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Comparing flat-rate with bonus-category cash-back credit cards

Feb. 18, 2022
11 min read
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Cash-back credit cards can be great. You know exactly what you're getting in return every time you swipe your credit card: an almost instant bonus for your purchase and no need to worry about the valuation down the road (as you would with many travel rewards credit cards). But even though cash-back credit cards are supposed to be the simpler option, there's still some complexity.

This stems from the fact that cash-back credit cards tend to offer two different types of earnings — some earn a flat rate on every single purchase made, while others offer variable returns based on the category of the purchase.

There isn't one type that's universally better than the other, but instead, your spending habits — and potentially your personality — will dictate which one works best for you.

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(Photo by Srdjanns74/Getty Images)

How do cash-back credit cards work?

As the name suggests, cash-back credit cards allow you to earn a certain percentage of cash back on the amount spent on your purchase. Cash back can be received in many ways — such as a check in the mail, a statement credit on your account or a deposit to your bank account. The cash can then be used for anything you wish — whether it offers you more savings or gives you a head start on the next large purchase you are looking to make.

With cash-back cards, you also know the exact amount you're earning on every purchase you make. There are no surprises down the road, and with most — although not all — you can receive the cash back within a month or two of the purchase being made.

Related: 3 reasons why you want a cash-back credit card in your wallet

What are flat-rate cash-back credit cards?

With a flat-rate cash-back credit card, you'll receive a fixed amount of cash back every time you make a purchase — regardless of the item purchased. Whether you are filling your tank up with gas or buying a toy at a big-box retailer, you'll receive the same percent back.

Up until a few years ago, most credit cards offered 1% to 1.5% cash back, but it's becoming more common to find 2% cash-back cards. This means for every dollar spent, you'll receive 2 cents in return. For example, a $50 purchase will net you $1 cash back and a $100 purchase will put $2 back in your pocket. And some of these cards even have no annual fee.

For example, the Citi® Double Cash Card earns 2% cash back — 1% when you make a purchase, plus 1% when you pay off that purchase — on all purchases, regardless of the item. There's also no cap on the amount of cash back you can earn. This card allows you to not have to think twice when at the store — or making a purchase online. You'll still earn 2% cash back with ease.

Related: Even more rewarding starting in March: A review of the Citi Double Cash Card

Some cash-back cards offer enhanced earnings on specific types of purchases — like groceries. (Photo by d3sign/Getty Images)

What are bonus-category cash-back credit cards?

Bonus-category cash-back credit cards allow you to earn more cash back on just select category purchases and then the normal earning rate on everything else you buy with the card. You'll find that some cards offer fixed categories throughout the year, while others change monthly or quarterly. There are even cards available that allow you to pick your own bonus category, allowing you to truly customize your cards to maximize your cash back.

Every card in this bucket offers different increased categories, so depending on your spending habits, you can get a card that works best for your purchases.

For example, if you find yourself with high grocery bills, you might enjoy the Blue Cash Preferred® Card from American Express. That is because this card earns 6% cash back on purchases at U.S. supermarkets (on up to $6,000 in purchases per calendar year, then 1%). This earns you 3 times the amount you'd earn with a 2% cash-back card every time you go to the store.

This particular credit card includes a few other increased cash-back categories as well. You'll earn 6% back on U.S. streaming subscriptions and 3% back at U.S. gas stations and on transit. However, on all other purchases that fall outside of these categories, you'll only earn 1% cash back. Terms apply.

Or, if you like the concept of picking your own categories for increased earning rates, the Bank of America® Customized Cash Rewards credit card allows you to select one category of your choice — gas, online shopping, dining, travel, drugstores or home improvement and furnishings — where you'll earn 3% cash back, and then you'll earn 2% cash back at grocery stores and wholesale clubs (these earning rates apply on the first $2,500 in combined purchases per quarter). Then, on all other purchases, or after you hit the quarterly cap, you'll earn 1% back.

The rotating bonus-category cards are also interesting, as they can allow you to earn 5% cash back on a variety of categories. For example, the Chase Freedom Flex allows you to earn 5% back on up to $1,500 in combined purchases across bonus categories that change each quarter. The only issue is that these cards require you to pay more attention, and there are times when the bonus categories might not work with your current purchases.

