Credit Cards » Credit Card Guides » How to Choose a Cash-Back Credit Card?
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How to Choose a Cash-Back Credit Card?

While focusing on cash back categories and rate is a must, there are additional factors such as fees, welcome bonus, and purchase protection
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024
The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024

The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.

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Table Of Content

What are Cash-Back Credit Cards?

Cash-back credit cards are a type of credit card that gives cash back on purchases. The idea is that for every dollar spent, or when the set spending amount is reached, the card user will receive a percentage of that money back.

Generally, cardholders use their cash-back rewards towards their balances or opt for direct deposit, but every card has different redemption offers.

Certain categories of cash-back cards- such as flat-rate cards- offer lower percentage rates on all purchases, while others offer higher percentage rates for specific purchases.

Factors to Consider When Choosing a Cash-Back Card

There are 6 main factors to consider when choosing a cash back credit card:

1. Cash Back Card Type

There are three categories that cash-back cards typically fall under:

  • Rotating Category Cash-Back Cards – Rotating category cash-back cards offer higher percentage rates on select categories that rotate every quarter. You may also be required to activate your cash-back rates and/or select your categories every quarter. Failure to choose categories could mean that your percentage rates will default to the card's flat rate.

For example, the Chase Freedom Flex card earns 5% cash back on up to $1,500 in combined purchases on selected categories each quarter and 5% cash back on travel purchased through Chase Ultimate Rewards®. Also, you can earn 3% cash back on dining at restaurants (including takeout and eligible delivery services), drugstore purchases , and 1% on all other purchases.

  • Tiered Bonus Cash-Back Credit Cards – Tiered cash-back cards offer higher percentage rates on select categories while offering a flat-rate percentage on all other purchases. This card type is known to put a spending limit on categories with the highest percentage rate- particularly on the categories you spend the most on.

The Capital One SavorOne Rewards card is a good option because it offers Earn unlimited 3% cash back on dining, entertainment, popular streaming services and grocery store purchases (excluding superstores like Walmart® and Target®), 1 percent on all other purchases. 10% percent cash back on purchases made through Uber and Uber Eats. 8% cash back on Capital One Entertainment purchases. 5% cash back on hotels and rental cars booked using Capital One Travel..

  • Flat-Rate Cash-Back Credit Cards. Flat-rate cash-back cards offer a single, flat-rate percentage on all purchases. Though every card is unique in its restrictions, these cards tend to be the most straightforward of the three card categories.

The Wells Fargo Active Cash Card is an example, as it offers a flat rate for each dollar spent in net purchases.

Card
Rewards
Bonus
Cash-back Type

amazon prime visa

1-5% 5% at Amazon.com, Amazon Fresh , Whole Foods Market and on Chase Travel purchases, 2% cash back on gas stations, restaurants and on local transit and commuting, 1% cash back on all other purchases
$100 $100
Tiered Bonus

Chase Freedom Flex

1-5% 5% cash back on up to $1,500 in combined purchases on selected categories each quarter and 5% cash back on travel purchased through Chase Ultimate Rewards®. Also, you can earn 3% cash back on dining at restaurants (including takeout and eligible delivery services), drugstore purchases , and 1% on all other purchases
$200 $200 bonus after you spend $500 on purchases in the first 3 months from account opening
Rotating Categories

citi double cash

Citi® Double Cash Card
1% – 5% 2% cash back rewards rate – 1% every time you swipe and another 1% upon payment.
$200 $200 cash back after you spend $1,500 on purchases in the first 6 months of account opening
Flat Rate Cashback

2. Reward Rates and Category Spending

Each category of cash-back cards offer specific percentage rates, and specific categories that these percentages apply. Say you spend more on groceries each month than in any other category.

The Blue Cash Everyday® Card from American Express offers 3% Cash Back at U.S. supermarkets / U.S. online retail purchases/ U.S. gas stations on up to $6,000 per year in purchases, then 1%, making it a practical choice.

3. Annual Fees

Annual fees are tricky when it comes to cash-back rewards because if you aren’t earning back more than the annual fee, it won’t be worth your while.

Fortunately, most cash-back credit cards don’t charge annual fees, and for those that do, if you are conscious about choosing a card that optimizes your spending habits, you will exceed the annual fee in rewards earned.

