Cash back cards survey: Complex is out, simple is in

Most cards offer flat cash percentage rather than shifting or tiered rewards

By  |  Updated: June 19, 2017

Taylor Tompkins
Staff Reporter
Former newspaper reporter now focused on rewards and fintech.

Cash back survey 2017: complexitiy out, simplicity in

For cash back cards, complex is out, simple is in.

That’s a key finding of a new CreditCards.com survey of 52 leading cash back credit cards. We compared all the features of every card marketed as a cash back card from the 40 largest card-issuing banks.

The survey found:

  • Every cash back cards offers a base rate – a flat percentage of cash back on all qualifying purchases – with 1 percent base rate being the norm and 2 percent a rare exception.
  • On top of the base rate, 22 cards have additional, but restricted, tiered rewards of 2 percent, 3 percent, 5 percent or even 6 percent. Three other cards have rotating categories where you can earn extra.
  • A majority (32 of 52) offer some sort of bonus for signing up.
  • At least 43 of the 52 cards let you redeem cash back as a statement credit – the ultimate easy, set-it-and-forget-it way to get money back on every purchase.

Because of their ease and flexibility, cash back cards are on the rise, said Edward Niestat, managing director at Novantas, a bank solutions company.

“Some sort of rewards is table stakes,” Niestat said. “These days, frequent flyer miles are still an important currency. I think, increasingly, the preference is for cash. [It] is where a lot of the action is in terms of the arms race.”

Cash back cards have universal appeal, said Michael Moeser, director of payments with Javelin Strategy and Research. “Unlike miles cards or hotel points – those tend to favor the affluent who spend a lot on cards or road warriors – cash back works for everybody,” said  “You don’t have to be Warren Buffett or Mark Zuckerberg to get the cash back card.”

Simplicity becoming king
And, in this race, simplicity is quickly becoming king. Of the 52-card sample, 27 cards had a flat percent of cash back on every purchase, and 22 cards had a tiered system, where certain purchases earned more cash back than others. Formerly popular, only 3 cards from the sample had rotating categories.

“At first, it might have been a sort of a fun game with the categories, but I think … that wore out,” Niestat said. “Unless you tend to be someone who fits the mold of the unique offering – for instance, if it’s skewed toward inflated ratios for travel or something, if you do a lot of travel it might be attractive. But by and large most people found that they did as well or better just having a flat rate across the board.”

For many cardholders, it is also about instant gratification.

“When we do our surveys, more than half of all rewards cards are cash back because they are so easy to understand and instantly give you that, ‘I spent $100 bucks, I’m getting 1 percent or 1.5 percent back on that money,’” Moeser said.

 

How much can you get?
With simplicity come simple base rates.

Consumers can expect to see offers of a 1 percent base rate: Sixty percent of all cards surveyed – 31 out of 52 – offer 1 it. That means consumers will earn 1 percent on general purchases, whether it is a flat rate across all purchases, or the rate earned outside of featured categories of spending.

More than one-third of cards – 18 out of all 52 surveyed – have a 1.5 percent base rate, and only three cards out of all 52 surveyed claim a 2 percent cash back. However, there is typically a catch with the three top earning cash back cards:

  • The Citi Double Cash card only gives consumers 2 percent when they pay off their balances, which half of consumers do not do every month.
  • The Fidelity Rewards Visa Signature card only gives 2 percent cash back when the rewards are deposited into an eligible Fidelity account – all of which are investment accounts that can’t be directly withdrawn without high penalty fees.
  • The Spark Business Cash, offers 2 percent, but has an annual fee of $59, waived the first year. But this card may not fit an average consumer’s needs because it’s a business card.

On top of those base rates, 25 cards – almost half of those surveyed – offer a higher percentage cash back on certain purchases, often with some sort of cap on earning. For example, the American Express Blue Cash Preferred card offers 6 percent cash back at supermarkets, but only for the first $6,000 spent in a calendar year.

CASH BACK CARD SURVEY 2017 - BY THE NUMBERS
CreditCards.com surveyed every credit card marketed as a cash back card from the 40 largest card-issuing U.S. banks – 52 cards in all. Here’s what we found:
Base cash back rate

All cards offered a base rate on all purchases.

  • 1 percent base cash back: 31 cards
  • 1.5 percent cash back: 18 cards
  • 2 percent cash back: 3 cards
Types of rewards programs
  • Flat percent back: 27 cards
  • Tiered percent back by category: 22 cards
  • Rotating categories: 3 cards
Sign-up bonuses
  • Sign-up bonuses that require you to spend a certain amount: 22 cards
  • Sign-up bonuses that offer a percent of what you spend: 10 cards
  • No sign-up bonus: 20 cards
Statement credit
  • Can be redeemed as statement credit: 43 cards
  • Cannot be redeemed as statement credit: 4 cards
  • Did not respond: 5 cards
Rewards expiration
  • Rewards that don’t expire: 38 cards
  • Rewards that do expire: 8 cards
  • Unclear / did not respond: 6
Bonuses
  • Give a bonus for having a relationship with the bank: 10 cards
CASH BACK CARD SURVEY 2017 – BY THE NUMBERS
CreditCards.com surveyed every credit card marketed as a cash back card from the 40 largest card-issuing U.S. banks – 52 cards in all. Here’s what we found:
Base cash back rate Statement credit

All cards offered a minimum base rate on every qualified purchase.

