Buying guide for Best cash back credit cards
A credit card is an excellent tool for building a solid credit score. However, with so many credit cards available, it can be tough to know which one would be best for you.
Depending on your credit history, you might not be eligible for every credit card, but you can almost certainly choose one with a handful of perks. Cash back credit cards are a good choice for some people for the money-saving properties they offer.
How do cash back credit cards work? They return a percentage of the amount you spend back to you. Rates vary depending on the card, and some offer a better rate if you spend more. For example, you might have a card with an introductory 1% cash back rate, but if you spend over $10,000 annually, you might get a 2% cash back rate.
Cash back is usually applied to your statement annually, but some cards let you transfer funds to other accounts so you can spend it how you want. Cash back credit cards are ideal for big spenders who pay their monthly balance in full because they are essentially being rewarded for spending money they would have spent anyway.
Cash back credit cards
The Chase Freedom Unlimited is our top pick for many reasons, but we love it most for its high cash back rates and comprehensive rewards program. It’s an excellent card for casual spenders, but big spenders will reap more benefits.
This card offers a 5% cash back rate when you purchase travel via Chase Ultimate Rewards. You can also get 3% on drugstore items, dining and all eligible takeout services and 1.5% on all other purchases. Plus, for the first year, you’ll earn an additional 1.5% on all purchases up to $20,000.
This card has no annual fee with a variable APR of 19.74% - 28.49%%. However, for the first 15 months, you can take advantage of a 0% APR. It also has built-in protection benefits such as zero liability protection and theft and damage coverage for purchases for up to 120 days. Plus, you can check your credit score anytime and use identity restoration services with Chase Credit Journey.
This American Express credit card has no annual fee for the first year (then it’s $95), and it offers an enticing sign-on bonus and several benefits, making it one of our preferred cash back credit cards.
The variable rate of 18.99% to 29.99% comes standard depending on your credit. You’ll get 6% cash back on grocery purchases and U.S. streaming services such as Netflix, HBO Max and more. You’ll also get 3% cash back at gas stations and on transportation costs such as rideshare, trains, buses, parking, and tolls.
This card also offers a $10 monthly statement credit for Equinox+ and a $7 monthly statement credit if you spend $12.99+ per month on a Disney Bundle subscription.
Pay It Plan It offers two ways to make payments on your purchases. Pay It lets you select purchases under $100 and quickly pay them off, while Plan It lets you split those over $100 into monthly payments.
All information about the American Express Blue Cash Preferred Card has been collected independently by BestReviews.
The Chase Freedom Flex is similar to our top pick, the Chase Freedom Unlimited card, but a few key differences exist. The primary difference lies in cash back flexibility, since the way you earn cash back is different compared to other cash back credit cards.
Bonus cash back categories rotate quarterly, meaning you’ll earn 5% on specific purchases every three months. For example, from January to March, you’d earn 5% cash back on whatever you spent at grocery stores (excluding Walmart), Target, fitness clubs and gym memberships.
If you spend $500 in your first three months, you’ll score a $200 statement credit. For the first 15 months after opening your account, you’ll have a 0% APR, which becomes variable from 19.24% to 27.99% after that. You’ll earn 5% on Chase Ultimate Rewards travel purchases, 3% on dining and eligible takeout services and 1% on other items. Discounts may also be had when you use Lyft, Fandango, Shoprunner and Hello Fresh.
It may seem like reaping the benefits of many credit cards requires you to spend a ton. While that’s true to a degree, some cards, like the Capital One Quicksilver Cash Rewards card, let you take advantage of benefits without spending a fortune. It’s an excellent card for budget-conscious spenders who aren’t focused on racking up travel points.
You’ll get a one-time $200 cash bonus if you spend $500 within your first three months and a 1.5% cash back rate for all purchases. Hotel and car rental bookings made through Capital One Travel will earn you 5% cash back. There’s no annual fee. And, for the first 15 months, you can take advantage of a 0% APR, which becomes a variable rate of 19.74% to 29.74% afterward.
Because there’s no annual fee, this is a great credit card for beginners. However, you’ll need a decent credit score to be approved for it.
The Citi Double Cash card is one of the best cash back cards for many reasons, but we love it most because there’s no annual fee. What’s more, you can earn cash back right away without being conscious of where you spend your money since there are no categories.
Unlike other cards where you earn points based on where you shop, such as those that offer higher cash back rates if you spend on dining or groceries, the Citi Double Cash card lets you earn one point for every dollar you spend regardless of where you spend it.
There is a low APR on balance transfers and some flexibility in how you can use your points, too. You can spend them on Amazon or redeem them for gift cards and travel. You can also transfer them to a cash back credit through a direct deposit, mailed check or statement credit.
Is a cash back credit card a good choice for you?
Answer the following questions to figure out your options.
Do you shop a lot?
The more you buy, the more you can earn with a cash back credit card. However, you also have to manage your payments properly to reap the cash back benefits.
How do you pay your monthly credit card bills?
If you’re financially responsible and pay off your bill each month before the interest is calculated, you can cash in on the money paid to you in the form of a cash back balance. You earn while you shop without paying interest.
On the other hand, if you don’t pay off your total balance each month or make just the minimum payment, the amount you earn on a cash back card could quickly be canceled out by the interest that accrues.
