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How to get the most out of your cash back credit card

Whether you prefer bonus spending categories or flat-rate cash back, it pays to have a plan when using cash back credit cards


Cash back rewards are a great way to earn money on credit card spending. But not all cards are created equal, which is why you need to have a solid plan in place to earn the most rewards.

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When you think of rewards credit cards, the first thing that comes to mind is earning points and miles for travel.

While a first-class flight or free trip to an exotic locale is hard not to love, there are times when you might want to put some of that card spending back in your wallet. Cash back credit cards are a type of rewards credit card that offer just as much value, if not more, than travel rewards cards. Like any rewards credit card, there are ways to use cash back cards to maximize your earnings.

Here’s a look at how cash back credit cards work and strategies you can use to get the most out of them.

What is a cash back credit card?

A cash back credit card is a type of rewards credit card that allows you to earn rewards in the form of cash back. As you make purchases with your credit card, you’ll earn a percentage back for your spending. Then, you either receive a credit to your account automatically, or you can save up your cash back rewards for a bigger redemption.

How cash back rewards work

Cash back rewards are simple to understand and use. As you spend money on your cards, you’ll earn a percentage back. Cash back rewards cards typically fall into three categories:

  • Flat-rate cash back cards: Flat-rate cash back cards earn the same cash back percentage on all purchases, big and small, regardless of spending category. If you made a $1,400 purchase on a cash back card that earns a flat 2% cash back, you would earn back $28.
  • Tiered cash back cards: Tiered cash back cards earn different rates depending on the spending category. You could have a card that earns 5% cash back on travel, 3% cash back at restaurants or gas stations and then 1% cash back on everything else. Using this card type is great if most of your card spending lies in a few specific categories.
  • Rotating category cash back cards: Other cash back cards offer tiered bonus rates in spending categories that change quarterly. So, you could earn 5% cash back on purchases in Q1 and then only 1% cash back on the same purchases the rest of the year. You typically have to activate or choose spending categories with rotating category cards to earn bonus rewards rates.

Cards also offer different methods for redeeming cash back rewards. Some cards automatically disburse rewards earned at the end of each statement period, while others let you build them up over time.

How to get the most from your cash back card

There’s more to earning cash back rewards than just using your card, though that works too. Here are some ways to get the most cash back you can.

Have a plan

How you plan to use your cash back rewards is just as important as finding ways to earn more. Some cards limit redemptions to statement credits, but others offer additional ways to redeem, like deposits to a bank account or paper checks. Also, cash back rewards are good for more than just getting a rebate on past purchases. If your card allows it, you can save up cash back rewards long-term to cover a large purchase down the road. Perhaps the most lucrative strategy from a value perspective is to deposit your cash back credits in an investment account for long-term growth.

Evaluate your spending habits

Knowing how you typically spend your money will help you decide what cash back card works best for you. Look at your credit card statements for the past few months to determine where most of your card spending lies. Another option is to use a budgeting app that links to your credit card accounts to track spending. You need to understand where your money is going to maximize your rewards earning potential.

Find cards with high rates that match your spending

When tracking your spending, pinpoint the biggest areas and find cash back cards that match your purchasing habits. If you frequently eat out or order take out, a cash back card that earns higher rates for dining would make sense. The same goes for travel, fuel and other popular spending categories.

Use a flat-rate cash back card for other purchases

A flat-rate cash back card can help you take advantage of spending outside your most popular categories. Most cash back cards that offer bonus rates in specific categories only earn 1% cash back on other purchases. You can find better than that, though. In fact, a handful of flat-rate cash back cards now offer 2% on all purchases.

Take advantage of sign-up bonuses

One of the best ways to quickly earn cash back is a sign-up bonus. You can earn a ton of cash back rewards in one shot just by meeting a certain spending requirement (usually $1,000 or more over a period of three or six months). If you sign up for a cash back card with a sign-up bonus offer, try to hit that spending goal, but be careful not to take on a balance you can’t pay in full.

Pay attention to rewards earning limits

Some cards allow you to earn cash back rewards in specific categories up to a certain dollar amount annually. Other cards have quarterly limits that reset every three months. Know your card’s limitations in case it’s holding back your earning potential. If that’s the case, consider pairing it with another card that earns in the same categories or replace it with something better.

Find other ways to earn cash back

Most loyalty rewards programs have shopping portals to earn bonus cash back for online purchases at affiliated retailers. If you like to shop online, check your card’s shopping portal before making purchases to find any bonus cash back deals.

Cash back apps are another way to earn back money spent online. Using apps like Rakuten, Fetch Rewards, Ibotta, Capital One Shopping, Dosh and Honey can help you earn extra rewards and save money on purchases.

Use your cash back card responsibly

The best way to maximize your rewards is to pay your credit card bill in full each month. Leaving a balance on your card from month to month leads to costly interest charges that undercut your rewards earnings.

Also, stay within your spending limits. Earning cash back rewards is only worth it when you stay within your means and your budget. Avoid spending money you don’t have to earn bonus rewards.

Bottom line

The best cash back credit cards are the ones that align with your spending and earn you the most money back. They help you put money back in your pocket or pay for purchases you may not buy otherwise. Developing a solid rewards-earning plan will help you get the most from your cash back cards.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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