Updated July 5, 2017
Cash-back credit cards can be worthwhile tools to have in your financial workshop. They offer cardholders the chance to earn rewards on everyday purchases and, in some cases, even offer bonus cash back in specific categories.
The key with these cards, as with any credit card, is to ensure that you’re using them smartly and that you’ve selected a card that aligns with your spending habits, financial goals and credit history.
Before jumping into a credit card application, take some time to understand the three types of cash-back credit cards.
The average American credit card holder has four credit cards in his/her wallet, and there are literally hundreds of options out there. If you’re looking to add a cash-back credit card to your portfolio, we can help. We can even give you some ways in which to use more than one cash-back credit card to maximize your rewards.
We reviewed several of our favorite cash-back credit cards, taking a look at their reward structures, credit score needed, best features, potential drawbacks and more. Still have questions? Reach us at firstname.lastname@example.org.
Why We Like It: Get the most out of 5 percent cash back in multiple categories. The categories rotate quarterly, but being strategic with your spending can mean big bucks. Plus Chase Ultimate Rewards® points are highly useful.
Bonus: Earn a $150 bonus after you spend $500 in the first three months.
Annual Fee: $0
Rewards Rate: Earn 5 percent back on up to $1,500 in purchases in quarterly bonus categories when you sign up (then 1 percent). Earn 1 percent on all your other purchases.
Why We Like It: We love the cash-rich features on this card, especially for anyone who finds themselves always in the grocery store or at the gas pump.
Bonus: Earn a $150 online cash reward after you spend $500 in the first 90 days.
Annual Fee: $0
Rewards Rate: 3 percent cash back on gas and 2 percent at grocery stores and wholesale clubs for the first $2,500 in combined grocery store, wholesale clubs and gas purchases each quarter, and 1 percent cash back on every other purchase.
Other Benefits: It also extends a 10 percent redemption bonus for customers who redeem cash back into an eligible Bank of America checking or savings account. If you're a Preferred Rewards client, that bonus could be as much as 25-75 percent.
Why We Like It: With a simple earning structure that allows you to earn more than the typical flat-rate card, this is a winner.
Annual Fee: $0
Rewards Rate: You'll earn 1 percent back when you make your purchase and another 1 percent back when you pay your bill.
Why We Like It: Another card set up to reward your financial responsibility, this time with options to plan for your future.
Annual Fee: $0
Rewards Rate: Earn a flat 2 percent back on all your purchases.
Other Benefits: When it's time to redeem your cash-back rewards you can do so directly into a qualifying Fidelity investment account such as a 529 College Savings Plan or a 401K. You can also redeem for travel, gift certificates and more.
Why We Like It: This card rewards you handsomely for living your everyday life – groceries, gas and select department stores all earn bonus cash back.
Bonus: Earn a $150 statement credit after you spend $1,000 within the first three months.
Annual Fee: $95
Rewards Rate: Earn 6 percent back on up to $6,000 of purchases at U.S. supermarkets annually; earn 3 percent back at U.S. gas stations and select U.S. department stores; earn 1 percent back on all other purchases.
Jumping into the cash-back credit card world requires that you ask a few questions before you begin applying for a card.
You've followed our advice and narrowed the field down to your perfect card. Congratulations! Here's more expert advice to keep in mind as you use your card and rack up cash back.
When your circumstances change - and they likely will – your card needs will likely change . Periodically review your spending situation and make sure your cards are working for you. Don’t be afraid to break up with your card if things aren't working out.
It sounds simple, but different cards maximize different things. Be aware before you swipe and always use the best card for the situation; don't just grab Old Trusty because it's handy.
When it comes to card rewards, is it better to focus on cash or miles?
A lot of that depends on your lifestyle and goals but in order to make an apples-to-apples decision, the trick is to come up with the dollar equivalent of a mile or point then think about your use cases.
Say someone flies on United twice a month. The earning potential of getting a United Airlines branded credit card, or another points card, might allow the miles to accrue so fast that realizing rewards is a snap.
Contrast that with someone else who doesn’t fly or stay in hotels often. In this case, a cash-back program is the better and quicker path to getting the cash to spend on a flight or hotel stay – and allow you to spend that cash back on other things as well.
This really goes back to what we discussed earlier in the “Questions to ask” section. Know your goals and your spending habits before making a credit card decision.
You are the best person to accurately assess which credit card will fit seamlessly into your lifestyle. Don’t be wooed by introductory offers from cards you know won’t ultimately be the best fit. Don’t fall into the “I’ll change my spending habits to make this card work because that intro offer is just too good to pass up” trap. Chances are, you’ll just end up carrying around the wrong credit card and not reaping maximum rewards.
Instead, do your research and take the time to know what you need. When it comes to credit cards, “To thine own self be true.”