Should you get a flat-rate or bonus-category card?

There are pros and cons to both, but there's no one right answer.

Flat-rate cards are by far the simpler method. There's no worrying about which credit card to pull out of your wallet or remembering to activate a certain bonus. You'll receive the exact same amount back, regardless of the category, without having to think twice while swiping. For those that want just one credit card — and a hassle-free approach to maximizing cash back — then a flat-rate card is the best way to go.

You'll also find that there are many types of purchases that don't typically fall in an increased cash-back category, such as extracurricular activities for kids, ski lift tickets, specialty stores and utility bills, making for perfect opportunities to use a flat-rate credit card.

But, if you want to use the best credit card possible for every purchase you make — and truly maximize the cash back you earn — then a bonus-category credit card may be your best bet. This is because some credit cards offer significantly more cash back on those select category purchases than what you'd receive with a flat-rate cash-back card. In fact, you might even find yourself juggling a few different cards depending on where you spend the most.

Just be aware that if your goal is to maximize your purchases, you'll need to be on top of your game.

Our top picks for cash-back cards

While you can see our full roundup of best cash-back cards, we’ll list some of our top picks (including some that were mentioned above) below:

CardAnnual feeWelcome offerEarning rate
Blue Cash Preferred Card from American Express$95 (see rates and fees).Earn a $350 statement credit after you spend $3,000 in purchases on your new card within the first six months.Earn 6% cash back on purchases at U.S. supermarkets (on up to $6,000 in purchases per calendar year, then 1%) and on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations and on transit, and 1% cash back on other eligible purchases. Cash back is received in the form of Reward Dollars that can be redeemed for statement credits. Terms apply.
Chase Freedom Unlimited$0.Earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) – worth up to $300 cash back.Earn 5% cash back on Lyft purchases (through March) and travel purchased through Chase Ultimate Rewards, 3% on dining and drugstores, and 1.5% on all other eligible purchases.
Chase Freedom Flex$0.Earn $200 cash back after you spend $500 on purchases in the first three months from account opening.Earn 5% back on up to $1,500 in combined purchases in bonus categories each quarter after you activate. Additionally, earn 5% cash back on Lyft purchases (through March) and travel purchased through Chase Ultimate Rewards, 3% on dining and drugstores, and 1% on all other eligible purchases.
Bank of America Customized Cash Rewards credit card$0.Earn a $200 online cash rewards bonus after making at least $1,000 in purchases in the first 90 days of your account opening.Earn 3% cash back in the category of your choice (gas, online shopping, dining, travel, drugstores or home improvement and furnishings) and 2% cash back at grocery stores and wholesale clubs on the first $2,500 in combined choice category/grocery store/wholesale club purchases each quarter, then earn 1%.
Citi Custom Cash℠ Card$0.Earn $200 cash back after you spend $1,500 on purchases in the first six months of account opening. This bonus offer will be fulfilled as 20,000 Points, which can be redeemed for $200 cash back.Earn 5% cash back on your top eligible spending category on up to $500 spent each billing cycle (then 1%) and 1% unlimited cash back on all other purchases.
Capital One SavorOne Cash Rewards Credit Card$0.Earn a one-time $200 cash bonus once you spend $500 on purchases within the first three months from account opening.Earn unlimited 3% cash back on dining, entertainment, popular streaming services and grocery stores (excluding superstores like Walmart and Target), plus 1% on all other purchases.
Citi Double Cash Card$0.Earn $200 cash back after you spend $1,500 on purchases in the first six months of account opening.Earn unlimited 2% cash back — 1% when you make a purchase, plus 1% when you pay off that purchase.
Wells Fargo Active Cash® Card

(see rates and fees)

$0.Earn a one-time $200 cash rewards bonus once you spend $1,000 on purchases within the first three months from account opening.Earn unlimited 2% cash rewards on purchases, in the form of a statement credit.
Synchrony Premier World Mastercard$0.None.Earn unlimited 2% cash back on all purchases, in the form of a statement credit.

