Which Cash-Back Credit Cards Have the Most First-Year Value?
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When you choose a cash-back credit card over one that offers big-time travel rewards that you can transfer to airline and hotel programs, you should expect to sacrifice some earning potential in favor of convenience. This is true when it comes to both sign-up bonuses and dieveryday rewards.
There’s nothing wrong with choosing a cash-back card, as you may be looking for a way to supplement your premium rewards card — or maybe the process of transferring and redeeming points and miles for travel just isn’t for you. Still, you should be aware of the tradeoff.
When I recently looked at the business credit cards with the best first-year value, I found a couple that topped $2,000 in estimated value and eight in total that should offer a typical user more than $1,000 in value during the first year. Cash-back credit cards are an altogether different story.
The best I could find offers more than $1,300 in first-year value, but you’ll have to pair it with a second credit card in order to achieve those riches. Most of the top cash-back credit cards offer $700 or less worth of bonuses and rewards during the first year.
The good news: The vast majority come with no annual fee and offer a fairly low spending requirement in order to claim the welcome bonus. Here are nine cash-back credit cards that should offer the typical user at least $600 in value during the first year.
How to Make a Fair Judgment
As with other other first-year analyses, I used consumer-expenditure data from the Bureau of Labor Statistics for the most recent year available (2016) to estimate what an “average” household would spend (and thus earn) on the card in one year. If you have a single go-to credit card, this may work well as an approximate guess of what you would stand to earn throughout a typical year.
I made similar assumptions as we’ve previously done:
- Only the “Other lodging” category under “Shelter” can easily be paid with a credit card (since you’ll pay a fee for paying most mortgage and rent payments with credit cards).
- The “Vehicle purchases” category under “Transportation” can’t be paid with a credit card, but all other transportation expenses can.
- 50% of the “Healthcare” category consists of premiums via payroll deductions and thus can’t be paid with a credit card.
- All “Personal insurance and pensions” expenditures can’t be paid with a credit card.
- All other expenses (including “Entertainment” and “Education”) can be paid with a credit card.
Your household spending may or may not resemble what’s in the government’s average consumer spending data. That’s fine. Using this set of data ensures an apples-to-apples comparison when looking at the value of different cash-back credit cards. Please feel free to adjust these assumptions to fit your actual spending patterns in order to calculate your own earning potential.
Here’s a table that shows how these spending patterns in the first year of cardmembership look using one of the top cash-back cards on our list, the Blue Cash Preferred® Card from American Express:
|Bonus||N/A||N/A||$250 after $1,000 spend in 3 months|
|Food at home||$4,049||6% cash back at US supermarkets (on up to $6,000 a year in purchases, then 1%). Terms apply.||$242.94|
|Food away from home||$3,154||1%||$31.54|
|Housing (other lodging)||$798||1%||$7.98|
|Utilities, fuels and public services||$2,453||1%||$24.53|
|Household furnishings and equipment||$1,829||1%||$18.29|
|Apparel and services||$1,803||3% (assuming purchases made at “select US department stores”). Terms apply.||$54.09|
|Transportation (gasoline)||$1,909||3% (assuming purchases made at US gas stations). Terms apply.||$57.27|
|Other vehicle expenses||$2,884||1%||$28.84|
|Public and other transportation||$623||1%||$6.23|
|All other expenses||$6,363||1%||$63.63|
|TOTALS||$32,130||N/A||$797.99 (not including annual fee)|
For each of the cards on the list, I added up the cash value based on the cash-back percentages earned in bonus and non-bonus categories. Two cards on the list can be paired with a points-based card to increase the value of the rewards. For those, I created an estimated cash value based on TPG’s most recent valuations. Where applicable, I added in the value of other card benefits — like airline fee credits — and subtracted the cost of the annual fee. Just two cards on the list carry an annual fee.
Here’s an example of how the math works for Blue Cash Preferred:
6% cash back at US supermarkets ($242.94) + 3% cash back at US gas stations ($57.27) + 3% cash back at select US department stores ($54.09) + 1% on all other eligible spending ($443.69) – $95 (annual fee; See Rates & Fees) = $702.99
Note: The bonus value and the total first-year value are estimated values calculated by TPG and not the card issuers.
Here’s a look at the cash-back credit cards with the most first-year value.
1. Chase Freedom Unlimited
Current bonus: Earn $150 cash back after you spend $500 on purchases within the first three months. Since this card allows for reward transfers to Chase cards in the Ultimate Rewards program, you can significantly boost the value of this welcome bonus when you transfer it to your Chase Sapphire Preferred Card points balance. That $150 bonus is worth 15,000 points when transferred to a UR account. Based on TPG’s most recent valuations, those points are worth $315.
Rewards: Earn 1.5% cash back on all spending. When transferred to a UR account to maximize your rewards, the cash back becomes 1.5x points on all purchases — a return of 3.15% based on our valuations.
Benefits: Enjoy 0% intro APR on purchases and balance transfers for 15 months (after that a 17.24 – 25.99% variable APR applies). This card also comes with zero-liability protection, which means you won’t be held responsible for unauthorized charges made with your card or account information; purchase protection, which covers your new purchases for 120 days against damage or theft up to $500 per claim and $50,000 per account; and an extended warranty, which lengthens the time period of a US manufacturer’s warranty by an additional year on eligible warranties of three years or less.
Annual fee: $0
Estimated first-year value: $1,327.10
2. Chase Freedom
Current bonus: This card offers the same bonus at the Freedom Unlimited — $150 cash back after you spend $500 on purchases within the first three months. Transfer the bonus to an Ultimate Rewards points-generating account to achieve maximum value: $315.
