Best Cash Back Credit Cards

Summary of the Best Cash Back Credit Cards

What are cash back credit cards and how do they work?

Cash back credit cards are a type of rewards credit card. Years ago, credit cards offered a line of credit with few additional rewards or benefits. Now, many credit cards offer cash back and other types of rewards as an incentive to use the card. Here’s how it works.

A percentage of each eligible purchase you make with your card is rewarded back to you. Let’s say you spend $500 each month in a category with a cash back rate of 5%. That means you are earning $25 a month, just for card loyalty ($500 X .05 = $25). Sometimes there are spending limits, which is why it’s important to read through a card’s terms before applying.

When you redeem your cash back, you’ll probably have several options. Most cards allow you to redeem your cash back as a statement credit, which will lower your credit card balance. Direct deposits to your bank account, gift cards and checks are also common redemption options.

You’ll usually need at least fair credit to get a cash back card, so make sure you meet the credit requirements before applying. Cash back cards are best for people who can spend responsibly and pay their bill in full each month. If there’s a chance you might carry a balance from time to time, you’re probably better off with a low interest credit card.

At a high level, cash back cards are as simple as that. Read our full guide to how cash back credit cards work to learn more.

Types of cash back credit cards

Nearly every cash back card on the market falls into one of three categories, each with its own benefits.

Flat-rate

Flat-rate cash back cards are probably the simplest type of rewards card you can get. With a flat-rate card, you’ll earn a set amount of cash back, usually between 1% and 2%, on every purchase. Since there’s no need to strategize spending, this type of cash back card is great for first-time cardholders and those who want to use just one credit card for the majority of their expenses. Simply set and forget until you want to redeem your rewards.

Read more: The top 1.5% cash back credit cards

A great option: the Citi® Double Cash Card. Earn 1% cash back on general purchases (excluding gift cards) and an additional 1% as you pay off those purchases, effectively 2%.

Tiered categories

This type of credit card will offer higher cash back rates – usually anywhere from 2% to 6% – in one or more categories, then 1% cash back on all other purchases. Common cash back categories include dining, groceries, travel and gas. Credit card issuers use merchant category codes to classify and reward your purchases.

A cash back card with tiered categories is a great choice if you have regular expenses within particular categories, like gas or groceries. One of the best ways to maximize your cash back earnings is to use a tiered card for your most common purchases while using a flat-rate card for miscellaneous expenses. That way, you get the best of both worlds and you never have to settle for a low rate of cash back.

A great option: the Chase Freedom Flex℠. Earn 5% cash back on rotating bonus categories that you must activate each quarter (on up to $1,500 per quarter), 5% cash back on travel purchased through Chase Ultimate Rewards, 3% cash back on dining and 3% cash back on drugstore purchases.

Rotating or customizable bonus category

This type of cash back card is very similar to a tiered category card, the main difference being that the categories change, usually each quarter. There are even cards that allow you to choose and change your own bonus category once per calendar month, like the Bank of America® Cash Rewards credit card. Rotating categories often correspond with the time of year, which can help you make the most of seasonal expenses, like holiday purchases or a summer road trip.

A great option: the Discover it® Cash Back. Enroll every quarter to earn 5% cash back in a new category (on up to $1,500 per quarter, then 1%).

Common cash back categories

Each credit card offers unique perks, and the rewards landscape is always expanding. In fact, as a result of the coronavirus pandemic, some credit cards have added new rewards categories like streaming service subscriptions and food delivery services.

That said, there are a few fan-favorite bonus categories you can find with many rewards credit cards. Here are some of the most popular rewards categories.

• Groceries – This is one of the most common and useful categories, especially for large families. Just be sure that your grocery store of choice actually qualifies for the rewards category; some grocery rewards programs exclude wholesalers like Costco and superstores like Target and Walmart.
• Gas – Unless you use public transportation, gas is one of those unavoidable expenses. Why not earn cash back on those purchases?
• Travel – If your idea of fun involves boarding a plane, there’s good news: Plenty of credit cards will reward your travel purchases with points or miles you can redeem for more travel.
• Dining – Whether you prefer a drive-through, sit-down, or takeout experience, there are lots of credit cards that reward restaurant purchases.

How to choose a cash back credit card

With so many cash back cards to choose from, it helps to know how to compare them. Here are a few of the most important factors to consider.

Rewards rates and categories

It may seem obvious, but you should choose a card with a rewards structure that fits your lifestyle and spending habits. For some, that might mean a flat-rate card that rewards all purchases at 1.5%. For others, that might mean a tiered rewards card that gives a higher cash back rate at grocery stores and then just 1% on everything else.

To decide which cash back categories are going to be the most useful to you, take a look at your expenses over the last month. You might be surprised to learn that you’re spending more on takeout than at the grocery store, or that your gas station fill-ups cost more each month than your online shopping habit. Whatever you find, looking at a real month of expenses can help you confidently pick the best cash back card for you.

Annual fee

Luckily, there are plenty of lucrative cash back cards that come without an annual fee, which are great for credit card beginners and those who don’t plan to spend a lot on their card. However, big spenders might find the higher rewards rates offered by annual fee cards to be worth it.