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4. Blackout Dates And Restrictions

Blackout dates are less common in cash-back cards, unlike travel cards. Nevertheless, it's necessary to review a card’s terms and conditions.

Most cash-back cards place restrictions on what transactions earn the allotted percentage rate, such as account transfers which typically do not earn cash back.

Cards like the Capital One QuicksilverOne Cash Rewards Credit Card offer unlimited 1.5% – 5% on all purchases but offer no cash redemption towards flights and car rentals.

5. Protections

Most credit cards offer fraudulent protection. Others may also offer travel insurance or car rental insurance.

Cards like the Chase Freedom Unlimited Credit Card offer a large range of protection: cell phone protection, purchase protection, zero liability protection, and extended warranty protection.

6. Welcome Bonus

Almost every credit card will give new cardholders the opportunity to earn a bonus or sign-on reward within the first several months.

Examples of this are the US Bank+Visa Signature card, which offers a $200 bonus after spending $1,000 in eligible purchases within the first 120 days of account opening. .

The Blue Cash Preferred Card from American Express, which not only offers a $250 statement credit after you spend $3,000 in purchases on your new Card within the first 6 months but also offers 0% APR rates for 12 months on purchases and balance transfers , then 19.24% – 29.99% Variable APR.

Here are some examples of credit cards with a high welcome bonus:

Card
Rewards
Bonus
Annual Fee

Discover It Cash Back
1-5% 5% cashback on up to $1,500 in rotating category purchases each quarter when you activate the bonus category (then 1%), as well 1% percent cash back on all other purchases
Cashback Match All cash back earned at the end of the first 12 months is matched.
$0

AMEX Blue Cash Preferred Card review

Blue Cash Preferred® Card from American Express
1-6% 6% cash back at U.S. supermarkets (up to $6,000 per year in purchases, then 1%) and selected U.S. streaming subscriptions, 3% cash back on transit and U.S. gas stations, 1% cash back on other purchases
$250 $250 statement credit after you spend $3,000 in purchases on your new Card within the first 6 months
$95 ($0 intro for the first year) (Rates & Fees)

chase freedom unlimited card

1.5% – 5% 5% on travel purchased through Chase Ultimate Rewards, 3% on dining at restaurants, including takeout and eligible delivery services, 3% on drugstore purchases and 1.5% cash back on all purchases
$200 Earn a $200 bonus after you spend $500 on purchases in the first 3 months from account opening.
$0

Marriott Bonvoy Boundless Card review 2019

Marriott Bonvoy Boundless® Credit Card
1x – 6X 6X points for every $1 spent at over 7,000 hotels participating in Marriott Bonvoy® with the Marriott Bonvoy Boundless® credit card. Plus, earn up to 10X points from Marriott for being a Marriott Bonvoy® member. Plus, earn up to 1X point from Marriott with Silver Elite Status. Earn 3X points for every $1 on the first $6,000 spent in combined purchases each year on grocery stores, gas stations, and dining. Earn 2X points for every $1 you spend on all other purchases.
3 Free Nights 3 Free Nights (each night valued up to 50,000 points) after you spend $3,000 on purchases in your first 3 months from your account opening
$95

Questions to Ask Yourself Before Applying for a Cash-Back Credit Card

Before applying for a cash-back card, it's a good idea to answer some questions that can help you to get the right decision:

It’s necessary to evaluate your monthly spending to know how much money you are spending and in what purchase categories. You want to apply for a cash-back card that earns you rewards on purchases you would already be making.

If you spend money on various purchases instead of specifics (groceries, gas, etc.), a flat-rate cash-back card may benefit you more than the other two types of cash-back card.

Customer loyalty can go a long way with credit cards; however, with cash-back rewards, some of the big brands you shop with may not be compatible with your category-specific percentage rates.

For example, if you shop at Target as your primary grocery store, and you've decided to opt for a grocery and gas cash-back card, make sure your primary percentage rates include superstores.

Alternatively, you can consider a co-branded card to boost your rewards as a loyal customer.

Part of owning a credit card is APR rates. While some cards offer a grace period before interest starts accumulating, it’s not always feasible for you to pay off your balance in full.

This is a two-part vice when it comes to cash-back cards.

  1.  Percentage rates may no longer apply if you carry a balance.
  2.  the carried balance may prevent you from exceeding the annual fee in cash-back rewards, rendering it useless.

Cash-back credit cards are not always as simple as earning cash-back.

