The 3 types of cashback credit cards, explained | finder.com
family shopping (2)

The 3 types of cashback credit cards, explained

We value our editorial independence, basing our comparison results, content and reviews on objective analysis without bias. But we may receive compensation when you click links on our site. Learn more about how we make money from our partners.

Depending on your unique spending habits, one card type might offer you more cash back.

There are tons of cashback credit cards out there. Needless to say, narrowing your options can be tough. Cards offer different reward rates. Some offer 3% cash back for groceries, while others offer 2% cash back for gas. Which card should you pick? Luckily, cashback cards can be neatly categorized into three types — flat rate, tiered and rotating bonus.

Compare two cashback cards: Flat-rate vs rotating

Chase Freedom Unlimited®

Chase Freedom Unlimited®

  • 0% intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 16.99 to 25.74%
  • Balance transfer fee is 3% of the amount transferred, $5 minimum
  • Unlimited 1.5% cash back on every purchase - it's automatic
  • Earn a $150 bonus after you spend $500 on purchases in your first 3 months from account opening
  • No minimum to redeem for cash back
  • Cash back rewards do not expire as long as your account is open
  • Free credit score, updated weekly with Credit Journey℠
  • No annual fee
  • Read Rates & Fees
Read less
Read more

Chase Freedom®

Chase Freedom®

  • 0% intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 16.99 to 25.74%
  • Balance transfer fee is 3% of the amount transferred, $5 minimum
  • Earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening
  • Earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate
  • Enjoy new 5% categories each quarter
  • Unlimited 1% cash back on all other purchases - it's automatic
  • Cash back rewards do not expire as long as your account is open and there is no minimum to redeem for cash back
  • Free credit score, updated weekly with Credit Journey℠
  • No annual fee
  • Read Rates & Fees
Read less
Read more
Promoted

What are the 3 types of cashback credit cards?

The three types of cashback credit cards are flat-rate, tiered and rotating-bonus-category. The rate that you earn cash back depends on your spending and card type. These terms are a fancy way to describe simple reward structures.

What is a flat-rate cashback credit card?

Quick look
  • Single cashback rate for all purchases.
  • Typically has no annual fee.
  • The simplest option among the three types of cashback cards

With a flat-rate cashback credit card, you get a single cashback rate for all purchases, regardless of category. This might be helpful if your spending is distributed evenly throughout many categories or you don’t want to deal with multiple reward rates.

The Chase Freedom Unlimited® credit card is a good example of this kind of card. It offers 1.5% cash back on all purchases.
Here’s a sample budget and the rewards you’d earn with the card:

Purchase category Annual spending Reward rate Cash back
Dining $1,000 1.5% $15
Grocery $1,000 1.5% $15
Gas $1,000 1.5% $15
Total $3,000 $45

How do I maximize my flat-rate card cash back?

The beauty of a flat-rate cashback card is you don’t have to worry about maximizing your rewards. With one reward rate, your card offers steady cash back for everything you buy.

What is a tiered-cashback credit card?

Quick look
  • Multiple cashback rates.
  • Many options have annual fees.
  • Common elevated-rewards categories include gas, groceries, dining, entertainment and travel.

What are elevated rewards?

Elevated rewards are cash back, points or miles you earn above the base reward rate.
Let’s say a card offers 3% cash back on groceries and 2% on gas, and 1% cash back on all other purchases. The cash back you earn on groceries and dining are considered elevated rewards.

With a tiered-cashback credit card, you’ll receive different cashback rates for different categories. This might be helpful if you spend big in certain categories.

For example, if you’re a foodie and dine out often, you might want a card that rewards you more for eating out. If you have a long commute and spend a lot on gas, you might consider a card that offers great cash back on gas.

Let’s say you rack up big bills for groceries and gas. Here’s how much cash back you might earn with a tiered-cashback product like the Blue Cash Everyday® Card from American Express.

Purchase category Annual spending Reward rate Cash back
US supermarkets $3,000 3% $90
US gas stations $6,000 2% $120
Other purchases $3,000 1% $30
Total $12,000 $240

On the same $12,000 of spending, you’d only earn $180 cash back with a card that offered a flat 1.5% reward rate on all purchases.

How do I maximize my tiered-cashback rewards?

Check which categories your card offers elevated rewards for, then use your card for spending in those categories. For example, if your card offers 3% for gas and 2% for groceries, then put more gas and grocery purchases on it.

If the card offers 1% for all purchases outside of gas and groceries, find a flat-rate rewards card with a higher cashback reward like 1.5% or higher.

What is a rotating-bonus-category cashback credit card?

