Best Cash Back Credit Cards
Choosing the right credit card can be a daunting task, especially with so many options available. For many, a cash back credit card is an excellent choice, offering the opportunity to earn money back on everyday purchases. This article will delve into the world of cash back credit cards, exploring some of the best options available, how they work, and how to choose the right one for your specific needs and spending habits.
Understanding Cash Back Credit Cards
Cash back credit cards are essentially credit cards that reward you with a percentage of your spending back in the form of cash. This cash back can be received as a statement credit, a direct deposit into your bank account, or even as a check. The percentage of cash back offered varies from card to card, and some cards offer different percentages for different spending categories.
How Cash Back Rewards Work
The mechanics of earning cash back are relatively straightforward. When you make a purchase using your cash back credit card, the card issuer tracks the amount you spend. At the end of the billing cycle, or sometimes monthly, the earned cash back is calculated and applied to your account or sent to you, depending on the card’s terms. The cash back rate is a percentage of your purchases, so a card offering 2% cash back will give you $2 back for every $100 you spend.
It’s important to note that cash back is typically earned only on eligible purchases. This usually excludes balance transfers, cash advances, and fees. Read the terms and conditions of your card carefully to understand what types of transactions qualify for cash back rewards.
Types of Cash Back Credit Cards
Cash back credit cards come in a variety of forms, each with its own unique reward structure. Understanding these different types will help you choose a card that aligns with your spending patterns.
Flat-Rate Cash Back Cards
Flat-rate cash back cards offer a consistent cash back percentage on all purchases, regardless of the category. For example, a card might offer 1.5% cash back on everything. These cards are simple and straightforward, making them a great option for people who want to maximize their rewards without having to track different spending categories.
Tiered Cash Back Cards
Tiered cash back cards offer different cash back percentages based on spending categories. For example, a card might offer 3% cash back on dining, 2% cash back on groceries, and 1% cash back on all other purchases. These cards can be lucrative if you spend a significant amount of money in the higher-reward categories. However, it requires some effort to keep track of which categories earn which rewards rates.
Rotating Category Cash Back Cards
Rotating category cash back cards offer bonus cash back in specific categories that change each quarter. For example, a card might offer 5% cash back on gas and internet services during one quarter, and then 5% cash back on groceries and department stores during the next quarter. These cards can offer very high rewards, but they require careful planning and tracking to maximize the benefits. You need to activate the bonus categories each quarter to earn the higher rewards rate.
Unlimited Cash Back Cards
Unlimited cash back cards typically offer a fixed percentage back on all purchases without any spending caps or restrictions. These cards are ideal for individuals who want simplicity and predictability in their rewards program. They are great if you don’t want to keep track of bonus categories or spending limits.
Factors to Consider When Choosing a Cash Back Credit Card
Selecting the right cash back credit card involves considering several factors, including your spending habits, credit score, fees, and the rewards structure.
Your Spending Habits
The most important factor to consider is your spending habits. Analyze your monthly expenses and identify the categories where you spend the most money. If you spend a lot on groceries and gas, a card with bonus rewards in those categories might be the best choice. If your spending is more evenly distributed, a flat-rate cash back card might be a better option.
Credit Score
Your credit score plays a significant role in determining the credit cards you’re eligible for. Generally, cash back credit cards with the best rewards rates require good to excellent credit scores (typically 670 or higher). If you have a lower credit score, you may still be able to qualify for a cash back card, but the rewards and benefits might not be as generous.
Fees
Pay close attention to the fees associated with the credit card. Look for cards with no annual fee, especially if you’re just starting out or don’t plan to spend a lot of money on the card. Other fees to consider include late payment fees, over-limit fees, and foreign transaction fees. Cards with high fees can quickly eat into your cash back rewards.
Rewards Structure
Understand the card’s rewards structure and how it aligns with your spending habits. Consider the cash back percentages offered, the categories where you’ll earn bonus rewards, and any spending caps or limitations. Also, consider how you can redeem your rewards – whether as a statement credit, direct deposit, or check – and choose a card that offers the redemption method that works best for you.
Introductory Offers and Bonuses
Many cash back credit cards offer introductory bonuses, such as a sign-up bonus after spending a certain amount of money within a specified timeframe. These bonuses can be a great way to boost your cash back earnings in the first few months of card ownership. However, be sure to meet the spending requirements to qualify for the bonus.