Depending on the card type, you may be responsible for activating your rewards or selecting your reward categories periodically. If you forget to do so, you may miss out on the rewards altogether- until the next activation date.

Make sure you read all the terms and conditions in place for the card you are considering and keep up with activation dates.

How To Get a Cash-Back Card?

The application process for cash-back cards is the same process you will follow for all credit cards:

  1. Check for pre-approval – Generally, card issuers will allow you to check for pre-approval on their website. Pre-approval does not impact your credit score and can save you time wasted applying if you do not meet the criteria.
  2. Make sure your account is in good-standing – If you are currently in debt and are not paying your monthly bills on time and in full- your application for a cash-back credit card may be rejected. Therefore, make sure you are practicing responsible money habits to benefit from a cash-back credit card.
  3. Provide your information – Be ready to provide the necessary information when applying for a cash-back credit card. Your social security number, address, yearly income, and monthly rent are pertinent information to be approved. A card’s website provides a list of criteria needed for review before approving an application.
  4. Accept your offer and start spending – Once approved, you can activate your rewards and go straight into spending. The sooner you start spending, the better, especially if you have a limited number of days to rake in your sign-up offer.
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amex platinum

Rewards Plan:
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Rewards Plan:
2X – 6X 6 Marriott Bonvoy points for each dollar of eligible purchases at hotels participating in the Marriott Bonvoy™ program, 3 points at Worldwide restaurants and on flights booked directly with airlines and 2 points on all other eligible purchases
Welcome Bonus:
95,000 points 95,000 Marriott Bonvoy bonus points after you use your new Card to make $6,000 in purchases within the first 6 months of Card Membership

Amex Delta SkyMiles Platinum card

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The product offers that appear on this site are from companies from which this website receives compensation.
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Welcome Bonus:
80,000 points 80,000 Membership Rewards® points after you spend $8,000 on purchases on your new Card in your first 6 months of Card Membership

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2X – 6X 6 Marriott Bonvoy points for each dollar of eligible purchases at hotels participating in the Marriott Bonvoy™ program, 3 points at Worldwide restaurants and on flights booked directly with airlines and 2 points on all other eligible purchases
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95,000 points 95,000 Marriott Bonvoy bonus points after you use your new Card to make $6,000 in purchases within the first 6 months of Card Membership

Amex Delta SkyMiles Platinum card

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Welcome Bonus:
60,000 miles 60,000 bonus miles + 500 Premier qualifying points (PQP) after you spend $4,000 on purchases in the first 3 months your account is open.
Advertiser Disclosure
The product offers that appear on this site are from companies from which this website receives compensation.
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Rewards Plan:
1X – 5X 5X points on up to $500,000 spent on directly-booked airfare and flights and prepaid hotels booked through American Express Travel (per calendar year), 2X points on prepaid car rentals through American Express Travel and 1X points on all other purchases
Welcome Bonus:
80,000 points 80,000 Membership Rewards® points after you spend $8,000 on purchases on your new Card in your first 6 months of Card Membership

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2X – 6X 6 Marriott Bonvoy points for each dollar of eligible purchases at hotels participating in the Marriott Bonvoy™ program, 3 points at Worldwide restaurants and on flights booked directly with airlines and 2 points on all other eligible purchases
Welcome Bonus:
95,000 points 95,000 Marriott Bonvoy bonus points after you use your new Card to make $6,000 in purchases within the first 6 months of Card Membership

Amex Delta SkyMiles Platinum card

Rewards Plan:
1X – 3X 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants worldwide including takeout and delivery in the U.S., and at U.S. supermarkets and 1X Miles on all other eligible purchases
Welcome Bonus:
50,000 miles 50,000 bonus miles after you spend $3,000 in your first six months
Advertiser Disclosure
The product offers that appear on this site are from companies from which this website receives compensation.