Are you disciplined when it comes to spending?
Once you get a cash back credit card, chances are you’ll be motivated to pay off your balance monthly and enjoy the rewards that accumulate. However, if you tend to add up credit card debt with excessive shopping, it’s probably in your best interest to set a goal to control spending with a plan to buy what you can afford to pay off each month.
Types of cash back rewards
Not all cash back credit cards are the same. Different cards have different reward payout amounts and structures. Here are the three main categories to choose from as you search for a cash back card.
Flat-rate rewards
Cash back credit cards that offer flat-rate rewards on purchases are the most straightforward to understand and use. The category says it all. With this type of card, you enjoy a set percentage back on any purchase you make. This type of card works best for anyone who shops from many categories and likes the idea of a simple reward structure.
Rotating rewards
These cash back cards provide higher cash back percentages, or accelerated benefits, for specific categories that change periodically, typically each quarter of the year. They may include restaurants, gas stations and grocery or retail stores. Items bought in categories off rotation provide lower cash back percentages and are often referred to as the base rate.
Shoppers’ habits change each season, and rotating rewards cards are geared toward these variances. Think of summer activities and travel. There are often accelerated rewards in those categories during that time frame. However, not everyone likes the strict rotating schedule of these cards – especially people who don’t make many purchases from one or more specific categories.
Tiered rewards
These cards offer varying percentages for different categories and allow the cardholder to choose which category gets accelerated benefits. For example, if you have this type of card and drive frequently, you may be able to choose 3% back on fuel while receiving 2% and 1% on other categories such as online shopping, hotels and restaurants. Most cards allow you to change your favorite category during a specific period, typically once per billing cycle.
Features of cash back credit cards
Cash back percentages
Most cash back credit cards offer reward rates ranging from 1% to 5%. Flat-rate cards typically offer 1% to 2% rewards, while those with rotating or tiered rewards provide accelerated percentages in specific categories. Remember that even when rewards are accelerated, 3% is typically the highest percentage you’ll earn. Cards with higher cash back rewards are available but often come with annual fees and higher interest rates.
Balance transfer offers
Just like other credit cards, some cash back cards come with introductory rates on balance transfers. These may come with no transfer fees and 0% APR for a limited time. However, if you take advantage of this offer, you may not want to use your new card for cash rewards until you pay off your promotional balance.
Interest rates
The annual rate you pay for a cash back card will likely hinge on your credit score and the bank you choose. It’s best to check the terms and conditions of the card you want before you apply. Remember that the interest rate won’t affect you if you pay your balance timely and monthly.
Annual fees
Not all cash back cards have annual fees. But as mentioned above, those with higher reward payouts are more likely to come with this charge.
Penalty and other fees
Cash back credit cards are just like other cards when it comes to late payment fees, over-limit spending, and foreign travel. Banks vary, however, so check these fees when you apply.
Common mistakes to avoid
You don’t check your credit score before you apply for a cash back card
Some cards require you to have a specific score before you are approved. Check with the banks you’re considering to determine their policies. Then, check your score to see if you’re a candidate for approval.
You fail to research your options
There are many credit cards on the market. Choosing the right one can be confusing. Find out if companies you’re considering offer cash back cards. Next, check the terms of the cash back cards you find to make sure they fit your lifestyle and spending habits.
You apply for too many cards
You might be excited to find numerous cards that offer cash back rewards. But don’t get carried away by applying for several cards at once. Potential creditors pull your credit reports, which can result in a hard inquiry and a reduction of approximately five points off your overall credit score. It’s best to choose a card that appeals to you most and then apply.
You apply for a new card when you already have a lot of credit card debt
A cash back credit card can be a positive step toward financial well-being, but not if you’re already deeply in debt. A new card may tempt you to spend more than you can afford to pay back in a timely manner. If you have other credit card debt, work on paying it down before you apply for a new card.
Tips
- Be prepared to pay your balance monthly before applying for a cash back credit card. Remember that if you don’t, the interest on your purchases will add up and negate the benefits of your reward balance.
- Check the terms of a cash back card to make the most of your purchases. Many cards offer rewards for purchases you might not expect, such as paying utility or medical bills.
- Set a goal. Don’t get discouraged if you can’t pay your balance in full during a billing cycle on your cash back credit card. By setting a goal to get the balance paid off and not charging more on the card until you do, you’ll get back on track and be able to use your card again and continue racking up rewards.
- Find the lowest interest rate. Search your available options for cash back cards to find the lowest interest rate possible.
- Keep track of your purchases when you open a cash back credit card account. Check your statements regularly so you don’t overspend.
FAQ
Q. Should I take advantage of a balance transfer offer on a cash back credit card?
A. If you’re approved for a cash back card that offers a limited-time promotional rate on balance transfers, this can be a way to save money. However, keep in mind that new purchases made with the card may not receive the same benefit.
Q. Can I use my cash back rewards card to splurge on a special purchase?
A. Yes. Many people build up their rewards for a trip or big-ticket item. It may take a while to accumulate your cash rewards, but it’s worth the effort when it’s time to enjoy them.
Q. Do cash back reward balances expire?
A. Not likely. Most reward balances have no expiration date. That said, it’s always a good idea to check the terms of the issuing bank.
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