  • 1 percent base cash back: 31 cards
  • 1.5 percent cash back: 18 cards
  • 2 percent cash back: 3 cards
  • Can be redeemed as statement credit: 43 cards
  • Cannot be redeemed as statement credit: 4 cards
  • Did not respond: 5 cards
Types of rewards programs Rewards expiration
  • Flat percent back: 27 cards
  • Tiered percent back by category: 22 cards
  • Rotating categories: 3 cards
  • Rewards that don’t expire: 38 cards
  • Rewards that do expire: 8 cards
  • Unclear / did not respond: 6
Sign-up bonuses Relationship bonuses
  • Sign-up bonuses that require you to spend a certain amount: 22 cards
  • Sign-up bonuses that offer a percent of what you spend: 10 cards
  • No sign-up bonus: 20 cards
Give a bonus for having a relationship with the bank: 10 cards

Bonus offers for signing up
Customers can also expect a hefty sign up bonus, with 32 out of the 52 cards – more than 60 percent of all surveyed – offering one. Typically, customers should expect to spend $500 or more in the first few months after opening their card to receive $150, though those numbers vary by card.

For example, a cardholder who opens a Chase Freedom Unlimited card can earn $150 after spending $500 within the first three months after opening the card. If the cardholder spends $7,000 a year on their credit card, they can earn $105 in addition to the sign-up bonus.

Having a relationship with the bank can also earn you extra cash. Ten out of 52 cards surveyed offer hefty boosts on their base rate if consumers already have a relationship – or establish a relationship – with the card’s issuing bank.

For example, a simple direct deposit into a USAA account will boost the base rate on their online pilot card, the Limitless Cashback Rewards Visa Signature, from 1.5 percent to 2.5 percent.

Other key findings:

  • Cash back cards are essentially free. Only four out of 52 cards surveyed charge an annual fee. The higher rewards offered, the more likely cardholders are to pay up yearly. The Blue Cash Preferred card from American Express charges the highest fee, $95 per year, but offers 6 percent on supermarket purchases.
  • If a card restricts earnings, rewards are slowed, not stopped. Of the 17 cards that did have earnings restrictions – one-third of all surveyed – all but one drop earnings down to a lower percentage. This means cardholders will still be earning if they hit their spend limit in their favorite category – just at a lower rate.
  • It is rare for cash back rewards to expire. Eight cards of the 52 included in the survey had expiration dates. Cardholders, though, usually have plenty of time to spend them. Five of the eight cards with expiration dates give cardholders three to five years to spend the extra cash earned.
  • Customers must have excellent or good credit to get a cash back card. Of the 35 cards in the survey for whom a response was provided or could be found, 27 required above-average credit – more than 75 percent.
  • The annual interest rate is typically higher on cash back cards. Consumers who carry a balance on their cash back cards are going to pay, on average, about 18 percent APR – more than 3 percent more on interest than the national credit card average.

‘Set it and forget it’
More cash back cards are adopting simpler and easier-to-understand models so that customers can set it and forget it.

In the survey, more than half of all cards – 52 percent – offered a simple rate – either 1 percent, 1.5 percent or 2 percent – across all purchases. Whether cardholders are buying gas, food or clothes, their cash back earning remains the same, leaving them to simply redeem their rewards after spending with no other hassle. Often those rewards can be redeemed as a statement credit, with 43 of the 52 cards providing that as an option – more than 80 percent.

The other popular type of rewards was a tiered system in which certain purchases earned the cardholder more money. Of the surveyed cards, 22 of them (42 percent) had some form of tiered system.

These cards require customers to consider their purchases before signing up, offering a larger percentage cash back for groceries, dining or gas depending on which card is chosen. But after signing up for a card that matches what they spend the most on, there is no rotating categories or extra sign ups on the tiered cards, typically.

However, the rewards benefit usually end up evening out to about the same as those without tiers for many consumers, Niestat said.

“The richest end of the cash rewards is sort of in the 1.5 percent to 2 percent range,” Neistat said. “Some of the cards play with something that averages out in that range by giving something super high – 3 times that amount – in certain categories which may rotate. More and more banks have moved away from that model, and are moving into sort of straight-across-the-board cash back at a certain level.”

Earning restrictions
Another factor to pay attention to, especially on tiered programs, is earning restrictions, which 17 cards out of all 52 surveyed had as a part of their program. It could make the difference between a good card and a great card for certain spenders.

If a card offers a big percentage in certain spending categories, it is likely after a certain point, those rewards will slow – 16 out of the 17 cards with restrictions do.

For example, BankAmericard Cash Rewards cardholders earn 3 percent rewards on gas station purchases. However, once a cardholder spends $2,500 at gas stations in a quarter, those rewards slow down, earning only 1 percent.

“Learn the programs – you got to match it up. The more you educate yourself about the deal you're getting into, the better off you'll be,” said Gaston Kroub, a lawyer who has worked with and written about rewards credit cards for Kroub, Silbersher & Kolmykov, a New York City-based law firm.

Kroub’s advice for making sure your restrictions fit your spending is to do a credit card audit every six months to a year. While it may not be advisable to close a card because it could adversely affect credit scores, issuers may convert a credit line to something a little more fitting.

“Ask yourself, ‘Do I need these cards or should I look to swap to something else that your bank offers?’” Kroub said. “See what cards you're using and see what cards you're not using. It can't be beneficial to you if you don't use it."

Methodology
The Cash Back Credit Card Survey of 52 U.S. credit cards was conducted in May 2017 by CreditCards.com. The 52-card pool is every credit card marketed as a cash back card from the 40 largest issuing banks nationwide. Information was gathered by cards’ terms and condition documents, any publicly available cardholder agreements and responses from issuers.

See related: 7 ways you can lose credit card rewards pointsRewards cards draw a surge of complaints to CFPB


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Updated: 10-18-2017

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


ADVERTISEMENT