A cash back credit card can be the simplest way to earn rewards. Cardholders can make a purchase knowing exactly how much they will earn back without having to decipher the value of points.
Some cash back cards give you a flat rate of return on every purchase. Others offer bonus rates depending on where you shop and can be a potentially better option for those trying to maximize their cash back. Before choosing a new card, learn about the different types of cash back rewards programs, additional cardholder benefits and how to find the best cash back card for you.
How Cash Back Credit Cards Work
Depending on the credit card, you may see your cash back rewards grow as cents, points or miles. You can then redeem these for cash back in the form of a statement credit, check or deposit into a bank account. Some cards that are marketed as cash back cards also let you use the points you earn for other rewards such as travel, gift cards or merchandise.
Most cash back cards let you earn 1 to 5 percent back on eligible purchases. While some cards give you the same amount no matter where you shop, others may have a base cash back rate with varying bonus rates for particular merchants or categories. Some cards offer bonus cash back when you pay your bill or make a certain number of purchases during a billing period.
Look in the fine print for what qualifies as eligible; noneligible purchases generally include balance transfers, wire transfers and cash advances. Fraudulent purchases, such as when someone steals your card and uses it to buy something, also may be disqualified. In addition, if you return an item purchased with your card, the issuer may claw back the associated rewards.
Benefits and Drawbacks of Cash Back Credit Cards
Easy to understand: It’s easy to track how much you’ve earned in rewards and what those rewards are worth since you don’t need to convert a point or mile into the equivalent cash value.
Easy to redeem cash back: Although you sometimes need to accrue a specific amount of cash back to redeem the reward, it’s easy to cash out once you have.
A wide range of bonus categories: Some cards offer bonus cash back rates when you make particular purchases, such as 2 percent cash back on travel or 6 percent cash back at U.S. supermarkets. The bonus categories may change throughout the year, giving you different opportunities to earn extra rewards.
Many cards have sign-up bonuses: If you want to boost your earnings, cash back cards may offer a sign-up bonus worth hundreds of dollars. You may also be able to get additional cash back by adding an authorized user to your account or referring new cardholders.
Cardholder benefits: While they aren’t exclusive to cash back cards, many cash back cards offer a variety of cardholder benefits that commonly include special access to events, zero liability protection, extended warranties on purchases, purchase protection on lost or stolen items, rental car insurance, roadside dispatch service and lost luggage reimbursement.
Credit requirements: The best cash back credit cards generally require a good or very good credit score (above a FICO 670).
Sign-up bonus requirements: To earn a sign-up bonus, you may need to meet a minimum spending requirement. The spending requirement can range from a few hundred to a few thousand dollars, usually within the first few months of opening an account. If you change your regular spending habits to earn a sign-up bonus, you could end up carrying a balance.
Tracking bonus categories: If the card has rotating categories, keeping track of a card’s different cash back rates can take time and effort.
Potentially less-valuable rewards: Cash back cards generally have a locked-in point valuation. While this means your point valuation will not dip below this rate, it also means you won’t receive any better valuation. This differs from cobranded airline and hotel cards where sometimes you can redeem your points at a very high conversion rate.
Fewer perks: Some different types of credit cards could offer more cardholder perks. For example, cobranded travel rewards cards might include free checked bags, elite status in a rewards program and vouchers for free hotel stays.
Fees: Depending on how you use a card, you might find that you’re spending more on annual fees than you earn in cash back rewards. You may also need to watch out for balance transfer, over limit, late payment and foreign transaction fees, all of which can offset or negate your earnings. If you think you may carry a balance, you could be better off with a lower interest non-reward card than a cash back card.
Is a Cash Back Rewards Card Right for You?
1. Check your credit. You need a good to excellent credit score to qualify for the best cash back credit cards. Applying for a credit card, even if you’re denied, could slightly lower your credit score.
Obtain your base FICO Score or FICO Bankcard Score to better understand whether or not you’ll be approved. These scores may be available for free from your bank, credit union or current credit card issuers, or for a fee from FICO directly. Some providers of free credit scores provide an educational credit score. These scores rely on similar factors, including your payment history, use of available credit, public records and length of credit history. However, almost all lenders use a FICO score when reviewing applications for new accounts.