The information for the Synchrony Premier Mastercard and Wells Fargo Active Cash has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Bottom line

Since there's no one best card that works for everyone, it's great to see that there are plenty of options when it comes to cash-back credit cards. For those that want to take a "set it and forget it" approach, a flat-rate cash-back card will probably work best for you. However, those willing to have a maximization strategy might prefer a bonus-category credit card.

Alternatively, you can combine a bonus-category card with a flat-rate card — using the bonus-category card on those purchases offering increased cash back and a flat-rate card on all other purchases.

For rates and fees of the Blue Cash Preferred Amex, click here

Featured image by Shutterstock
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

TPG featured card

Best starter travel card
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

1 - 3X points
3XEarn 3 Points per $1 spent at Restaurants and Supermarkets
3XEarn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
1XEarn 1 Point per $1 spent on all other purchases

Intro offer

Earn 80,000 ThankYou® points60,000 points
For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening

Annual Fee

$95

Recommended Credit

670-850
Excellent, Good
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

The Citi Premier’s 3 points per dollar spent across a wide range of popular categories is one of the more lucrative offerings in the world of points and miles. The Citi Premier comes with a $95 annual fee and is currently offering a solid sign up bonus of 80,000 points after you spend $4,000 on purchases within the first three months. It also has some valuable transfer partners to make the most of your rewards. Add in access to Citi Entertainment plus a $100 hotel credit for any single-stay hotel booking that exceeds $500 or more, excluding taxes and fees, booked through the Citi travel website, there are few reasons why the Citi Premier should not be in every traveler’s wallet.

Pros

  • Earns 3x points on restaurants, supermarkets, gas stations, air travel and hotels.
  • $100 annual hotel savings benefit (on single hotel stay bookings of $500 or more, excluding taxes and fees, booked through thankyou.com)
  • Points transfer to 16 airline programs, from JetBlue to Virgin Atlantic.
  • World Elite Mastercard benefits, extended warranty, damage and theft protection.

Cons

  • $95 annual fee
  • Lacks travel protections that other travel rewards cards come with
  • For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening
  • Earn 3 Points per $1 spent at Restaurants and Supermarkets
  • Earn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
  • Earn 1 Point per $1 spent on all other purchases
  • Annual Hotel Savings Benefit
  • 80,000 Points are redeemable for $800 in gift cards when redeemed at thankyou.com
  • No expiration and no limit to the amount of points you can earn with this card
  • No Foreign Transaction Fees on purchases
Best starter travel card
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

3XEarn 3 Points per $1 spent at Restaurants and Supermarkets
3XEarn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
1XEarn 1 Point per $1 spent on all other purchases
  • Intro Offer
    For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening

    Earn 80,000 ThankYou® points
    60,000 points
  • Annual Fee

    $95
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    670-850
    Excellent, Good

Why We Chose It

The Citi Premier’s 3 points per dollar spent across a wide range of popular categories is one of the more lucrative offerings in the world of points and miles. The Citi Premier comes with a $95 annual fee and is currently offering a solid sign up bonus of 80,000 points after you spend $4,000 on purchases within the first three months. It also has some valuable transfer partners to make the most of your rewards. Add in access to Citi Entertainment plus a $100 hotel credit for any single-stay hotel booking that exceeds $500 or more, excluding taxes and fees, booked through the Citi travel website, there are few reasons why the Citi Premier should not be in every traveler’s wallet.

Pros

  • Earns 3x points on restaurants, supermarkets, gas stations, air travel and hotels.
  • $100 annual hotel savings benefit (on single hotel stay bookings of $500 or more, excluding taxes and fees, booked through thankyou.com)
  • Points transfer to 16 airline programs, from JetBlue to Virgin Atlantic.
  • World Elite Mastercard benefits, extended warranty, damage and theft protection.

Cons

  • $95 annual fee
  • Lacks travel protections that other travel rewards cards come with
  • For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening
  • Earn 3 Points per $1 spent at Restaurants and Supermarkets
  • Earn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
  • Earn 1 Point per $1 spent on all other purchases
  • Annual Hotel Savings Benefit
  • 80,000 Points are redeemable for $800 in gift cards when redeemed at thankyou.com
  • No expiration and no limit to the amount of points you can earn with this card
  • No Foreign Transaction Fees on purchases