How to choose a cash-back credit card

Feb 15, 2022

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Credit cards can often provide opportunities to rack up travel rewards like airline miles or hotel points. But if simplicity and a solid return on spending are your top priorities, you can’t go wrong with a cash-back credit card.

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Before you start shopping for a new card, though, it’s a good idea to think about what you want in a cash-back card and which one is the best fit for you. Here are four things to consider.

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Look at the earning rates

Not all cash-back cards work the same, and it’s important to know which approach you want to take with how you earn rewards. There are three different ways cash-back credit cards structure their rewards programs:

  • Flat-rate cash-back cards: With this type of card, you get the same rewards rate on every purchase you make. The Citi® Double Cash Card is a top option in this category, giving you 2% back on every purchase (1% back as you make purchases and another 1% back as you pay them off).
  • Tiered-rate cash-back cards: These cards offer higher rewards rates on select categories, then typically 1.5% or 1% back on everything else. The Blue Cash Preferred® Card from American Express is a solid example, giving you 6% cash back on select U.S. streaming subscriptions and 6% back on up to $6,000 spent each calendar year at U.S. supermarkets (then 1%). You’ll also earn 3% back at U.S. gas stations and on transit and 1% back on everything else.
  • Rotating-category cash-back cards: A handful of cash-back cards earn elevated cash-back rates on everyday spending categories that rotate every quarter. They typically offer 1% back on non-bonus spending, but some also offer some tiered rewards. The Chase Freedom Flex earns 5% back on up to $1,500 spent in quarterly rotating categories, 5% back on travel purchased through Chase Ultimate Rewards, 3% back on drugstores and dining (including takeout and eligible delivery services), and 1% back on everything else.

With tiered and rotating rewards, you’ll have a better chance to maximize your cash back with certain bonus categories. But in a lot of cases, most of your purchases will net you the lowest rewards rate, and you’ll need to keep track of the different bonus categories.

On the flip side, flat-rate rewards cards can give you a consistent earning rate on all of your spending, but they lack the flexibility to maximize your rewards in some of your top spending categories.

Think about how you want to earn rewards on your new card, and which one you can maximize on your major purchase categories each month, quarter or year.

Review your budget

Crunch the numbers to see which card offers the best rewards based on your monthly spending. (Photo by Sam Edwards/Getty Images)

Depending on which type of cash-back credit card you choose, you’ll want to get an idea of where you spend most of your money and focus on cards that reward those purchases the most.

For example, if you have a big family and spend a lot on groceries, a tiered rewards card with outsized earning on grocery purchases, such as the Blue Cash Preferred Card from American Express, should be on your radar. The same goes for other top spending categories like gas, dining, entertainment and more.

The only exception here is if you prefer the idea of a flat-rate rewards card. With the Citi Double Cash Card, for instance, it won’t matter what your spending looks like because you’re getting 2% cash back on everything (as long as you are paying off your balance).

Related: TPG’s 10 commandments of credit card rewards

Consider the intro offer, annual fee and other features

Cash-back credit cards are more than just their rewards rates. Many of them also offer sign-up bonuses, introductory 0% APR promotions (which allow you to make purchases or transfer balances and pay them off over a set period, interest-free), and other perks that can add value to your experience.

As you compare cash-back credit cards, think about other benefits that are a good fit for what you want. If you have a big purchase coming up, for instance, a solid 0% APR promotion may be a top priority. For example, the Chase Freedom Unlimited offers an introductory 0% APR on both purchases and balance transfers for 15 months. After that, the variable APR is 15.74% to 24.49%.

If you want a welcome offer, compare values and minimum spending requirements. With the Wells Fargo Active Cash® Card, (rates and fees) for example, you’ll get a $200 cash rewards bonus when you spend $1,000 in purchases in the first three months of opening account. Meanwhile, the Blue Cash Preferred Card from American Express is offering a Earn a $350 statement credit after you spend $3,000 in purchases on your new Card within the first 6 months. For some, the chance at $150 more cash back is worth the extra spending, while others will be satisfied with the offer on the Active Cash card.

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

You’ll also want to consider whether the card charges an annual fee — fortunately, many don’t — and how that will impact your rewards earning power, as well as how much flexibility you have with redeeming your rewards. For example, the Capital One QuicksilverOne Cash Rewards Credit Card earns 1.5% cash back on all purchases but charges a $39 annual fee. This means you’d need to spend at least $2,600 each year just to break even on the annual fee.

If you can qualify for the Capital One Quicksilver Cash Rewards Credit Card instead (and yes, the names are confusing), you can still earn 1.5% back on purchases but with no annual fee and a potential sign-up bonus. This means you can start earning cash back right from the start without having to worry about offsetting a yearly cost.

Consider having multiple credit cards

If you’re open to it, having more than one cash-back card can be a great way to maximize your rewards. (Photo by Isabelle Raphael/The Points Guy)

There’s no cash-back credit card that’s best for everyone, and even if one card gives you more value than another, the best way to maximize your rewards is to use multiple cards for different spending categories.

For example, you may opt for the Blue Cash Preferred for groceries and gas thanks to its higher earning rates on these categories, the Chase Freedom Flex for travel, dining, drugstores and its rotating categories, and the Citi Double Cash Card for everything else (because it gives you a flat 2% cash back).

This approach may take some getting used to, and you’ll need to keep track of your due dates and balances to avoid interest and late fees. However, it’s a great way to make the most of your daily expenses.

Bottom line

The best cash-back credit cards offer flexible rewards and the chance to rack up a lot of value on your everyday spending. While picking the right cash-back card can feel daunting, you can easily narrow down your list of options using these four tips to choose the right card (or cards) for you.

Featured photo by adriaticfoto/Shutterstock.com.

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