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Best cash-back credit cards of November 2020

Finding the best cash-back credit card for your wallet doesn't have to be difficult. CardRatings editors break down the top cash-back cards in multiple categories and reveal how actual cardholders rate their cards, too.
Jennifer Doss, CardRatings Editor Last Updated, November 23, 2020

Our credit card articles, reviews and ratings maintain strict editorial integrity; however we may be compensated when you click on or are approved for offers (terms apply) from our partners. How we make money.

Best cash-back credit cards of 2019
LIST OF WINNERS

Every serious credit card rewards strategy should involve a cash-back credit card. In fact, a CardRatings survey showed that credit card holders across the country overwhelmingly prefer a card that puts cash back in their pocket versus a card that earns points or miles. That's because these cards essentially offer you a way to earn cash-back rewards on every purchase you make and, in some cases, that cash-back percentage is substantial (think as high as 6% on your grocery purchases, for instance). Furthermore, a number of the best cash-back cards from our partners also happen to be no-annual-fee cards.

Cash-back credit cards are a convenient way to put money back in your pocket, with little to no effort on your end, and can be particularly useful in certain seasons. Take the current COVID-19 pandemic, for example. Before the pandemic there was a huge boom in travel rewards credit cards, but as many people put travel plans on hold, credit card issuers really stepped up their game with cash-back credit card offers, making these cards more competitive than ever. From extending welcome offer spending periods to adding new bonus categories, banks have made the cash-back credit card market the strongest we've seen it in a while. If you're looking for an easy way to offset some of your expenses, the right cash-back credit card can help you achieve your goals.

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. Let us help you understand what a cash-back credit card is (and isn't) as well as how to use that card.

The average American credit card holder has four credit cards in his/her wallet, and there are literally hundreds of options out there. So is it worth getting a cash-back credit card? We think so, and if you’re looking to add a cash-back credit card to your portfolio, we can help. We can even offer some guidance on how to use more than one cash-back credit card to maximize your rewards.

So what are the best cash-back credit cards of 2020? We reviewed several of our favorite cash-back credit cards for small businesses and consumers, taking a look at their reward structures, credit score needed, best features, potential drawbacks and more to help you understand which credit cards offer the highest cash-back potential, and which ones could be the right fit for your lifestyle. We've narrowed down the options for you to some of the top picks on the market right now.

BEST FLAT-RATE CASH-BACK CREDIT CARD

5
About Our Ratings

Why We Like It: This card has no annual fee and allows you to earn more than the typical flat-rate cash-back rewards credit card. Citi is a CardRatings advertiser.

Bonus: It doesn't offer a traditional bonus, but this card does have an introductory offer of 18 months of no interest on balance transfers (then, 13.99% – 23.99% (Variable)), which could be "bonus" enough if you're currently paying hefty interest charges on a balance you're carrying on another card.

Annual Fee: $0

Rewards Rate: You'll earn 1% back when you make your purchases and another 1% back when you pay your bill on time (at least the minimum balance due), for a possible total of 2% cash back on all your purchases, a nice lift over the typical 1.5% cash back offered by many flat-rate cash-back rewards credit cards.

Credit Needed: Excellent

PROS:

  • This is a good card to use if you want to be sure you’ll pay off your purchases because you’ll earn 1% when you make the purchase and 1% when you pay for your purchases.
  • If you have a balance on a card with a higher APR, you could save on interest with the intro 0% APR on balance transfers for the first 18 months (then, 13.99% – 23.99% (Variable)).
  • Earning 2% cash back (assuming you’re paying off the purchases you make) on a card that doesn’t charge an annual fee is higher than you’ll find on other no-annual-fee cards.

CONS:

  • Earning up to 2% cash back on every purchase is a great rate for a flat-rate cash-back card, but there are cards with rotating categories or tiered cash-back rewards that could award more.
  • There’s no traditional welcome bonus with this card.

Read our full Citi® Double Cash Card - 18 month BT offer review.

BEST CASH-BACK CREDIT CARD WITH TIERED REWARDS

5
About Our Ratings

Why We Like It: The convenience of a tiered-rate rewards card along with the flexibility and value of Ultimate Rewards® points makes this a strong contender for a best cash-back credit card.

Bonus: New cardholders can earn $200 cash back once spending $500 within the first three months of opening an account. Plus, take advantage of an intro offer of 15 months no interest on purchases. After the intro period, the rate jumps to 14.99% - 23.74% Variable.

Annual Fee: $0

Rewards Rate: Earn 5% on travel purchased through Chase Ultimate Rewards®, 3% on dining at restaurants and on drugstore purchases, and 1.5% on all other purchases. Plus, earn 5% cash back on up to $12,000 spent at grocery stores (excluding Target and Walmart) in your first year of card membership.

