0 as an introductory annual fee for the first year.

Bank of America® Customized Cash Rewards credit card

The Bank of America® Customized Cash Rewards credit card earns you 3 percent cash back in the category of your choice and 2 percent cash back at grocery stores and wholesale clubs (up to $2,500 in combined 3 and 2 percent category purchases each quarter, then 1 percent). You’ll also earn 1 percent cash back on all other purchases.

The 3 percent categories you can choose from are gas, online shopping, dining, travel, drug stores and home improvement/furnishings. But the most interesting part is that you can swap out your choice category each month to match your upcoming expenses, which makes this card more flexible than traditional rotating category cards.

For a welcome bonus, you’ll earn a $200 online cash rewards bonus after making at least $1,000 in purchases during the first 90 days after opening your account. The card also comes with an introductory 0 percent APR on both purchases and balance transfers for the first 15 billing cycles (balance transfers, in particular, must be made in the first 60 days and a 3 percent fee with a $10 minimum applies). After that, the APR is 13.99 percent to 23.99 percent.

Bank of America® Customized Cash Rewards credit card last updated on 08.25.21

Capital One SavorOne Cash Rewards Credit Card

Thanks to its May 2021 update, the Capital One SavorOne Cash Rewards Credit Card is one of the best bonus category cards if you hate keeping up with spending limits. You’ll be able to earn unlimited 3 percent cash back on dining, entertainment, popular streaming services and grocery store purchases (excluding superstores like Walmart and Target). Other purchases will earn the standard 1 percent back, but Vivid Seats purchases will earn an impressive 8 percent back until January 2023.

You can also expect an easy-to-earn $200 cash bonus after spending only $500 during your first three months, plus a 15-month 0 percent intro APR on purchases (14.99 percent to 24.99 percent variable APR afterward).

The bottom line

Cash back credit cards are worth signing up for if you want to earn rewards on your spending and don’t plan to carry a balance. However, the fact there are different types of cash back credit cards means you’ll need to do some research.

The cards on this list are a good place to start, but make sure to compare other rewards credit cards to see what’s out there.

Learn more: Weighing a cash back card vs. a points and miles card

The information about the Alliant Cashback Visa® Signature Credit Card has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.