Key takeaways

  • 2 percent cash back cards are great, but it's possible to get more value out of seemingly lower-rate credit cards offering solid returns.
  • Chase, Bank of America and Discover offer 1.5 percent cash back cards that boost rewards over limited-time offers, in specific categories or on travel — saving you more than a typical 2 percent card.
  • For a stronger rewards strategy, combine or rotate multiple cards to earn even more on your everyday spending.

While I believe almost everyone should have a no-annual-fee 2 percent cash back credit card, there are some instances in which choosing a cash back card with a seemingly lower payout can actually provide more value, at least for a period of time. Here’s what you need to know.

When 1.5% is better with Chase

The Chase Freedom Unlimited®* has a base rewards rate of 1.5 percent cash back on all purchases, but it does even better in certain categories. Cardholders earn 5 percent cash back on travel booked through Chase Ultimate Rewards and on Lyft rides (through March 2025), plus 3 percent cash back on dining and at drugstores. If you spend a lot in those categories, that could potentially boost your overall cash back earnings over 2 percent.

You want to earn heightened rewards on travel redemptions

If you also have a Chase card that allows you to transfer Ultimate Rewards points to Chase airline and hotel partners — like the Chase Sapphire Reserve®, Chase Sapphire Preferred® Card or Ink Business Preferred® Credit Card — you can get even more value from your Freedom Unlimited rewards. That’s because you can combine Ultimate Rewards points earned across various cards, and when you transfer points to airlines and hotels, you might be able to get a significantly higher redemption value than the standard 1 cent per point.

Ultimate Rewards points are worth around 2.0 cents apiece on average when transferred to high-value travel partners, according to Bankrate estimates. Sometimes you can get even more value if you find a sweet spot in an airline or hotel award chart.

You want credit card and travel protections

The Freedom Unlimited also has generous purchase protection, extended warranty coverage and trip cancellation and interruption insurance. It’s a versatile card that’s one of the most valuable no-annual-fee options on the market.

When 1.5% is better with Bank of America

Bank of America has two credit cards with no annual fee that give 1.5 percent cash back on every purchase. The simplest is the Bank of America® Unlimited Cash Rewards Card, which provides exactly that: unlimited cash rewards. There’s also the Bank of America® Travel Rewards credit card, which comes with the stipulation that cardholders must redeem for statement credits that offset eligible travel or dining purchases.

You’re interested in maximizing rewards through Preferred Rewards

On both cards, your 1.5 percent rewards rate could grow to as much as 2.625 percent if you have at least $100,000 in deposits or investments with Bank of America or Merrill Lynch. The bank’s Preferred Reward program boosts your credit card rewards by 75 percent at the highest tiers, by 50 percent if you have between $50,000 and $99,999 in eligible deposits or investments, and by 25 percent if you have between $20,000 and $49,999. If you’re a loyal customer, it means you could get 2.625 percent, 2.25 percent or 1.875 percent, respectively, in cash back or statement credits.

When 1.5% is better with Discover

You want a no-fuss travel card that offers cash back redemptions

Discover’s typical welcome offer is to match all of the cash back a new cardholder earns at the end of the first year. With the Discover it® Miles card, that means an effective 3 percent cash back on everything for the first 12 months.

The Discover it® Miles is marketed as a travel card, and while these miles can be used to offset eligible travel purchases, they can also be used for more straightforward cash back redemptions. Regardless of how you redeem, you get 1.0 cents per mile. What seems like a 1.5 percent cash back card actually gives an effective 3 percent cash back on all purchases made at the end of that first year.

The bottom line

Don’t get me wrong — I still love 2 percent flat rate cash back cards with no annual fee, such as the Wells Fargo Active Cash® Card (which earns 2 percent cash rewards on purchases), the Citi Double Cash® Card (which technically gives 1 percent cash back when you make a purchase and another 1 percent when you pay it off) and the PayPal Cashback Mastercard®*. These all offer a solid, straightforward return.

If you want to keep it really simple, you could achieve a favorable outcome by using one of them for all of your spending. Or if you’re willing to take on a bit more complexity in exchange for a higher benefit, you can incorporate both flat rate cards and those with better rewards in certain categories (but lower in others, which is where the 2 percent cash back cards factor in as a strong foundation).

But, as you can see, there are also some instances in which a 1.5 percent cash back card could potentially be even better.

Have a question about credit cards? E-mail me at ted.rossman@bankrate.com and I’d be happy to help.

*Information about the Chase Freedom Unlimited® and PayPal Cashback Mastercard® has been collected independently by Bankrate.com. Card details have not been reviewed or approved by the card issuer.