APR (Annual Percentage Rate)
The APR is the interest rate you’ll be charged if you carry a balance on your credit card. If you plan to pay your balance in full each month, the APR is less important. However, if you anticipate carrying a balance, choose a card with a low APR to minimize interest charges. Remember that cash back rewards are essentially negated if you are paying high interest charges.
Best Cash Back Credit Cards: A Detailed Look
Now, let’s take a look at some of the best cash back credit cards currently available, highlighting their key features, benefits, and drawbacks.
Chase Freedom Unlimited
The Chase Freedom Unlimited card is a popular choice for its simple rewards structure and valuable perks. It offers 5% cash back on travel purchased through Chase Ultimate Rewards, 3% cash back on dining and drugstores, and 1.5% cash back on all other purchases. The card also offers a valuable sign-up bonus and introductory APR period.
Key Features:
- 5% cash back on travel purchased through Chase Ultimate Rewards
- 3% cash back on dining and drugstores
- 1.5% cash back on all other purchases
- No annual fee
- Introductory APR period on purchases and balance transfers
Pros:
- Simple and straightforward rewards structure
- Valuable bonus categories
- No annual fee
- Part of the Chase Ultimate Rewards ecosystem, offering opportunities for travel rewards
Cons:
- Requires good to excellent credit
- Foreign transaction fees apply
Chase Sapphire Preferred Card
While primarily known for its travel rewards, the Chase Sapphire Preferred Card also offers a solid cash back value when points are redeemed for cash. It earns 5x points on travel purchased through Chase Ultimate Rewards, 3x points on dining, online groceries, and select streaming services, and 2x points on all other travel purchases. Points can be redeemed for cash back at a rate of 1 cent per point.
Key Features:
- 5x points on travel purchased through Chase Ultimate Rewards
- 3x points on dining, online groceries, and select streaming services
- 2x points on all other travel purchases
- Points can be redeemed for cash back at a rate of 1 cent per point
- Annual fee
Pros:
- High earning potential in bonus categories
- Flexible redemption options, including cash back and travel
- Travel insurance and purchase protection benefits
Cons:
- Annual fee
- Requires good to excellent credit
Blue Cash Preferred Card from American Express
The Blue Cash Preferred Card from American Express is a top choice for families and individuals who spend a lot on groceries and gas. It offers 6% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%), 6% cash back on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations and transit, and 1% cash back on all other purchases.
Key Features:
- 6% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%)
- 6% cash back on select U.S. streaming subscriptions
- 3% cash back at U.S. gas stations and transit
- 1% cash back on all other purchases
- Annual fee
Pros:
- High cash back rates in popular spending categories
- Amex Offers program provides additional savings and benefits
Cons:
- Annual fee
- Spending cap on the 6% cash back at U.S. supermarkets
- Requires good to excellent credit
Capital One Quicksilver Cash Rewards Credit Card
The Capital One Quicksilver Cash Rewards Credit Card is a simple flat-rate cash back card that offers 1.5% cash back on all purchases. It’s a good option for those who prefer a straightforward rewards program without having to track bonus categories.
Key Features:
- 1.5% cash back on all purchases
- No annual fee
- No foreign transaction fees
Pros:
- Simple and easy-to-understand rewards program
- No annual fee
- No foreign transaction fees
Cons:
- Lower rewards rate compared to some other cash back cards
Discover it Cash Back
The Discover it Cash Back card is known for its rotating quarterly categories, offering 5% cash back on purchases in those categories (up to a quarterly maximum). All other purchases earn 1% cash back. Discover also offers a unique “cash back match” at the end of your first year, effectively doubling all the cash back you’ve earned.
Key Features:
- 5% cash back on rotating quarterly categories (up to a quarterly maximum)
- 1% cash back on all other purchases
- Cash back match at the end of your first year
- No annual fee
Pros:
- High earning potential in rotating categories
- Cash back match provides a significant bonus in the first year
- No annual fee
Cons:
- Requires tracking rotating categories to maximize rewards
- 5% cash back is limited to a quarterly maximum
Citi Double Cash Card
The Citi Double Cash Card offers a unique cash back structure: you earn 1% cash back when you make a purchase and another 1% cash back when you pay your bill, for a total of 2% cash back on all purchases. This makes it a great option for those who want a high flat-rate cash back card.
Key Features:
- 1% cash back when you make a purchase
- 1% cash back when you pay your bill
- No annual fee
Pros:
- High flat-rate cash back of 2%
- No annual fee
Cons:
- Foreign transaction fees apply
- Requires paying your bill to earn the full 2% cash back
U.S. Bank Cash+ Visa Signature Card
The U.S. Bank Cash+ Visa Signature Card allows you to customize your rewards by choosing two 5% cash back categories and one 2% cash back category each quarter. All other purchases earn 1% cash back. This flexibility makes it a great option for those who want to tailor their rewards to their specific spending habits.