Credit Needed: Excellent, Good

PROS:

  • Earning 1.5% cash back on every non-bonus purchase is a simple way to earn rewards, plus, that 5% cash back on up to $12,000 spent at grocery stores for the first year, is hard to beat. You can also earn a $200 bonus after spending just $500 on purchases within the first three months.
  • You can combine the points you earn with this card with the points you earn using one of Chase’s other cards, such as Chase Sapphire Preferred® Card or Ink Business Preferred® Credit Card which can end up helping you rack up even more points.
  • There is an introductory 0% APR for 15 months from account opening on purchases (then, 14.99% - 23.74% Variable).

CONS:

  • The 5% cash back earned on Chase Ultimate Rewards® travel purchases is nice, but remember, this isn't a true travel card so all other travel purchases will only earn 1.5%.
  • This card charges foreign transaction fees, which can add up if you need to make purchases outside of the U.S.

Read our full review of Chase Freedom Unlimited®.

BEST CASH-BACK CREDIT CARD WITH ROTATING BONUS CATEGORIES

5
About Our Ratings

Why We Like It: Get the most out of 5% cash back in multiple categories. The categories rotate quarterly, but being strategic with your spending can mean big bucks. Plus, enjoy 3% cash back at restaurants and drugstore purchases all year long!

Bonus: Earn a $200 bonus after you spend $500 in the first three months. Plus, earn 5% cash back on grocery store purchases (excluding Target and Walmart) for the first $12,000 spent during your first year as a cardholder.

Annual Fee: $0

Rewards Rate: Earn 5% back on up to $1,500 in purchases in quarterly bonus categories when you sign up (then 1%). Additionally, earn 5% cash back on travel purchased through the Chase Ultimate Rewards® portal, 3% at restaurants and on drugstore purchases, and 1% on all other eligible purchases.

Credit Needed: Excellent, Good

PROS:

  • This is a unique rotating-category/tiered-rewards card hybrid, meaning it offers a ton of point-earning potential. Not only can you earn up to 5% cash back each month in rotating categories, but there are a number of static bonus categories as well that you can earn bonus rewards in all year long.
  • Take advantage of an intro 0% APR on new purchases for 15 billing cycles (then 14.99% - 23.74% Variable).
  • Pay your cell phone bill with this card and enjoy up to $1,000 a year in cell phone insurance.

CONS:

  • This card charges foreign transaction fees, so you’ll probably want to carry a different card abroad.
  • This card requires some planning and a hands-on approach to maximize rewards. If you want a simple credit card, you might be better off with a flat-rate option.

Read our full Chase Freedom Flex℠ review.

BEST CASH-BACK CREDIT CARD FOR INTRO 0% APR ON PURCHASES AND BALANCE TRANSFERS

5
About Our Ratings

Why We Like It: This is a no-annual-fee card which effectively awards up to 10% back during your first year as a cardholder. Discover matches all cash back earned during the first year (more below), so your 5% back is effectively worth 10% back in that first year. Plus, it offers a generous intro 0% APR period, giving you 14 months to pay off any new purchases made with the card, or to pay off an exsiting balance transferred from another card (regular 11.99% - 22.99% Variable APR applies after the intro period).

  • INTRO OFFER: Unlimited Cashback Match - only from Discover. Discover will automatically match all the cash back you've earned at the end of your first year! There's no minimum spending or maximum rewards. You could turn $150 to $300.
  • Earn 5% cash back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate.
  • Plus, earn unlimited 1% cash back on all other purchases - automatically.
  • Redeem cash back in any amount, any time. Rewards never expire.
  • Use your rewards at Amazon.com checkout.
  • Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
  • No annual fee.
  • Discover is accepted nationwide by 99% of the places that take credit cards.
See More

PROS:

  • Discover will MATCH all the cash back new cardholders earn during their first year as a member. That means $200 in cash back will automatically become $400 at the end of your first year.
  • This is an excellent no-annual-fee card for people who are willing to maximize the spending categories each quarter.
  • You can also take advantage of an introductory 0% APR on purchases and balance transfers for 14 months (then, 11.99% - 22.99% Variable).

CONS:

  • This card requires a fair amount of planning to maximize the rewards.
  • You’ll earn 1% cash back on non-bonus category spending, which isn't a high earn rate. If you aren't going to maximize the bonus categories, you'd be better off with another card that earns a higher ongoing rate.
  • If you're going to put the balance transfer offer to use, remember that you'll pay a 3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*.

Read our full Discover it® Cash Back review.

BEST CASH-BACK CREDIT CARD FOR GROCERY PURCHASES

5
About Our Ratings

Why We Like It: This card rewards you for everyday life purchases – U.S. supermarket, select U.S. streaming subscriptions, U.S. gas station and eligible transit purchases all earn bonus cash back. American Express is a CardRatings advertiser.

The Welcome Offer: For a limited time earn a $300 statement credit bonus after you spend $3,000 in the first six months of card membership (offer expires 12/10/20).

Annual Fee: Limited time offer: $0 introductory annual fee for one year, then $95 (offer expires 12/10/20).