If you’re trying to decide, some quick math can give you an idea of whether it makes sense to choose a card with an annual fee. For example, if the annual fee is $100 and the cash back rate is 5% at restaurants, you would have to spend $2,000 at restaurants before making up the cost of the annual fee (2,000 X .05 = 100). Since most cash back cards have more than just one bonus category, you might need to do the math for each to get the full picture.

Welcome bonus

Most cash back cards have a welcome bonus, usually around $150 after a set amount of spend within a specific timeframe. Cash back cards with an annual fee may have higher offers.

Other perks and benefits

Some cards come with extra perks that add long-term value. For example, the Wells Fargo Cash Wise Visa® card is famous for offering up to $600 worth of cellphone protection against covered damage and theft (subject to a $25 deductible) to cardholders who use the card to pay their monthly phone bills. Other common perks to look out for include auto rental insurance, price protection and travel insurance.

Pros and cons of using a cash back card

Cash back cards are appealing for a number of reasons, but two of the biggest benefits are simplicity and flexibility.

While many people love cash back cards, they do have limitations. If you’re contemplating whether a cash back card is right for you, here are some advantages and disadvantages of cash back cards to keep in mind as you make a decision.

Pros

Earning rewards is straightforward. Rather than keeping track of the monetary value of point or mile conversions, cash back cards simply give a percentage of your purchase back. This makes them great for credit card beginners and those who like to keep it simple.

Rewards are flexible. Once you redeem your cash back for a statement credit or direct deposit, that money can go toward buying anything you want.

They often come with welcome bonuses. Welcome bonuses for cash back cards are often $150 or more, some even as high as $300. While a welcome bonus isn’t something you should base your entire decision on, it can be a good tie-breaker if you’re deciding between a few cards.

Earn rewards for the purchases you’re already making. With so many cash back cards on the market – rewarding everything from groceries to streaming services – you have the freedom to choose one that matches the way you already spend. That way, you don’t feel like you have to spend more money than you normally would to earn rewards.

Build and maintain your credit score. Cash back cards encourage healthy credit behavior by rewarding a paid balance with cash rewards. Your positive activity is then reported to credit bureaus, which can help your credit score climb over time.

Many have no annual fee. While some cash back cards do offer premium rewards rates in exchange for an annual fee, you can find plenty of great offers with no annual fee. That way, you can carry the card without worrying whether it’s actually costing you money to have. This is different from travel rewards cards, which more often do come with annual fees.

Cons

Cash rewards are often less valuable than travel rewards. While the value of cash back is pretty straightforward, the value of travel rewards depends on what card you have and how you redeem your points or miles. However, in terms of dollar value, you can usually get more bang for your buck using a travel rewards card – but keep in mind that those rewards will be less flexible than cash back.

They lack travel benefits. Don’t expect many travel benefits outside basic car rental insurance with cash back cards.

Some cash back cards have spending limits on rewards categories. Some tiered rewards cards have a quarterly or annual spending cap for their boosted cash back rate. For example, you might earn 5% cash back on only the first $1,500 you spend each quarter. After that, you would earn just 1% cash back until the next quarter.

You may have to sign up each quarter to qualify for boosted cash back rewards. Activating your rewards category each quarter is common for bonus category cards. Cardholders who could forget quarterly deadlines – or don’t like dealing with them – may not find these higher-earning cards to be worthwhile.

Carrying a balance negates any rewards you earn. Because rewards credit cards do pose an interest rate higher than the rewards rate, it’s critical that you pay off your balance each month or your interest will surpass your cash back.

Research methodology: How we picked the best cash back credit cards

Cash back credit cards analyzed: 682

Criteria used:

Cash back rate and categories

Of course, the best cash back credit cards make it easy to earn cash back. That’s why we chose credit cards that offer high rewards rates on common purchases. We understand that “everyday spending” looks different for various lifestyles, so we chose a variety of bonus categories, from travel to groceries to entertainment.

Redemption options

What’s the use of cash back if you can’t redeem it in a way that’s valuable to you? Most cash back cards allow the option to redeem as a statement credit, but some also allow you to redeem as a bank direct deposit, gift card, charitable donation or even a credit toward a loan balance. Since these alternative redemption methods can sometimes add value to your cash back earnings, we weighed all methods of redemption. We also considered ease of redemption since some cards require a minimum cash back balance in order to redeem.

Sign-up bonus

When analyzing a credit card’s overall value, we always think long-term: ongoing rewards rate, fees, etc. But a sign-up bonus is a nice way to kickstart your cash back earnings. The ideal sign-up bonus rewards you generously for a low spending threshold.

Rates and fees

Here, we dug into a few costs that may cut into the card’s potential value. When assessing cards with annual fees, we did the math to ensure that cardholders’ cash back and other benefits could likely surpass that cost. We also avoided cards with sky-high interest rates.

Miscellaneous benefits and features

Additional perks and benefits are rarely the main attraction, but they can be tie-breakers when comparing two similar offers. Features like auto rental insurance and price protection are often overlooked but can save you hundreds if you remember to use them.

Check out our reviews

Interested in learning more about each card? We’ve reviewed several cash back credit cards – check them out in our reviews section.