2. Review your regular monthly purchases. Knowing how much you spend at different types of stores, and overall, each month can help you determine which cash back card will be right for you. If you don’t already keep a budget, you can upload your purchase history from existing debit or credit card accounts into budgeting software and categorize the purchases. Common bonus cash back categories include travel, dining, gas stations and U.S. supermarkets.
3. Make sure you can pay the balance in full. If you carry a balance on your card, the interest you’ll have to pay could more than offset your rewards. In addition, you’ll lose the grace period or the interest-free period between your statement date and your bill’s due date. As a result, your purchases will immediately start to accrue interest.
Choosing a Cash Back Card
There are some critical criteria to consider when deciding which cash back card is right for you.
- Pick the right rewards program for you.
- Calculate earning potential.
- Factor in sign-up bonuses.
- Subtract annual fees.
- Understand cardholder benefits.
1. Pick the right rewards program for you.
Straight cash back
Many types of cash back cards, including flat rate, bonus category and rotating category cards, give cardholders straight cash back as a reward. Depending on your card, you might see the amount you’ve accrued in your account and be able to choose when to redeem it. With some cards, you can sign up for automatic redemption.
When choosing how to redeem your cash back, you may be able to opt for a statement credit, check, gift card or transfer the money into a bank or brokerage account. There could be a minimum redemption amount, such as $5 or $25, and you may only be able to redeem your rewards in increments of that amount.
Points or miles cards
There are credit cards that advertise themselves as cash back cards when you actually earn points or miles in a larger program. For example, with the Chase Freedom card, the cash back you earn is actually Ultimate Rewards points. You could redeem these for cash back or other rewards if you want, including travel, gift cards or merchandise. These cards offer you some flexibility, but the cash rewards rate could be lower than the value of a mile or point that you redeem for travel.
2. Calculate earning potential.
Cash back cards earn rewards at different rates depending on which card you use, where you make purchases and whether or not a category bonus is in effect.
Flat-rate cards apply the same cash back rate to all your purchases. Generally, the rate is between 1 and 2 percent, although you sometimes may be able to find a card promotion that offers a higher flat cash back rate.
A flat-rate card can be valuable if your spending is pretty evenly spread across multiple categories or if you don’t want to track which credit card will earn you the most on specific purchases.
Bonus category cards
Bonus category credit cards offer different cash back rates depending on where you use the card. Bonus category cards often have several rewards rates, a base rate (generally 1 percent) and higher rates depending on the merchant. If you spend thousands of dollars at the grocery store or buying gas each year, using a card that offers a higher rewards rate in that category could be a good idea.
Common bonus categories for consumer credit cards include:
- Gas stations
- U.S. supermarkets
- Department stores
Business owners who are looking for a business credit card could choose a card that aligns with their business spending. Some of the cash back business cards’ bonus categories include utilities, office supply stores, telecom bills, shipping, and social media or search engine advertising.
Rotating bonus category cards
Rotating bonus category cards typically have a 1 percent cash back base rate along with bonus categories that change throughout the year, often quarterly.
The rotating categories typically offer 5 percent cash back, one of the highest rates you’ll get on cash back cards. But there may be a limit to how much you can earn each quarter. The categories may be more specific and limiting than flat-rate or static bonus categories but sometimes align with the season, such as department stores during the winter holidays.
You won’t always know all the upcoming categories when you apply for a card. Issuers tend to reveal a quarter’s bonus categories a few months ahead of time and only give you a general sense of what the other categories will be in the coming year.
A rotating bonus category card could be best for someone who enjoys tracking rewards and looking for ways to maximize their credit card rewards. It can be difficult to keep track of the changing categories, and without proper planning, you might be better off going with a 2 percent flat rate like the Citi Double Cash Card or static bonus category card.
Before choosing a cash back credit card, consider how you’re likely to use the card and how much you tend to spend at different types of merchants. If simplicity is best for you, a flat-rate card could be a good fit. If you keep a close eye on your spending and remember to sign up for rotating bonus categories, you might be better off with a card that offers bonus cash back rates.
