The 3 types of cashback credit cards, explained

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.

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 Capital One® Quicksilver® Cash Rewards Credit Card is a good example of this kind of card. It offers unlimited 1.5% cash back on all purchases.

Here’s a sample budget and the rewards you might earn with the card:

Purchase category	Annual spending	Reward rate	Cash back
Dining	$2,000	1.5%	$30
Grocery	$3,000	1.5%	$45
Gas	$1,000	1.5%	$15
Other	$6,000	1.5%	$90
Total	$12,000	–	$180

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 accelerated-rewards categories include gas, groceries, dining, entertainment and travel.

What are accelerated rewards?

Accelerated 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 accelerated 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 accelerated 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

• Accelerated 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.

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 American Express Cash Magnet® Card, which offers a 1.5% reward rate on all purchases.

Compare cashback credit cards

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.

Flat-rate cashback credit card

Category	Annual spending	Reward rate	Cash back
Dining and entertainment	$3,000	1.5%	$45
Groceries	$6,000	1.5%	$90
Other purchases	$5,000	1.5%	$75

A flat-rate cashback card would give you $210 cash back.

Tiered cashback credit card

Category	Annual spending	Reward rate	Cash back
Dining and entertainment	$3,000	4%	$120
Groceries	$6,000	2%	$120
Other purchases	$5,000	1%	$50

A tiered-cashback credit card like the Capital One® Savor® Cash Rewards Credit Card would give you $290 cash back. However, this card comes with a $95 annual fee starting the second year, which would give you an effective cash back haul of $195 a year.

This changes if you were to spend more on, say, dining and entertainment. Let’s tweak the budget and pretend you spent $6,000 a year in those categories:

Category	Annual spending	Reward rate	Cash back
Dining and entertainment	$6,000	4%	$240
Grocery stores	$6,000	2%	$120
Other purchases	$5,000	1%	$50

You’d earn $410 cash back. With the annual fee, you’d earn an effective cash back haul of $315.

Rotating-bonus-category cashback credit card

Category	Spending during bonus months	Reward rate during bonus months	Spending during rest of year	Reward rate for rest of year	Cash back
Dining and entertainment	$1,000	5%	$2,000	1%	$70
Groceries	$2,000	5%	$4,000	1%	$140
Other purchases	$1,250	1%	$3,750	1%	$50

A rotating-bonus-category credit card could offer $260 cash back over a year, assuming you spent more in certain categories during the bonus months.

Ultimately, the cash back you earn depends on your preferred categories and how you allocate your spending. Remember that signup bonuses and annual fees can change your effective rewards. And keep track of spending limits if your card has them.

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

Flat-rate cashback credit card

Pick this card type if you want a card with easy-to-understand rewards.

Pros	Cons
Simple rewards. Don’t have to keep track of multiple reward rates. Typically no annual fee.	May lose out on rewards if you spend heavily in certain categories.

Tiered-cashback credit card

Pick this card type if you’re a power spender in certain categories.

Pros	Cons
Great card choices if you spend big on gas, groceries, dining, entertainment or travel.	Poor rewards for non-bonus categories. Many cards have annual fees.

Rotating-bonus-category cashback credit card

Pick this card type if you’re a careful planner and willing to vary your spending throughout the year. It can bring you incredible rewards, but you’ll need to keep track of your bonus categories.

Pros	Cons
Stellar rewards for bonus categories. Most cards have no annual fees.	Small rewards outside of bonus categories. Must keep track of cashback calendar to maximize rewards. Often have to sign up for the bonus categories each quarter.

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

• Should I get a cashback card or a travel card?
  This depends on your tastes. A cashback card can be a good choice because the rewards are often simpler. You’ll need to redeem points or miles with a travel card, which can be a more complicated process.

  To be fair, travel cards can bring a lot to the table. You can redeem your points or miles for unique travel rewards that you might not be able to access through a cashback card. Compare your options to find out which reward card is best for you.

• What are a few top flat-rate cashback cards?
  The Citi® Double Cash Card is a great choice, offering 1% cash back on all purchases and another 1% as you pay them off.

  If you’re willing to pay an annual fee, the Alliant Cashback Visa® Signature Credit Card is a stellar option. It offers 2.5% cash back on all purchases.

• What are a few top tiered-cashback cards?
  • For everyday spending, the Bank of America® Cash Rewards Credit Card, Blue Cash Preferred® Card from American Express and Costco Anywhere Visa® Card by Citi are strong choices.
  • For travel, try the Chase Sapphire Preferred® Card or The Platinum Card® from American Express.
  • For dining, the Capital One® Savor® Cash Rewards Credit Card is a market-leading products.

  There are many more tiered-cashback cards, so compare several before deciding on one.

• What are a few top rotating-bonus-category cards?
  One well-known rotating-bonus-category card is the Chase Freedom Flex℠.