IN THIS SERIES
Introduction to Cash Back Credit Cards

Westend61 / Getty Images

How to choose a cash back credit card

Cash back credit cards offer similar rewards, but not all in the same way

Summary

There are three main types of cash back cards from which to choose. Find out how they work and how to decide which card is for you.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

Getting ahead with a credit card may seem like a pipe dream, but there are plenty of people who rack up hundreds (or even thousands) in rewards without piling up debt. The key to maximizing cash back credit cards is simple – charge only planned purchases you can afford to pay off each month and never, ever carry a balance.

Cash back credit cards reward consumers with “free” cash back for each dollar they spend. This cash back is added to their rewards account when they use their credit card to pay for purchases, usually as a percentage of each dollar spent. Typically, cardholders can redeem their cash back for a check in the mail, statement credits to their account, gift cards and other options.

See related: How do cash back credit cards work?

Factors to consider when choosing a cash back credit card

If a cash back credit card seems like what you’re after, you still have some important decisions to make. The first one is deciding on the type of cash back credit card that might serve you best by considering these factors:

A flat-rate cash back credit card offers one rate of rewards on everything you buy. For example, a rewards credit card with a flat rate might offer 1.5% back or 2% back for each dollar spent, then offer the option to redeem for statement credits, a check in the mail, gift cards or more.Generally speaking, flat-rate cash back credit cards are best for people who don’t want to deal with rotating rewards categories or earning caps.

Rewards credit cards with fixed bonus categories offer a higher fixed rate of rewards in some categories and a standard rewards rate on everything else. For example, you might earn up to 6% back on grocery store purchases, or a higher-than-average rate on dining or transit. In the meantime, you would still earn a standard rate on everything else you buy, usually 1%. Fixed bonus category cards are best for people who spend a lot in specific categories and want to maximize their rewards as a result.

Cash back credit cards with rotating categories also offer a flat rate of rewards for each dollar you spend, usually 1% back. Typically, cards with rotating categories let you earn 5% back on up to $1,500 spent in specific categories each quarter when you activate, after which you earn 1% back. Also, note that some have other bonus categories in which you can maximize rewards throughout the year. Like other cash back credit cards, rotating bonus category cards tend to offer welcome bonuses, 0% APR offers or both.

How to choose the best cash back credit card

Since credit cards with cash back can be so different, consider what would work best for your spending habits by thinking long and hard about the following:

Spending habits

Your spending habits should play a significant role in the cash back credit cards you ultimately sign up for. If you happen to spend a lot of money in categories like dining out, groceries or gas station purchases each month, for example, it wouldn’t make sense to skip over cards that offer a lucrative rewards rate on this spending.

If you aren’t entirely sure which categories you spend the most in right now, it can help to track your spending for a few weeks to see where your money goes. If you use a credit card already, you can look over your statements to see which categories you tend to spend the most in.

Rewards rate

Even if you decide on a specific type of cash back credit card, you’ll find that some offer a better rewards rate than others. For example, there are flat-rate credit cards that only offer 1.5% in cash back for everything you buy, but you’ll also find cards that give you 2% back with no annual fee.

Obviously, you should focus on rewards credit cards that offer the highest rate of cash back possible, whether you’re looking for a card with a flat rate, bonus categories or rotating bonus categories. For example, you may find a card with bonus categories that make sense with your lifestyle, then still pick up a 2% cash back credit card to use for miscellaneous purchases and bills.

Rewards limits and caps

Also, note whether rewards credit cards you’re considering set limits on how much cash back you can earn. Some of them do, and these limits are worth tracking if you’re someone who spends a lot with plastic every month.

For example, credit cards that offer 5% back on up to $1,500 in spending each quarter only let you earn $75 in bonus cash in rotating categories every three months. This doesn’t mean they’re not useful; you just need to know the limits you’re dealing with and how they can impact your rewards over time.

Redemption options

Finally, you should figure out how you can redeem rewards with the cards you’re most interested in. While some cash back credit cards offer a plethora of rewards options, others only let you redeem your cash back for statement credits to your account.

There is no right or wrong answer here; your rewards redemptions should suit your personal preferences, and that’s all that matters. If you want some flexibility, look at cash back credit cards that let you redeem for at least two or three options including gift cards, travel, merchandise, cash back and statement credits.

Should you get multiple cash back credit cards?

First, know that you don’t have to limit yourself to just one. There are plenty of consumers who successfully manage multiple cash back credit cards, which they use to maximize rewards in different categories as well as on miscellaneous purchases. With the right credit combination, you can earn hundreds of dollars in rewards on everyday purchases – and easily double your cash back reward.

Bottom line

Cash back credit cards really do offer the prospect of “something for nothing,” but you’ll benefit only if you are disciplined enough to avoid debt. Make sure you have a plan in place to earn rewards responsibly, and that you have an idea of the type of card you want to sign up for.

With some research and planning, you can earn cash back in no time.

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.

Credit Card Rate Report
Reward
16.35%
Student
17.07%
Airline
16.04%
Business
14.59%
Cash Back
16.47%

Questions or comments?

Contact us

Editorial corrections policies

Learn more