Key Features:
- Choose two 5% cash back categories each quarter
- Choose one 2% cash back category each quarter
- 1% cash back on all other purchases
- No annual fee
Pros:
- Highly customizable rewards program
- No annual fee
Cons:
- Requires actively selecting categories each quarter
- 5% and 2% cash back are limited to combined spending of $2,000 per quarter
Maximizing Your Cash Back Rewards
Once you’ve chosen the right cash back credit card, there are several strategies you can use to maximize your rewards.
Use Your Card for All Purchases
To earn the most cash back, use your card for all eligible purchases. Even small purchases can add up over time. Consider using your card for everyday expenses like groceries, gas, dining, and online shopping.
Pay Your Balance in Full Each Month
To avoid interest charges, pay your balance in full each month. Carrying a balance will negate the benefits of your cash back rewards, as the interest charges will quickly outweigh the cash back you earn. Set up automatic payments to ensure you never miss a payment.
Track Your Spending and Rewards
Keep track of your spending and rewards to ensure you’re maximizing your cash back earnings. Many credit card issuers provide online tools and mobile apps that allow you to track your spending, monitor your rewards balance, and redeem your rewards.
Take Advantage of Bonus Offers
Be sure to take advantage of any bonus offers or promotions offered by your credit card issuer. These offers can provide extra cash back or other valuable benefits. Check your email and online account regularly for new offers.
Redeem Your Rewards Strategically
Choose the redemption method that works best for you and redeem your rewards strategically. If you prefer a statement credit, you can use your rewards to reduce your credit card balance. If you prefer a direct deposit, you can use your rewards to pay bills or save for a specific goal.
Consider Combining Cards
Depending on your spending habits, you might consider combining multiple cash back credit cards to maximize your rewards. For example, you could use one card for gas and groceries, another card for dining, and a third card for all other purchases.
Cash Back vs. Other Rewards Programs
While cash back credit cards are a popular choice, they’re not the only type of rewards credit card available. Other options include travel rewards cards and points-based rewards cards.
Travel Rewards Cards
Travel rewards cards offer points or miles that can be redeemed for flights, hotels, and other travel expenses. These cards often come with travel-related benefits, such as travel insurance, airport lounge access, and priority boarding. If you travel frequently, a travel rewards card might be a better option than a cash back card.
Points-Based Rewards Cards
Points-based rewards cards offer points that can be redeemed for a variety of rewards, including cash back, gift cards, merchandise, and travel. These cards offer more flexibility in terms of redemption options, but the value of the points can vary depending on how you redeem them.
Which is Right for You?
The best type of rewards card for you depends on your individual needs and preferences. If you value simplicity and want to earn cash back on all purchases, a cash back card is a good choice. If you travel frequently and want to earn travel rewards, a travel rewards card might be a better option. If you want more flexibility in terms of redemption options, a points-based rewards card might be the best fit.
Common Mistakes to Avoid
When using a cash back credit card, it’s important to avoid common mistakes that can diminish your rewards.
Carrying a Balance
As mentioned earlier, carrying a balance on your credit card will negate the benefits of your cash back rewards. The interest charges will quickly outweigh the cash back you earn. Always pay your balance in full each month.
Missing Payments
Missing payments can result in late fees and a negative impact on your credit score. Set up automatic payments to ensure you never miss a payment.
Overspending
Using your cash back credit card as an excuse to overspend can lead to debt and financial problems. Stick to your budget and only spend what you can afford to pay back each month.
Ignoring Fees
Pay attention to the fees associated with your credit card, such as annual fees, late payment fees, and foreign transaction fees. These fees can eat into your cash back rewards.
Not Tracking Rewards
Failing to track your rewards and redeem them regularly can result in lost cash back. Monitor your rewards balance and redeem your rewards before they expire.
Conclusion
Cash back credit cards can be a valuable tool for earning rewards on everyday purchases. By understanding the different types of cash back cards, considering your spending habits, and avoiding common mistakes, you can choose the right card and maximize your cash back earnings. Whether you prefer a simple flat-rate card, a tiered rewards card, or a rotating category card, there’s a cash back credit card that can fit your needs and help you earn money back on every purchase. Remember to always use your card responsibly and pay your balance in full each month to avoid interest charges and maximize the benefits of your cash back rewards.