Quick look
  • Elevated rewards for bonus categories that changes quarterly.
  • Common bonus categories include gas, groceries, wholesale clubs and dining.
  • Relatively fewer card options.
  • You’ll usually pay no annual fee.

A rotating-bonus-category cashback credit card offers a higher reward rate for certain categories during certain times. Rates typically rotate and need to be activated quarterly. This card type isn’t for everyone. To maximize your rewards, you’ll need to keep an eye on your card’s cashback calendar.

One of the strongest cards of this type is the Discover it® Cash Back. You’ll earn a stellar 5% cash back in categories that rotate quarterly, typically on up to $1,500 in purchases each quarter you activate, then 1%. On everything else, you’ll earn just 1%.

How do I maximize my rotating-bonus-category cashback rewards?

Keep track of your rotating-cashback calendar and spend accordingly.

For example, in January through March your card might offer 5% cash back at gas stations and wholesale clubs. This could be a good time to take a road trip, or make your big purchase to stock up on supplies at Costco. By spending more in the bonus categories during these months, you’ll get more cash back.

Once your bonus category is up, maximize your cash back by using another card with a higher flat rate. Check out the Barclaycard Arrival® Plus World Elite Mastercard®, which offers a 2% reward rate on all purchases.

Compare cashback credit cards

Name Product Filter values Annual Fee APR for Purchases (Purchase Rate) Intro APR for Balance Transfer
$0
16.99% to 25.74% variable
0% for the first 15 months (then 16.99% to 25.74% variable)
0% intro APR for 15 months from account opening on purchases and balance transfers.
$0
16.99% to 25.74% variable
0% for the first 15 months (then 16.99% to 25.74% variable)
0% intro APR for 15 months from account opening on purchases and balance transfers.
$95
14.99% to 25.99% variable
0% for the first 12 months (then 14.99% to 25.99% variable)
Earn $200 bonus cash back after you spend $1,000 on purchases in the first 3 months. Rates & Fees
$0
14.99% to 25.99% variable
0% for the first 15 months (then 14.99% to 25.99% variable)
Earn a $150 bonus statement credit after you spend $1,000 on purchases in the first 3 months. Rates & Fees
$0
14.99% to 25.99% variable
0% for the first 15 months (then 14.99% to 25.99% variable)
Earn up to $250 back. Earn $150 back after you spend $1,000 or more in purchases with your new card within the first 3 months of card membership. Plus, earn an additional $100 back after you spend an additional $6,500 in purchases within your first 12 months. Rates & Fees

Compare up to 4 providers

Which cashback card type has the best value?

Here’s a quick comparison of the cash back you might earn from the different card types based on our sample budget:

  • $3,000 per year on dining and entertainment.
  • $6,000 per year on groceries.
  • $5,000 per year on other purchases.

Pros and cons: Which cashback card type is best for you?

Bottom line

There are many cashback credit cards, making it easier to find a card that meets your spending needs. Analyze your spending and gauge your willingness to track different reward rates. With some research, you could find the right cashback card that’ll reward you handsomely.

Frequently asked questions

Kevin Joey Chen

Kevin Chen is a world-travelin', copy-writin', Game of Thrones-watchin' credit cards writer for finder.com. When he's not crunching the numbers on bonus points and comparing APRs, you can find him flying around the world in search of the perfect beer.

Was this content helpful to you? No  Yes

US Credit Card Offers

Important Information*
Deserve® Classic Card
Deserve® Classic Card

APR

24.49
variable

Annual fee

0 For the first year
More info
Luxury Card Mastercard® Gold Card™
Luxury Card Mastercard® Gold Card™

APR

16.74
variable

Annual fee

995 For the first year
More info
First Access Visa Card®
First Access Visa Card®

APR

29.99
variable

Annual fee

75 For the first year
More info
Indigo® Platinum Mastercard® Credit Card
Indigo® Platinum Mastercard® Credit Card

APR

23.9
variable

Annual fee

75 For the first year
More info

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

US Credit Card Offers

Important Information*
Deserve® Classic Card
Deserve® Classic Card

APR

24.49
variable

Annual fee

0 For the first year
More info
Luxury Card Mastercard® Gold Card™
Luxury Card Mastercard® Gold Card™

APR

16.74
variable

Annual fee

995 For the first year
More info
First Access Visa Card®
First Access Visa Card®

APR

29.99
variable

Annual fee

75 For the first year
More info
Indigo® Platinum Mastercard® Credit Card
Indigo® Platinum Mastercard® Credit Card

APR

23.9
variable

Annual fee

75 For the first year
More info
Go to site