Rewards: Earn 1% cash back on all spending. Each quarter, you also can earn 5% back on the first $1,500 in eligible purchases in rotating categories. If you max out and transfer the points, you can earn 7,500 points per quarter or 30,000 points per year, worth $630. I didn’t include this additional bonus in the calculations since we can’t know much in advance what those quarterly categories will be, but maximizing the quarterly bonus could significantly boost the first-year value of this card.
Benefits: Chase Freedom offers the same intro APR and benefits package as Chase Freedom Unlimited.
Annual fee: $0
Estimated first-year value: $989.73
Current bonus: Although not exclusively a cash-back card, the Premium Rewards card works fine as one because all redemption options are worth the same 1 cent apiece. This card has so much first-year value because it offers the best sign-up bonus among the cards on this list. You’ll receive 50,000 bonus points after spending $3,000 in the first 90 days of account opening. The welcome bonus is worth $500.
Rewards: Premium Rewards comes with a tiered rewards program. You’ll earn a minimum of 2 points for every dollar spent on travel and dining purchases and 1.5 points for every dollar spent on all other purchases. If you have a banking relationship with Bank of America, you can increase the value of the rewards based on the size of your deposits. Rewards top out at 3.5 points on travel and dining and 2.625 points on all other purchases when you have at least $100,000 in your Bank of America accounts. I didn’t include the tiered bonuses in the first-year calculation.
Benefits: Earn one statement credit per account every four years when you sign up for either the TSA PreCheck ($85) or Global Entry ($100) program. Earn up to $100 annually when you charge airline incidental transactions to your card. This card also includes trip cancellation insurance of up to $5,000 per person, per trip, for unused, prepaid, non-refundable travel expenses including passenger fares, tours and hotels if you have to cancel due to a covered reason, a $500 reimbursement if your flight is delayed for more than 12 hours, $100 per day (up to five days) when your baggage is delayed for more than six hours and purchase protection, which will replace the item or reimburse you up to $10,000 for lost or damaged items purchased on the card.
Annual fee: $95
Estimated first-year value: $905.84
Current bonus: No sign-up bonus
Rewards: Earn unlimited 2% cash back on every purchase. First, you’ll earn 1% cash back on every purchase, and you’ll earn the second 1% cash back on those payments as long as you pay the minimum due.
Benefits: No liability for unauthorized charges.
Annual fee: $0
Estimated first-year value: $742.60
5. Blue Cash Preferred Card from American Express
Current bonus: Earn $200 (as a statement credit) after you make $1,000 in purchases within the first three months.
Rewards: Earn 6% cash back at US supermarkets (on up to $6,000 per year in purchases, then 1%), 3% cash back at US gas stations and at select US department stores and 1% back on other purchases. Terms apply.
Benefits: Enjoy a 0% intro APR for 12 months on purchases and balance transfers (after that a variable rate of 15.24% to 26.24% applies) (See Rates & Fees). This card also includes extended warranty protection, which lengthens the time period of a US manufacturer’s warranty by an additional year on eligible warranties of five years or less.
Annual fee: $95
Estimated first-year value: $702.99
Current bonus: Earn $150 after you make $500 in purchases within the first three months.
Rewards: Earn an unlimited 1.5% cash back on all purchases. Earn 1.8% cash back on Google Pay or Apple Pay digital wallet purchases during the first 12 months. I didn’t include the mobile-wallet bonuses in the first-year calculation.
Benefits: Enjoy a 0% intro APR on purchases and balance transfers for 15 months (after that a variable rate of 15.49%-27.49% will apply). Receive up to $600 of protection (subject to $25 deductible) against covered damage or theft when you pay your monthly cell phone bill with this card.
Annual fee: $0
Estimated first-year value: $681.95
7. HSBC Cash Rewards Mastercard
Current bonus: Earn $150 back after you make $2,500 in purchases within the first three months.
Rewards: Earn 1.5% cash back on all purchases. You’ll also earn a 10% anniversary bonus on all cash rewards each year.
Benefits: Enjoy a 0% intro APR for 15 months on balance transfers (after that a variable rate of 14.99% to 24.99% will apply).
Annual fee: $0
Estimated first-year value: $680.15
8. Discover it® Cash Back
Current bonus: There is no traditional bonus, but cardholders will earn a match of all the cash back they earn the first year.
Rewards: Earn 1% cash back on all spending. With the Discover it Cash Back, you can earn 5% cash back on up to $1,500 in purchases made in accordance with Discover’s 2019 Cashback Calendar after enrollment. Just like with the Chase Freedom, I didn’t include this additional bonus in the calculations since we can’t know much in advance what those quarterly categories will be and whether they’re the type of purchases you’re likely to make, but maximizing the quarterly bonus could significantly boost the first-year value.
Benefits: Enjoy a 0% intro APR for 14 months on purchases and balance transfers (after that a variable rate of 13.49% to 24.49% will apply).
Annual fee: $0
Estimated first-year value: $642.60
Current bonus: Earn a $150 bonus after you make $500 in purchases within the first three months.
Rewards: Earn 1.5% cash back on all spending.
Benefits: Enjoy a 0% intro APR on purchases and balance transfers for 15 months (after that a variable rate of 15.74% to 25.74% will apply).
Annual fee: $0
Estimated first-year value: $631.95
You certainly may be able to squeeze more rewards from these cards if your spending is greater than the average consumer — especially in bonus categories that certain cards offer. With Blue Cash Preferred, for instance, government data suggests the typical consumer would earn a shade over $240 at US supermarkets. But the cap on 6% rewards is $6,000 annually, meaning you could max out at $360, or $120 more than average. You could also boost your gas earnings if you spend significantly more than the government data suggests. The key here is to find the credit card that fits your spending needs.
For rates and fees of the Blue Cash Preferred Card, please click here.