How to Maximize Your Cash-Back Card

Generally, maximizing your cash-back card depends on your ability to understand your spending, control your emotions and plan it as much as you can. Here are the main things to consider:

  • Optimize your lifestyle – Spend money and earn cash back on purchases that matter to you. Use your card on all purchases, especially in the categories with the highest percentage rates.
  • Leverage your rewards and perks – When ready to redeem your cash back, go to your card account to review the redemption options. Cash-back cards offer exclusive perks to their card users, and it's up to you, the user, to use them.
  • Get your sign-on bonus – Sign-on bonuses are a great way to kickstart your cash-back rewards. If you choose a card that leverages the categories you spend in often, meeting the purchase requirements needed for your sign-on bonus won’t be hard.
  • Read the fine print – The terms and conditions that come with credit cards are not advertised in big, bold letters. Card issuers want you to feel excited about their cards, and restrictions aren’t exciting. Whether it be restrictions or redemptions, read the fine print so that you can take full advantage of your card.
  • Never miss a bill – If you accrue massive debt, you will be spending even more to pay off the high-interest rates that come with cash-back credit cards. Paying your bills on time and in full every month is one of the best ways to maximize your credit card and to keep away pesky interest rates.

FAQs

Yes, you can get a cash-back credit card for free. Unless there is an annual fee, there will be no additional costs. You are responsible for paying off monthly bills and any APR rates that may apply when carrying a balance.

Credit cards offer cash-back as an incentive for you to use their cards instead of cash or a debit card. Credit card companies make money off of merchant fees. The more you swipe their cards, the more money they receive and the more rewards you earn.

The IRS decides what money is taxable by the way it is received. Cash back earned with your credit card is generally deemed a rebate, making it non-taxable.

Sign-up bonuses and rewards may be taxable, particularly if they exceed $600 annually.

Choosing between a cash-back and travel credit card depends on your spending habits and financial goals. Cash-back cards offer flexibility.

Travel cards give you rewards and miles to spend on travel. If you are looking for a low-maintenance credit card with easy redemption, choose a cash-back card.

Cash-back cards are easier to understand. Points credit cards have more specific rules around their reward redemption. Points earned can be redeemed in more ways than cash. 

Picture of Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
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Rewards Plan:
1X – 5X 5X points on up to $500,000 spent on directly-booked airfare and flights and prepaid hotels booked through American Express Travel (per calendar year), 2X points on prepaid car rentals through American Express Travel and 1X points on all other purchases
Welcome Bonus:
80,000 points 80,000 Membership Rewards® points after you spend $8,000 on purchases on your new Card in your first 6 months of Card Membership

amex brilliant

Rewards Plan:
2X – 6X 6 Marriott Bonvoy points for each dollar of eligible purchases at hotels participating in the Marriott Bonvoy™ program, 3 points at Worldwide restaurants and on flights booked directly with airlines and 2 points on all other eligible purchases
Welcome Bonus:
95,000 points 95,000 Marriott Bonvoy bonus points after you use your new Card to make $6,000 in purchases within the first 6 months of Card Membership

Amex Delta SkyMiles Platinum card

Rewards Plan:
1X – 3X 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants worldwide including takeout and delivery in the U.S., and at U.S. supermarkets and 1X Miles on all other eligible purchases
Welcome Bonus:
50,000 miles 50,000 bonus miles after you spend $3,000 in your first six months
Advertiser Disclosure
The product offers that appear on this site are from companies from which this website receives compensation.
Top Offers From Our Partners

amex platinum

Rewards Plan:
1X – 5X 5X points on up to $500,000 spent on directly-booked airfare and flights and prepaid hotels booked through American Express Travel (per calendar year), 2X points on prepaid car rentals through American Express Travel and 1X points on all other purchases
Welcome Bonus:
80,000 points 80,000 Membership Rewards® points after you spend $8,000 on purchases on your new Card in your first 6 months of Card Membership

amex brilliant

Rewards Plan:
2X – 6X 6 Marriott Bonvoy points for each dollar of eligible purchases at hotels participating in the Marriott Bonvoy™ program, 3 points at Worldwide restaurants and on flights booked directly with airlines and 2 points on all other eligible purchases
Welcome Bonus:
95,000 points 95,000 Marriott Bonvoy bonus points after you use your new Card to make $6,000 in purchases within the first 6 months of Card Membership

Amex Delta SkyMiles Platinum card

Rewards Plan:
Up to 3x miles 3 miles per $1 spent on United purchases immediately after earning your $125 annual United purchase credit, 2 miles on all other travel and select streaming services, 1 mile on all other purchases
Welcome Bonus:
60,000 miles 60,000 bonus miles + 500 Premier qualifying points (PQP) after you spend $4,000 on purchases in the first 3 months your account is open.
Advertiser Disclosure
The product offers that appear on this site are from companies from which this website receives compensation.

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