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10 cash back credit card mistakes you need to avoid

Learn how to get the most out of your card now


Signed up for a cash back card but not getting enough love? You might be making one of these common mistakes.

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More than half of American adults (59%) hold at least one cash back credit card, according to a 2021 survey from Bankrate.com.

But that same research reveals that we don’t always make the most of card rewards: Thirty-three percent of cardholders didn’t redeem any rewards in 2020.

Here are 10 common cash back mistakes to avoid – along with a few tips for squeezing every dollar from those rewards.

1. You’re not finding the card that best suits your lifestyle

“With cash back cards, there are so many flavors and options,” said Marc Bellanger, director of client marketing for Visa. And depending on your lifestyle and where you spend money, there may be a card where you earn more, he added.

The secret: Tally up how much you’re spending in various categories such as travel, dining, groceries, etc., said Julie Pukas, head of U.S. bankcard and merchant solutions for TD Bank. Her advice: “Really understand what you are really looking for and where you are spending.”

You can also maximize your cash back earnings by shifting (not increasing) some of your everyday spending to the right card. For example, if you spend a generous amount of your paycheck on groceries, maybe a card that offers an extra bonus for purchases at supermarkets is what you need. Conversely, if you don’t eat out much, a card that offers an extra bonus on restaurants might not be worth your attention.

And if you are willing to use your card everywhere but don’t want to spend time figuring out what card to use on every purchase, perhaps a flat-rate cash back card is the way to go.

The other factor in your equation: annual fees.

“Using a no-fee card is a win-win,” said Zach Honig, editor at large at The Points Guy. And some of the best cash back cards have no annual fee.

“Depending on your lifestyle, and where you spend money, there may be a card where you earn more,” Honig said.

2. You’re saving rewards for too long or not cashing them in strategically

There are definitely consumers who forget to redeem cash back – even though it’s often simpler than redeeming points or miles, Bellanger said.

“Redeeming often is probably a good thing to do.”

The one exception to the rule is when you’re saving rewards to cash them in on another (higher rate) card.

Expert tip: Some cards will let you trade your cash back rewards for points or miles on another of the same issuer’s cards.

For example, if you have a Chase Freedom Flex℠ or Chase Freedom Unlimited card, you accumulate cash back benefits worth about 1% to 5%.

But if you bank those rewards and redeem them for travel through Chase Ultimate Rewards with one of the Chase Sapphire cards, you can get an extra bonus worth 25% to 50% of your points.

So, if you plan to travel frequently after the pandemic, turning your cash back into points could help you score major rewards.

See related:Cash back vs. points

3. You’re neglecting to register for those quarterly bonus categories

While some cards offer extra bonuses on specific categories year-round, others increase your cash back in rotating categories – which change quarterly – if you register for them online each quarter.

In some cases, such as with certain Chase or Discover cards, this can quintuple your cash rewards.

“If you’re not activating those quarterly bonuses, that’s a mistake,” Honig said. It’s also a good time to note the new spending categories, so you’re using the card that gives the most for your purchases.

Easy hack: Add a reminder on your calendar to sign up for rotating categories every quarter.

4. You’re not using rebate coupons and shopping portals to boost cash back

The other mistake too many consumers make: Not using coupon apps (such as Ibotta), coupon codes and shopping portals (such as Rakuten and Upromise) to stack extra savings on top of cash back rewards, said Brian Preston, CFP, managing principal for Abound Wealth and host of The Money Guy Show podcast.

If you can pile up cash back bonuses, portal rebates and coupon codes, “that’s the trifecta,” Preston said.

“As a consumer, my advice is ‘don’t get star-struck’ by that [sign-up] bonus amount. Make sure the underlying value is going to be lucrative for you over the long term,” he added.

5. You’re dazzled by sign-up bonuses

“Most cash back cards have some kind of upfront bonus,” Bellanger said.

The average of these sign-up bonuses, which require you to meet a minimum spend usually during the first three months after opening the account, is about $150.

Those are a nice plus. But if you plan to use the card regularly for a few years, focus on the return rate you get for the things you want to buy instead, Bellanger said.

That way, long after you’ve redeemed that bonus, you’ll still have a card that’s rewarding you richly when you use it.

“As a consumer, my advice is ‘don’t get star-struck’ by that bonus amount,” Bellanger said. Instead, “make sure the underlying value is going to be lucrative for you over the long term.”

6. You’re ignoring spending caps

Some cards cap spending limits for cash back rewards. After you hit the cap you can still earn cash back, but at a lower rate, usually the minimum the card pays.

This means you’re wasting a chance to max out rewards for money you’re already spending.

Instead, aim for a cash back card that covers what you already spend (overall or in categories such as gas, groceries and dinners out), with a little room to spare.

Or, consider using multiple cards to maximize your cash back rewards.

For example, the Costco Anywhere Visa® Card by Citi offers 4% back on up to $7,000 in eligible gas purchases (then it’s 1%) every year. At $3 per gallon, that’s roughly 45 gallons a week – more than enough for several drivers.

7. You’re carelessly using cards for ‘autopay’

Using a cash back card for bills is a great way to hit spending thresholds and rack up cash rewards.

“Essentially, it’s a 2% off coupon,” Preston said.

But that doesn’t mean you have to put bills on autopilot, Honig said.

After frequently finding small erroneous charges on bills, Honig has learned that “it makes sense to review everything” – and use the cards to pay electronically without putting bills on automatic.

Also, if bills are larger than expected (and too much for your credit line), that autopay could max out your card. Or the payment could even be denied.

Any resulting penalty fees might also cancel any hard-earned cash back on your card.

Pro tip: If you still opt for autopay, review your statements on a regular basis. That will help you spot billing errors as soon as they occur.

8. You’re not avoiding foreign transaction fees

While many elite rewards cards have eliminated foreign transaction fees, some cash back cards still have them, Honig said.

Foreign transaction fees generally add 3% to your purchases made abroad, and you don’t have to be a high-flyer to get hit with them.

“If you make purchases [from websites or companies] outside the U.S., it’s something to keep an eye out for,” he pointed out.

Easy hack: If you plan to use your cash back card while traveling outside the U.S. or at foreign websites, consider signing up for a card that doesn’t charge foreign transaction fees.

9. Duh – you’re carrying a balance

“If you’re getting 2% [cash] back but paying interest, you’re negating any potential benefit from a cash back card,” Honig said.

About 40% of Americans don’t pay off card bills in full every month, according to the American Bankers Association.

That’s a losing game.

The average APR on cash back cards is about 1.3% monthly, so if your cash back card is paying 1%, you’re leaking money.

And if you’re getting 2%, you’re barely breaking even.

Want to get all the juice from your cash back card? Spend only what you can afford to pay each month.

If you need a card you can occasionally revolve, shop for one of our best 0% APR credit cards.

And if you’ve run up a balance you can’t pay, take the cash back card out of circulation, and consider putting those rewards toward your current balance.

10. You’re sticking with same-old, same-old

In the credit card business, new customers get the goodies – in the form of rich sign-up bonuses, promotional rates and generous perks.

While changing cards can be a pain, it’s often the only way to trade up. It’s also a good way to pick up the cards that will offer you the most when your spending habits change.

And switching cards doesn’t have to sink your credit as long as you do it correctly.

If you’re looking at switching cash back cards (and closing one), make sure you’ve cashed out all your rewards before you close the account.

See related: How cash back credit cards work

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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