Whether or not you receive bonus cash back from your purchases depends on the business’s merchant category code (MCC). Merchants may be able to choose their code or they might be assigned a code by a payment processor. Often, each store will have one code, but sometimes large stores have several. Similarly, different card issuers or networks may not categorize businesses in the same way.
It’s important to track your purchases and cash back to see if your purchases count toward a bonus, especially before making a large purchase. You could look in online credit card forums to see if other cardholders got a bonus for purchases at the store.
3. Factor in sign-up bonus and welcome offers.
Many cards attract new applicants by offering a sign-up bonus. The bonus could be a temporary increase in your cash back rate, or it could be hundreds of dollars if you meet the minimum spending requirement during the allotted time frame.
A cash back card with a large sign-up bonus can certainly help boost your earnings, but it’s also important to know the minimum spending requirement and whether you’ll have to spend more than usual.
4. Subtract annual fees.
Some cash back cards charge an annual fee for being a cardholder. The fee usually ranges from $49 to $95, although it may be higher on some cards and waived the first year.
Often the cards with the highest sign-up bonus, rewards rates and perks also have the highest annual fee. Consider whether the earnings or benefits of using a card will more than offset the card’s annual fee. If they don’t, you likely will be better off with a no-fee card.
When the fee is waived the first year, you may be able to cancel the card or downgrade to a no-fee version of the card at the end of the first year and avoid paying the annual fee. You can also call the issuer and ask if they can offer you a retention bonus, such as a statement credit or rewards to offset the fee.
5. Understand cardholder benefits.
Many credit card issuers and card networks offer benefits beyond the rewards program. The benefits could include extended warranties, concierge services, travel accident insurance, theft and fraud protections, low-price guarantees, guaranteed returns and access to a credit score.
Comparing Two Cash Back Cards
U.S. News selected two cash back cards to evaluate using the five steps explained above. We looked at one flat-rate cash back card and one bonus category card to see how each stacks up in potential yearly earnings.
1. Pick the right rewards program for you.
With the Chase Freedom Unlimited Credit Card, rewards are in the form of Ultimate Rewards points. If you redeem these for cash, one point equals 1 cent. You can choose to redeem points for other rewards, such as travel or merchandise.
Blue Cash Preferred from American Express offers a straight cash back program. American Express calls the cash back Rewards Dollars, and you decide how you want to receive your cash back (check, statement credit, etc.).
2. Calculate earning potential.
The Chase Freedom Unlimited Credit Card is a flat-rate cash back card, and you’ll earn 1.5 percent cash back on all your purchases.
The Blue Cash Preferred from American Express is a bonus category cash back card. You can earn 6 percent cash back on the first $6,000 you spend at U.S. supermarkets each year and 1 percent after that. Cardholders also earn 3 percent at U.S. gas stations and department stores and 1 percent back on other purchases.
Using a sample budget, U.S. News calculated potential rewards earned by these two popular cash back cards to demonstrate how choosing the right cash back card can generate hundreds of dollars more in rewards.
Sample monthly budget
|General: $369||Groceries: $334|
|Dining: $250||Utilities: $323|
|Gas: $174||Department Stores: $50|
The sample budget totals $1,500 in spending a month. The Chase Freedom Unlimited Credit Card earns 1.5 percent back on the annual spending of $18,000 (12 months of spending $1,500), which equals $270.
The Blue Cash Preferred from American Express has different earning rates for each category. With an annual budget of $4,008 spent at U.S. supermarkets, $2,688 at department stores and gas stations and $11,304 on other purchases, the cash back rewards are $240.48 for groceries, $80.64 for gas and department stores, and $113.04 for other purchases, totalling $434 overall.
First-year cash back rewards when spending $1,500 per month
|Chase Freedom Unlimited Credit Card||$270|
|Blue Cash Preferred from American Express||$434|
3. Factor in sign-up bonuses.
Both cards offer a sign-up bonus. The Chase Freedom Unlimited Credit Card offers a $150 bonus if you spend $500 within the first three months. Blue Cash Preferred from American Express also offers a $200 statement credit if you spend $1,000 in the first three months.
First-year cash back
|Chase Freedom Unlimited Credit Card||$270 + $150 = $420|
|Blue Cash Preferred from American Express||$434 + $200 = $634|
4. Subtract annual fees.
The Chase Freedom Unlimited Credit Card doesn’t have an annual fee. The Blue Cash Preferred from American Express has a $95 annual fee.