Rewards Rate: Earn 6% back on up to $6,000 in purchases at U.S. supermarkets annually (then, 1%) and on select U.S. streaming subscriptions; earn 3% back at U.S. gas stations and on transit including rideshares, train fares, tolls, parking and more; earn 1% back on all other purchases.

Credit Needed: Good, Excellent

PROS:

  • This is among the highest reward rates out there for U.S. supermarket purchases, so it could be lucrative if you have a big grocery bill.
  • For a limited time you can earn a $300 statement credit bonus after spending $3,000 in the first six months of card membership (offer expires 12/10/20).
  • This is a great card for families because it awards purchases with U.S. supermarkets (6% cash back up to $6,000 spent in a year, then 1%), on select U.S. streaming subscriptions (6% cash back), at U.S. gas stations (3% cash back), and on transit (3% cash back).

CONS:

  • American Express cards aren’t as widely accepted as cards issued by Visa or Mastercard, but the American Express network is ever-expanding both in the U.S. and abroad.
  • This card charges foreign transaction fees, something you should avoid if you’ll be using your card for purchases abroad.
  • There's also the annual fee to consider; make sure you'll earn enough rewards to more than offset the annual fee.

Read our full Blue Cash Preferred® Card from American Express review.

 

EDITOR'S NOTE

Like the sound of the Blue Cash Preferred® card but you're not interested in a card with an annual fee? Consider the no-annual-fee Blue Cash Everyday® Card from American Express instead. This card offers a still valuable rate of 3% cash back at U.S. supermarkets (up to $6,000 annually, then 1%), 2% cash back at U.S. gas stations and select U.S. department stores, and 1% on all other purchases. There's also a welcome bonus for new cardholders: earn 20% back on purchases at Amazon.com on the card in the first six months, up to $200 back, plus earn $100 back after you spend $1,000 in purchases on your new card within that same time frame. See Rates and Fees.


BEST CASH-BACK CREDIT CARD FOR DINING AND TAKEOUT

5
About Our Ratings

Why We Like It: This tiered cash-back card awards you for both dining out and cooking at home. Plus, earn a $200 bonus after spending just $500 on purchases in the first three months, and there are no foreign transaction or annual fees to worry about.

Bonus: Earn a $200 cash-back bonus after you spend $500 on purchases within your first three months of account opening.

Annual Fee: $0

Rewards Rate: Earn unlimited 3% cash back on all your dining and entertainment purchases, 2% back at grocery stores, and 1% back on all your other purchases. Plus, enjoy 5% cash back on Uber Eats purchases through Jan. 31, 2021.

Credit Needed: Excellent, Good

PROS:

  • This card is one of the only cards offering high rewards focused on dining out and entertainment.
  • There's a welcome offer of $200 bonus cash back after you spend $500 in the first three months.
  • This card could be perfect for families or singles who enjoy dining out – earn cash back at restaurants or grocery stores.
  • Earning rewards on Uber Eats purchases is also a nice bonus thanks to an uptick in food delivery orders.
  • Enjoy intro 0% APR on new purchases for the first 15 months (then 15.49% - 25.49% (Variable) applies).
  • It's rare to see no-annual-fee cash-back credit cards with no foreign transaction fees. This is a great card to take with you abroad as it doesn't charge extra on foreign transactions.

CONS:

  • This is an ideal card for people who love to eat. If you don't regularly use a credit card for food purchases, this might not be the best option for you.
  • While cash-back rewards are always welcome, there isn't a lot of redemption flexibility or opportunity to, so-called, maximize rewards as you can with cards that offer points.

Read our full Capital One SavorOne Cash Rewards Credit Card review.

 

EDITOR'S NOTE

If you are willing to pay an annual fee and you heavily spend on food purchases, you might consider the Capital One® Savor® Cash Rewards Credit Card instead. Sure, it charges a $0 intro for first year; $95 after that annual fee, but if you regularly dine out, you shouldn't have trouble offsetting this cost. This card earns 4% cash back on dining and entertainment, 2% back on grocery stores purchases, and 1% on everything else. It also offers a generous $300 cash-back bonus once spending $3,000 on purchases in the first three months of opening an account.


BEST CASH-BACK CREDIT CARD WITH NO FOREIGN TRANSACTION FEES

5
About Our Ratings

Why We Like It: This card is the rare cash-back rewards card that doesn't charge foreign transaction fees (usually in the 3% range) each time you use it while traveling abroad. That, combined with its solid flat-rate cash-back rewards rate, makes it a winner.

Bonus: Earn a $200 bonus after spending $500 on purchases within your first three months as a cardholder.

Annual Fee: $0

Rewards Rate: Earn 1.5% cash back on all your purchases. There are no categories or spending caps to think about. Additionally, you can take advantage of an introductory 15 months no interest on purchases (then, 15.49% - 25.49% (Variable)).

Credit Needed: Excellent, Good

PROS:

  • Earn unlimited 1.5% cash back on all purchases with no annual fee.
  • This card offers intro 0% APR for 15 months on new purchases. This is a great perk for anyone looking to make a large purchase. Once the intro period expires, a rate of 15.49% - 25.49% (Variable) will apply.
  • This is a great card to take along on international trips as there's no fee charged on foreign transactions.

