How to maximize cash back with your credit card
Editor's Note
Credit cards come in many different "flavors," offering cardholders rewards like points, miles or cash back. Cash-back rewards are a longstanding perk within the world of credit cards, which offer a simple way to earn a return on everyday expenses.
Cash-back credit cards offer varying rates of return, and it's important to understand how to maximize cash-back rewards. Using the right card to earn cash back on everyday purchases such as gas, dining and groceries maximizes your earning potential. Here's what you should consider.
Understand your spending habits
Before applying for a new cash-back credit card, it's important to evaluate your spending habits to see how you spend your money. Are there specific categories you spend in, such as dining and travel? Or do you see that your spending habits are flexible and change every month or every few months? This is also a great time to evaluate what you want from your rewards credit card and how you would maximize cash-back rewards.
To understand your spending habits, take some time to review charges on any existing credit cards. Issuers like Chase assign categories to charges on their cards, making it easy to discern the areas where you spend the most money. Whether you're spending on travel-related purchases such as ride-hailing services and public transportation or on groceries, mapping out your spending habits will help you pick the best card.
Once you've identified how you are spending, you can then select a credit card that complements your typical spending habits.
Find a card with the best sign-up offer
One of the greatest benefits of opening a new card is being rewarded with a sign-up bonus after meeting a card's spending requirements. Before applying for any card, it's a good idea to research what is currently offered before selecting a card.
Ideally, you want to find a cash-back offer that provides the largest bonus with a spending requirement that's easy to meet. Earning a large sign-up bonus is a great way to jump-start your entry into cash-back credit cards.
The following are several cash-back credit cards offering solid welcome bonus offers:
- Chase Freedom Flex® (see rates and fees): Earn $200 cash back after you spend $500 on purchases in the first three months of account opening.
- Citi Custom Cash® Card (see rate and fees): Earn $200 cash back after you spend $1,500 on purchases in the first six months of account opening.
- Capital One Quicksilver Cash Rewards Credit Card: Earn a $200 cash bonus after you spend $500 on purchases in the first three months from account opening.
The information for the Citi Custom 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.
Related: The best cash-back credit cards
Choose a credit card that matches your spending
No perfect cash-back credit card matches all your spending habits. However, you can get pretty close to perfect. Categories and bonus-earning rates differ based on issuers and the different types of cash-back cards. After evaluating your spending habits, time should be devoted to researching the various credit cards in the marketplace.
For those who enjoy cooking at home, a bonus-earning rate on groceries might be the best way to maximize cash-back rewards. The Blue Cash Preferred® Card from American Express is an excellent choice as it offers 6% cash back at U.S. supermarkets (on up to $6,000 per year, and then 1% cash back thereafter), all for a low $95 annual fee once the $0 introductory annual fee for the first year is up (see rates and fees).
Additionally, Blue Cash Preferred cardmembers also earn 6% cash back on select U.S. streaming services and 3% cash back on transit and at U.S. gas stations. Members receive cash back in the form of Reward Dollars that they can redeem as a statement credit and at Amazon checkout.
If your spending habits change from month to month, a card to consider would be the Citi Custom Cash. It offers cardholders 5% cash back on their top eligible spending category on up to $500 spent each billing cycle and 1% unlimited cash back on all other purchases. Every month, cardholders can easily earn at least $25 in cash back if they spend at least $500 in their top spending category — a good return for those being rewarded for their flexibility.
Related: Cash back vs. travel rewards: How to choose a credit card
Activate rotating bonus categories
Maximizing cash-back credit cards includes being mindful of how certain cards earn cash back and the right time to use specific cards. This brings us to rotating rewards categories certain issuers offer on select cash-back credit cards. Cards with rotating rewards categories give cardholders a list of merchants or categories eligible for increased cash-back earnings every quarter.
For those who have flexible spending habits, the right cash-back credit card may offer rotating bonus categories. The Chase Freedom Flex has no annual fee; it earns a strong 5% cash back on purchases in activated bonus categories each quarter on up to $1,500 in purchases, then 1% after that. Bonus categories are announced every quarter, and they have historically included great categories such as Amazon, Target, grocery stores, drugstores and gas stations.
Carry 2 cash-back credit cards
As you seek to maximize your cash-back rewards with cards that offer bonus-earning categories, a useful strategy to further maximize rewards is to carry a flat-rate-earning cash-back credit card.
The ideal card should give you 2% cash back on all purchases, so you don't need to keep track of rotating quarterly bonus categories. You could use a flat-rate credit card to make purchases that fall outside the categories of your bonus-earning cash-back card.
The Citi Double Cash® Card (see rates and fees) is a fantastic flat-rate credit card that offers 2% cash back on all purchases — 1% cash back when you make a purchase and 1% cash back as you pay for your purchases.
Utilize issuers' shopping portals and special offers
Credit card issuers give card-linked offers for online and in-person shopping. Chase Freedom Unlimited® (see rates and fees) and Freedom Flex cardholders can access the Shop Through Chase portal, which allows them to earn additional cash back on their purchases on top of the earning bonuses for each card. The stores on Chase's shopping portal vary and can change occasionally, so it's worth looking into which shop is offering a bonus and maximizing cash-back rewards.
In addition to issuer shopping portals, credit cards also provide cash-back offers, which can be activated to earn even more rewards. American Express, Chase, Capital One and Citi all have offers that can be activated via an issuer's mobile app or website. Generally, these offers have a limited redemption window, varying cash-back percentages and limits on how much cash back you can earn from each offer.
Bottom line
You can maximize cash-back rewards by understanding your spending habits, choosing a card that matches your spending, utilizing opportunities such as activating bonus-earning categories each quarter, and taking advantage of issuer shopping portals and offers. Cash-back cards are a great addition to any wallet. However, it's important to remember that any cash back earned can easily be negated if you carry balances on your card and accrue interest.
Related: Are cash-back cards worth it?
For rates and fees of the Amex Blue Cash Preferred, click here.
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