Annual cash back earnings after annual fees at $1,500/month spending
|Year 1 Earnings||Year 2 and Beyond Earnings|
|Chase Freedom Unlimited Credit Card||$429||$270|
|Blue Cash Preferred from American Express||$634 – $95 = $539||$434 earnings – $95 = $339|
Even with the annual fee, the Blue Cash Preferred from American Express earns $110 more in rewards the first year and $69 more in cash back during subsequent years. By year six, using the Blue Cash Preferred from American Express instead of the Chase Freedom Unlimited Credit Card could result in earning $455 more in cash back.
However, if you don’t spend as much in the bonus categories to earn higher rewards with the American Express card, the Chase Freedom Unlimited Credit Card may earn you more rewards in the long run.
For example, if you spend $184 more per month at restaurants instead of the grocery store, the Chase Freedom Unlimited Credit Card’s flat-rate cash back will earn $429 for the first year and $270 for subsequent years. In comparison at that spend, the Blue Cash Preferred from American Express will earn $108 per year for groceries, $80.64 for gas and department stores, and $135.12 for other purchases. The resulting rewards are $428.76 for the first year and $228.76 for each subsequent year.
Three years’ of cash back value at $1,500/month spending
(modified grocery and dining spending)
|Year 1 Total||Year 2 Total||Year 3 Total|
|Chase Freedom Unlimited Credit Card||$429||$699||$969|
|Blue Cash Preferred from American Express||$428.76||$657.52||$886.28|
5. Understand cardholder benefits.
You should consider the cardholder benefits and whether or not they provide additional value to you beyond the cash back.
The Chase Freedom Unlimited Credit Card and Blue Cash Preferred from American Express cards both offer:
- Zero liability for unauthorized purchases
- Secondary auto rental insurance that covers damage to and theft of rental vehicles
- Damage and theft protection on new purchases (120 days for Chase Freedom Unlimited Credit Card and 90 days for Blue Cash Preferred from American Express)
- Extended manufacturer’s warranty (up to one additional year)
- Guaranteed returns for 90 days even if the merchant doesn’t accept a return
- No expiration on points or cash back as long as the account is open and in good standing
The Chase Freedom Unlimited Credit Card also comes with price protection, which will reimburse you up to $500 if a product you buy drops in price within 90 days.
There are also a few benefits that come with the Blue Cash Preferred from American Express card, but not with the Chase Freedom Unlimited Credit Card.
- Travel protections, including death and dismemberment insurance and a roadside assistance hotline
- A global assistance hotline
- Access to AmEx’s Premium Car Rental Protection program
- Free ShopRunner membership
- Access to presale tickets and member-only events
The bottom line: The Chase Freedom Unlimited Credit Card card offers more simplicity and flexibility than the Blue Cash Preferred from American Express. Its flat-rate rewards program means you can earn a good cash back rate on all your purchases. It doesn’t have an annual fee, and you can use the Ultimate Rewards points you receive in a variety of ways.
However, depending on your budget, Blue Cash Preferred from American Express could lead to more cash back earnings even after the annual fee. It also offers more cardholder perks. If you value these benefits and your regular spending falls into the bonus categories, you may benefit more from this choice.
Best Cash Back Credit Cards of 2018
Cash back credit cards are one of the most popular types of rewards cards available because they’re fairly easy to use and understand. But there isn’t a single best cash back card. Finding the best card for you can depend on the card’s rewards program and benefits, your monthly and annual spending, and the value you place on additional cardholder perks.
U.S. News evaluated 308 credit cards that offer cash back as a rewards option using the criteria identified above and selected the top cards that best fit the common needs of potential cardholders.
- Capital One Quicksilver Cash Rewards Credit Card
- Discover it Card
- Citi Double Cash Card
- Chase Freedom Unlimited Credit Card
- Chase Freedom Credit Card
- Blue Cash Preferred Card from American Express
- Bank of America Cash Rewards Credit Card
- Chase Sapphire Preferred Credit Card
- Chase Ink Business Cash Credit Card
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