CONS

  • If a big chunk of your spending is in a particular category, you might earn more rewards with a card that offers bonus rewards in those categories.
  • Paying no annual fee is great, but if you plan to use your card often, choosing an annual fee card that offers higher rewards might be worth it.

Read our full review of the Capital One Quicksilver Cash Rewards Credit Card.

BEST CASH-BACK CREDIT CARD FOR SMALL BUSINESS PURCHASES

5
About Our Ratings

Why We Like It: This no-annual-fee card is a leader when it comes to excellent earning for small businesses as well as flexible rewards that can be combined with other Chase Ultimate Rewards® earned through other cards.

Bonus: New cardholders earn a bonus of $750 after spend you $7,500 within the first three months of card membership.

Annual Fee: $0

Rewards Rate: Earn 5% cash back on purchases at office supply stores and purchases of internet, cable and phone services (up to $25,000 in combined spending each account anniversary year). Additionally, earn 2% back on the combined $25,000 spending each account year on gas station and restaurant purchases. Earn 1% back on your other purchases as well as in the bonus categories once you reach the spending cap.

Additional Info: This card's cash back rewards accumulate as Chase Ultimate Rewards® points, which means you can decide to use the rewards as cash back or redeem them for travel. Furthermore, you can combine points you earn with this card with points you've earned through other Ultimate Rewards® cards, such as the Ink Business Preferred® Credit Card, in order to make your points add up more quickly and possible be worth more. Ink Business Preferred® cardholders receive 25% more value when they redeem points for travel through the Ultimate Rewards® portal.

Credit Needed: Excellent, Good

PROS:

  • Making $7,500 in purchases with the card in three months, you could pocket $750 cash back. What a great way to jump start your rewards.
  • Whether you're buying office supplies or paying for internet, cable and phone services, you'll benefit big with 5% cash back earned, up to $25,000 annually. Outside of these categories you'll earn 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants each account anniversary year, and unlimited 1% on everything else.
  • Enjoy 0% intro APR on purchases for 12 months (then 13.24% - 19.24% Variable).

CONS:

  • The $25,000 annual cap on bonus category spend could be limiting depending on your spending. If you know you'll be spending far above $25,000 annually on your business needs, you might want to consider a card with a higher spending cap.
  • Earning 5% cash back on select business categories is great, but only if you regularly spend within those categories. With this card, you'll only earn 1% on all "other" purchases.
  • If business frequently takes you abroad, this might not be the card for you as it charges foreign transaction fees.

Read our full review of the Ink Business Cash® Credit Card.

 

EDITOR'S NOTE

To see more great business credit card options, please see our list of the best small business credit cards.


BEST CASH-BACK CREDIT CARD FOR FAIR CREDIT

5
About Our Ratings

Why We Like It: The best cash-back rewards credit cards are often reserved for people with excellent credit. This card, however, is available to people with average, fair, limited credit and it offers a solid percentage of cash back for a modest annual fee.

Bonus: There isn't a traditional bonus with this card, but a cash-back rewards card for people with average, fair, limited credit is fairly unique, so let's think of the bonus as your opportunity to earn cash-back rewards while you work on moving your credit score into the good/excellent range.

Annual Fee: $39

Rewards Rate: Earn 1.5% back on all your purchases without having to worry about rotating categories or spending caps. In addition, you could get access to a higher credit line in as little as six months.

Credit Needed: Average, Fair, Limited

PROS:

  • Earn unlimited 1.5% cash back on all purchases.
  • This card is available for people with fair or limited credit histories. Plus, with responsible use, you could qualify for a credit limit increase in as little as six months.
  • This is a great card to take along on international trips as there's no fee charged on foreign transactions.

CONS

  • You’ll have to consider the annual fee and whether you are earning enough with this card for it to be worth it.
  • The interest rate is fairly high because it is for people with fair or limited credit. This isn’t a card you will want to carry a balance on.

Read our full Capital One QuicksilverOne Cash Rewards Credit Card review.

BEST CASH-BACK CREDIT CARD FOR BAD OR LIMITED CREDIT

5
About Our Ratings

Why We Like It: It's not easy to find a card that will help you rebuild your credit while still allowing you to earn cash-back rewards. Not only does this card do that, it also offers a nice introductory bonus as well.

