Our pick for a cashback credit card: Blue Cash Preferred® Card from American Express
Up to 6%
Cash back
- $0 intro annual fee for the first year, then $95
- Huge cashback on groceries and streaming
- Intro APR on purchases
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.
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.
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 |
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.
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.
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.
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.
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.
Here’s a quick comparison of the cash back you might earn from the different card types based on our sample budget:
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.
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.
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.
Pick this card type if you want a card with easy-to-understand rewards.
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Pick this card type if you’re a power spender in certain categories.
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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.
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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.
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.
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.
There are many more tiered-cashback cards, so compare several before deciding on one.
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