  • No Annual Fee, earn cash back, and build your credit with responsible use.
  • It's a real credit card. You can build a credit history with the three major credit bureaus. Generally, debit and prepaid cards can't help you build a credit history.
  • Establish your credit line by providing a refundable security deposit of at least $200 after being approved. Bank information must be provided when submitting your deposit.
  • Automatic reviews starting at 8 months to see if we can transition you to an unsecured line of credit and return your deposit.
  • Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases - automatically.
  • Discover is accepted nationwide by 99% of the places that take credit cards.
  • Get 100% U.S. based customer service & get your free Credit Scorecard with your FICO® Credit Score
  • INTRO OFFER: Unlimited Cashback Match - only from Discover. Discover will automatically match all the cash back you've earned at the end of your first year! There's no minimum spending or maximum rewards. Just a dollar-for-dollar match.
  • Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
See More

PROS:

  • This is one of the few secured cards that offers cash-back rewards. Earn 2% back on the first $1,000 spent each quarter at gas stations and restaurants (then 1%) and 1% on all other purchases.
  • Not only is this a secured credit card that offers ongoing rewards, but it also offers a welcome bonus— which isn’t always offered with secured credit cards. Discover will match all the cash back you’ve earned at the end of your first year as a cardholder. This means, if you earn $150 cash back in your first year, you’ll actually pocket $300 that year.
  • After eight months of responsible use, Discover will automatically review your account monthly to determine whether you’re eligible to be transitioned to an unsecured credit card.

CONS:

  • There’s no annual fee but the minimum security deposit amount could be a stretch for some people at $200. If you can’t see yourself coming up with that deposit, there are additional secured cards with lower security deposit requirements.
  • Although the rare cash-back rewards associated with this card is attractive, not everyone will be approved. Approval depends on credit history and other financial variables. If you’re uncertain that you will be approved and don’t want a hard credit inquiry on your report, a different secured credit card might be a better fit for you.

Read our full Discover it® Secured review.

WHAT IS A CASH-BACK CREDIT CARD?

When we say "cash-back credit card," what comes to mind? If you thought, "I can get cash back when I make a purchase at the grocery store" or, "It's a credit card that waives fees if I make a withdrawal from an ATM," then you should keep reading. If you thought, "hard-to-keep up with categories that earn minimal rewards and won't actually benefit me in the long run," keep reading. And if you thought, "Cash-back credit card? I have no idea what that means," definitely keep reading.

A cash-back credit card isn't the same as getting cash back at a grocery store, nor is it simply a card that waives the fees if you make a withdrawal from an ATM. It's a credit card that incentivizes cardholders to use their plastic frequently in exchange for rewards like statement credits, cash deposits and gift cards. Cash-back rewards typically range from 1%-6% depending on your particular credit card and, in some cases, where you're doing your shopping (more on that below). In general, there's very little you have to do beyond just using your credit card and then deciding when and how to redeem your rewards. Credit card transactions automatically accumulate rewards on your behalf in an account usually held with the issuer.

Cash-back credit cards typically fall into one of three types: flat-rate, tiered and rotating categories. They each have their pros and cons, but your ultimate choice should depend upon your spending habits and the level of planning you want to do with your credit card usage.

Flat-rate credit cards

These are the simplest cards to understand and are a great place to start for the person who is new to cash-back credit cards. With a flat-rate cash-back credit card, you earn a flat percentage back – often 1%-2% – on all your purchases. You won't earn bonus cash back for shopping at particular stores or spending in particular categories, but you also don't have to keep up with tiers or categories so "maximizing your rewards" just means using your card regularly.

flat rate description

Tiered-rate credit cards

The next step in cash-back credit cards are tiered-reward cards that offer differing percentages of cash back depending on where you make your purchase. These levels of cash-back do not rotate, but do often come with spending caps. For instance, you may earn 3% back at grocery stores on up to $1,500 in spending each quarter as well as 2% back at gas stations and 1% back on all other purchases. Unlike flat-rate cash-back cards, tiered-rate cards do require a bit of planning in order to maximize your rewards. If the tiers don't match up with your typical spending categories, you'll be leaving rewards on the table.

tiered rewards description

Rotating category credit cards

These are the most complex of the cash-back credit cards, but also the ones with the highest rewards-earning potential (assuming, of course, that the categories mesh with your spending habits and you max out the spending caps). In a nutshell, a rotating-categories card offers bonus cash back, usually in the 5% range, for particular credit card transactions during a given period of time. Often, cardholders must sign up for the bonus categories each period (often quarterly) and there's usually a spending cap, meaning cardholders will earn the bonus cash back up to a particular spending threshold ($1,500 is a pretty typical spending cap) and then rewards will revert to the non-bonus level (usually 1%).

rotating description

Credit cards with cardholder's choice rewards

These cards are rare, but you might see more of them in the future. Think of them as a sort of combination tiered rewards meets rotating categories with a dash of customer choice thrown in. The rewards structure generally involves tiers of some kind, along with the spending caps you see with traditional tiered cards. In addition, the cardholder gets to decide a category or two in which to earn rewards.

 An example of this card is the Bank of America® Cash Rewards credit card, which allows cardholders to choose from among six categories where they'll earn 3% cash back along with 2% back on grocery store and wholesale club purchases (3% and 2% rewards apply to the first $2,500 spent in combined choice category/grocery store/wholesale club purchases each quarter) and 1% on all other purchases. Cardholders can change their choice category once each calendar month.

Practically, the type of card that is right for you will depend on your spending habits and your tolerance for organizing your credit card spending. Just to give you an idea of how each of these types of cards COULD stack up for you, take a look at the hypothetical scenario below for Frank, Rebecca and Thomas.

Rewards on $500
at Grocery Stores
Rewards on $100
at Restaurants
Rewards on $200
at Gas Stations
Rewards on $200
in Other Purchases
Total
Frank - flat-rate card; 1.5% on all purchases $7.50 $1.50 $3 $3 $15
Rebecca - rotating-categories card; 5% at restaurants this period, 1% on everything else $5 $5 $2 $2 $14
Thomas - tiered rewards card; 3% back on groceries, 2% on gas and 1% on other purchases $15 $1 $4 $2 $22

As you can see in the example above, Thomas with his tiered-rewards credit card came out on top for this particular time period; however, let's say Rebecca wanted to maximize her 5% restaurant rewards for the period and spent $500 at restaurants and just $100 at grocery stores. In that case, Rebecca would have come out ahead, earning a total of $30 in rewards for the month ($1 on groceries, $25 on restaurant spending, $2 at gas stations and $2 on other purchases).

What this should show you is the importance of honestly assessing your spending habits before making a decision about a cash-back credit card. At the end of the day, credit card rewards are only as good as your willingness and ability to maximize them.

HOW DO CASH-BACK CREDIT CARDS WORK?

In short, the best cash-back cards automatically earn you cash back each time you swipe your card— it’s as simple as that. Most often you’ll earn consistent 1% cash back on all purchases made, but there are a number of cards that will earn you more than that up to a certain spending threshold, in certain categories, etc., as we've explained above.

The basic idea with cash-back credit cards is that when you swipe your card, you’ll earn yourself cash back each time you make your purchase. Unfortunately, spending money is just a part of everyday life— from filling up the tank with gas, to buying groceries for dinner, paying bills, purchasing school supplies, etc. You might as well earn yourself some cash back on money you’ll be spending regardless. With that said, here's some expert advice to keep in mind as you use your cash-back card to rack up rewards:

Change is constant. When your circumstances change – and they likely will – your card needs will likely change, too. Periodically review your spending situation and make sure your card (or cards) is still working for you. Don’t be afraid to break up with your card if things aren't working out. Maybe you've changed jobs and your commute got much shorter – that card that offered high cash-back rewards on gas station purchases might not be right any longer. Or maybe you've gone back to school and find yourself eating a lot of meals at coffee shops and diners – a card that offers bonus rewards at restaurants could benefit you now.

Actually use it. 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. 

Pay off your balance each billing cycle. Nothing will offset rewards earned quite as quickly as mounting interest charges. If you're going to the effort to earn cash-back rewards, be responsible with your card and pay off your balance each month. Along the same lines, spending more than you can afford simply for the rewards is a terrible idea; you won't come out on top. 

WHAT IS THE BEST CASH-BACK CREDIT CARD?

If you prefer earning cash back on every purchase you make, the best cash-back card is the Chase Freedom Unlimited®. This card has a unique tiered/flat-rate structure, offering cardholders 5% on travel purchased through Chase Ultimate Rewards®, 3% on dining at restaurants and on drugstore purchases, and 1.5% on all other purchases. Plus, you can earn 5% cash back up to $12,000 spent at grocery stores (excluding Target and Walmart) in the first year of card membership and that flat rate of 1.5% cash back on all non-bonus category purchases puts this card ahead of the pack. You can also take advantage of 0% introductory APR for 15 months on purchases (then, 14.99% - 23.74% Variable). Lastly, new cardholders can earn $200 cash back after spending just $500 in the first three months of card membership. And best of all? There's no annual fee for this card.

If you don't mind an annual fee, one of the best cash-back credit cards is the Blue Cash Preferred® Card from American Express. This card awards a staggering reward rate of 6% back on up to $6,000 in purchases at U.S. supermarkets (then 1%) and on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations and transit which includes rideshares, train fares and more and 1% on all other purchases. You also get a 0% intro APR on purchases for 12 months (then, 13.99% - 23.99% Variable). For a limited time, new cardholders can earn a $300 statement credit after spending $3,000 within the first six months (offer expires 12/10/20). This card (and any cash-back credit card) is, of course, only the best cash-back credit card if you frequently spend on these purchases. You should consider whether you can take advantage of the bonus cash-back opportunities and the new cardholder offer before committing to an annual fee.

WHAT IS THE DIFFERENCE BETWEEN A CASH-BACK CARD AND A REWARDS CARD?

Cash-back credit cards allow cardholders to put money toward their credit card statement, redeem cash back for gift cards or cash equivalent prizes, or receive a physical check. Rewards programs, on the other hand, are compiled of special offers and bonus points which can be redeemed for things other than cash: airline miles, gas cards, gift cards, hotel stays and more. When deciding if a cash-back or rewards card is best for you, it's important to take a deep dive into your lifestyle and spending patterns to see which type of card will benefit you the most.

Cash-back cards can be viewed as a more practical reward – you see a physical return for the money you spend on your credit card. Cash back can usually be put right back toward your statement, or in some cases into other funds like your 401K, savings account or an IRA, so you don't have the opportunity to take your reward and splurge on an item or experience. Rewards cards are geared toward really treating yourself – your reward isn't cash, it's more like a "present" that you must use.

Don't get us wrong, rewards cards can also be very practical depending on your lifestyle. If you travel for business frequently, looking into rewards cards that offer flight and/or hotel benefits may be more lucrative for you. Furthermore, some cards offer the option for either cash back or some kind of reward. Doing your research about the card that best fits you will always be the best method for choosing which plastic to put in your pocket.

HOW TO CHOOSE A CREDIT CARD

Choosing the best type of cash-back credit card will be a decision based on how much you put on your credit cards each month and where you typically spend your money. Really look through the above breakdowns of the pros and cons of each type of cash-back card as well as the type of credit card user who should possibly consider each type. Once you've decided what type of cash-back credit card is best for you, you'll want to take a look at a few other things that should, in fact, be part of the decision to apply for any credit card – cash-back or otherwise.

Read the fine print - Apart from judging your spending categories and which card will earn you the most points or cash back, it's also important to pay attention to the fine print. If you earn a higher rewards rate with one card but the APR is sky high, will you end up earning more in the long run, or paying more in the long run? The fine print will also lay out things like whether you'll pay foreign transaction fees when using the card abroad and if you'll enjoy certain privileges like rental car insurance, concierge service, price protection and so much more. It's tedious to read, but the fine print contains critical information that will both help you get the most out of your credit card and keep you from paying fees you don't need to pay.

Compare the annual fee to your earning potential - Some credit cards require a cardholder to pay an annual fee, but don't let that be an instant turn-off if you otherwise like what the card has to offer. Some cards waive the annual fee during the first year and, within that first year you should be able to assess whether you'll earn enough cash back or points to offset the fee once it kicks in. As an example, Blue Cash Preferred® Card from American Express charges a $0 introductory annual fee for one year, then $95 annual fee (offer expires 12/10/20), but the cash-back earning opportunities are incredibly high. As a reminder, cardholders can earn 6% cash back at U.S. supermarkets (on up to $6,000 spent annually, then 1%) and on select U.S. streaming subscriptions and 3% cash back at U.S. gas stations and on transit like bus fare, parking, tolls and more; all other purchases are worth 1% cash back.  So if you spend $1,000 a month at the supermarket and pay your balance off each month you'll earn $60 back for six months out of each year, or $360. That more than covers the annual and we haven't even discussed what you can earn in the other cash-back categories.  If you are going to spend that money anyway, why not earn some money back when you do it?

Know your credit tier- It can seriously damage your credit to apply for multiple credit cards at once and receive rejections. Credit scoring companies such as FICO may assume you are in an emergency situation and are about to binge on credit. Apply only for cards for which you are reasonably certain you will be approved. For each card reviewed on CardRatings, we strive to provide details about the credit tier most likely to be approved for the card. If you know your credit score is only in the average range, you're unlikely to be approved for a card designed for people with good to excellent credit. That said, situations do vary from person to person. Unsure of your credit score? You are entitled by federal law to a copy of your credit report from each of the three major credit reporting bureaus once every 12 months. You can request the reports online.

How to choose a cash-back card

APPLYING FOR A CASH-BACK CREDIT CARD

After assessing which card fits within your spending wheelhouse and financial profile, applying is an easy process. Most credit cards these days offer online applications that take only a few minutes to complete. You will need to enter some personal information, so make sure that when you do apply you're online with a secure connection in a private area. Be prepared to enter information including the following:

  • Name
  • Address
  • Social security number
  • Housing costs
  • Employment status
  • Annual income

Usually after you've entered in all of the requested info, the inquiry will automatically be submitted to the lender. Sometimes you'll see approval immediately and other times you'll receive mail and/or a phone call to verify your approval or denial of credit card issuing. The process usually happens within a week at the most (unless you're applying for a secured credit card or credit cards for bad credit in which cases the process can take up to four weeks).

ARE CASH-BACK CREDIT CARD REWARDS TAXABLE?

In a word, no. The Internal Revenue Service tends to view credit card rewards, whether cash back or frequent flyer miles or some other form of points, as a discount rather than income so you generally won't need to report your cash-back rewards on your tax return. Consider this: The cash-back you earn with your credit card is really just a refund based on purchases you're making. In other words, you aren't getting something for nothing. There are slightly different things to consider if you redeem points for a tax-deductible purchase for your business. You can only deduct the amount that you actually pay, so you'll need to subtract whatever amount was covered by credit card rewards. Obviously, taxes are complicated and every person's situation differs, so if you have any doubt about how to treat your credit card rewards, whether business or personal, consult a tax professional.

WHEN NOT TO USE A CASH-BACK CREDIT CARD

To get actual cash back- Except in extreme emergencies, do not use credit cards, cash-back or otherwise, for actually getting cash back from an ATM. Credit cards generally charge fees for cash advances – often in the 3% to 5% range – plus there are sometimes fees for using the ATM. Additionally, the APR on cash advances is often higher than on regular purchases, and that interest usually starts accruing immediately rather than after a grace period. Once the fees and interest start piling up, you'll regret the decision to use your card for a cash advance.

Be aware of other fees- All credit card issuers will let you know whether they assess usage fees like:

  • Foreign transaction fees
  • Balance transfer fees
  • Late fees

If you can avoid using your card in situations in which you know you'll be assessed an additional fee, you're on the right track!

BEST PRACTICES FOR USING YOUR CASH-BACK CREDIT CARD

Avoid adding new debt- Pay your credit card balance in full each month. If you let interest accumulate you'll be negatively offsetting the cash rewards you're earning with your cash-back card. Even with a card that has low or even zero interest intro offers, get in the habit of paying your bill in a timely manner each month. The beauty of credit cards is that, when used correctly, they can be a major tool for consumers. Incorrect use of credit cards can result in a long road of rebuilding your financial well-being.

Don't overspend- Don't buy just for cash-back rewards. Let's say your cash back is valid at restaurants but you don't have a huge entertainment budget, eating out to earn rewards won't get you into a better financial situation than staying home and cooking meals. Perhaps you should look into changing your cash-back program to one that racks up points at the grocery store or gas station where you'll (hopefully) be less likely to overspend.

Monitor your points- Points and cash-back offerings are sometimes capped, particularly for tiered or rotating categories cards, and sometimes your points or rewards do expire. It's important to pay close attention to the fine print of your credit card. If each year your points max out after $6,000 in spending, continuing to use your credit card won't be as beneficial to you as it was when you were earning two, three or even six times the amount of points – perhaps you have another option in your wallet that will mean more benefits.

Also, what's the point in using a cash-back card for the cash back then letting those accumulated rewards expire? Make sure that you are actually claiming the points that you are earning – double check when and if points expire as well as any other restrictions that may prevent you from taking full advantage of your credit card cash back.

Along those same lines, if you decide to carry a tiered or rotating categories cash-back card, make sure that you are using that card for the purchases that will earn you the bonus rewards. Often you'll need to sign up quarterly in order to take advantage of rotating categories; set reminders on your calendar or take advantage of the reminder services offered by the credit card issuer so that you don't miss out on those bonus rewards.

Share your card wisely- We certainly don't advocate just handing your credit card to anyone, but you should consider whether adding a trusted authorized user could help you maximize your reward opportunities since that person's charges on the card will also accumulate toward your cash-back rewards.

Most credit cards don't charge an additional fee for adding an authorized user. That means that you could have two people racking up rewards, but you'll only be paying one annual fee (if there's an annual fee to pay at all). With you and your authorized user spending toward rewards, you could find yourself on the way to a dream vacation or free gift card sooner than you think.

ARE CASH-BACK CREDIT CARDS WORTH IT?

You are the best person to accurately assess whether a cash-back 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.

With that said, however, if you're someone who wants an easy way to earn rewards, without having to think about redemption options too much, a cash-back credit card may be the way to go. Because they earn money back on each purchase made, cash-back credit cards are a simple way to put more money in your pocket. Plus, they're a safe way to make purchases, and usually come with a plethora of other benefits, like warranty protection and certain travel perks. So in short, our editors give a collaborative yes— cash-back credit cards are generally worth it.


To see the rates and fees for the American Express cards featured in this post, please visit the follow links:  Blue Cash Everyday® Card from American Express (See Rates and Fees); Blue Cash Preferred® Card from American Express (See Rates and Fees)

Disclaimer: The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers change frequently. Therefore, we cannot guarantee the accuracy of the information in this article. Reasonable efforts are made to maintain accurate information. See the online credit card application for full terms and conditions on offers and rewards. Please verify all terms and conditions of any credit card prior to applying.

This content is not provided by any company mentioned in this article. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any such company. CardRatings.com does not review every company or every offer available on the market.

Comments
1 Comments

  1. Ron Crum
    November 23, 2015 - 3:06 pm
    My wife and I got the Fidelity Investment Rewards American Express. Having carried an American Express Card since 1975, getting one that paid 2% was a no brainer. Or so I thought. We have outstanding credit and our credit reports show we have never missed a payment. I spend about $5-8k/month on the card and lay promptly. That said, the FIA Card Services that runs the program would decline to accept charges ALL THE TIME as part of their Fraud Alert program. This has happened several times in the last 18 months. Just six weeks ago, they declined the card at 4 merchants we use frequently, all within 5 miles of my house. I called them and complained, again. Then, they did it again this week at my local grocery, Winn-Dixie; at my nearest Walgreens; and at Amazon, all merchants I use 30-40 times a year. I called and canceled the card yesterday.
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