Cash Back Credit Cards

According to a 2015 American Bankers Association survey, 51 percent of credit card customers prefer cash back credit cards over other varieties.


Cash back credit cards award you a percentage of the amount you spend on purchases as a refund. The more you spend with the card, the more cash back you receive.

Many cash back credit cards even offer more than one way to redeem cash back than merely as a refund deposited into the cardholder’s linked bank account. Many let you redeem your cash back rewards as a credit applied to the balance on your credit card statement.

Many also let you redeem your cash back in the form of gift cards or even as donations to your favorite charities.

Often, a credit card issuer will offer a more generous redemption rate for redeeming your cash back as a gift card or charitable donation than as actual cash or balance credit. However you choose to redeem your cash back rewards, there are many other factors to consider in choosing the right cash back credit card.
Remember that the key to making cash back credit cards work for you is to pay your bills on time, especially before any interest is charged. When you accrue late fees and interest charges on your credit card, it can quickly counterbalance any cash back reward benefit you may receive from the card.

Kinds of Cash Back Credit Cards

There are several different types of cash back credit cards to consider. Each one differs in how it rewards spending and varies in the rewards it gives and the valid spending categories.

Cash back credit cards also vary in whether the rewards are limited or unlimited.

  • Flat-rate cash back credit cards pay one reward rate on every purchase. With these cards, knowing exactly what reward you will get each time is simple. Often, the rewards on these cards are unlimited.
  • Tiered cash back credit cards pay varying reward rates, depending on the type of purchase. Cardholders may bet a higher cash back rate for certain purchases, like groceries, dining out and fuel. Sometimes, there will be a limit on how much you can earn in cash back rewards from the higher tier purchases.
  • Bonus category cash back credit cards are like tiered cards, except that the rewards rates are typically higher for certain purchase categories, and the bonus categories rotate on a recurring basis. Further, you must typically activate the bonus category each rotation period in order to accrue the bonus rewards. Often, these cards also offer an ongoing cash back reward at a much lower rate, like one percent, on all other spending categories.

Factors to Consider

When comparing cash back credit cards, there are several factors to consider. While you may naturally prioritize one or two factors over the others, be sure to at least examine each factor as it applies to any cash back credit card you are considering.

It is best to compare cash back cards of the same type, such as flat-rate or tiered.

  • Rewards – Is it better to get a two percent cash back reward on all purchases or five percent on certain purchases and one percent on all others? It depends, of course, on your spending habits. If the five percent reward is on movie tickets and you never go to the movies, then it is not much of a reward. If it is on groceries, however, consider how much you spend on groceries each month. Could you max out the benefit regularly? If so, how much of a reward will it bring you? Moreover, how much of your grocery spending will go unrewarded? Compare that against, for example, an unlimited one percent cash back rate on all purchases.
  • Fees – Some cash back credit cards charge an annual fee, but many do not. Therefore, if you consider a cash back card that charges such a fee, ask yourself what value you are getting from that card for the fee. Consider whether you can get the same rewards from another card that does not charge an annual fee.
  • Ease of redemption – In addition to how you can redeem your cash back from a cash back credit card, it is also useful to know how easy it is to do so. What are the procedures for cardholders to redeem cash back from different issuers? Is there a minimum cash balance that must first be reached? How long do you believe it will take for you to spend enough on the card to achieve the minimum? Can you only redeem rewards at certain times or for a limited number of times in a certain period? How long must you wait to receive your cash back reward after you request the redemption?

In addition to these factors, many cards will offer bonuses for new cardholders, such as a sign-up bonus and/or an introductory zero percent APR. These are nice incentives, but do not let them fool you into picking a card that is not the best one for you.

After you have considered all the other more pertinent factors and you are still left with more than one cash back credit card to choose from, you can then take bonus offers into account. When looking at sign-up bonuses, note the requirements for earning and redeeming the bonus to make sure they are reasonable and that you can realistically achieve them.

On introductory zero percent APRs, note how long the introductory interest rate lasts and, more importantly, what the interest rate becomes after the introductory period runs out.


A Multi-Card Cash Back Strategy

After reviewing all these factors, you may decide multiple cash back credit cards serve you best. For example, imagine one card offers five percent back on clothing purchases to a limit and one percent on everything else, while another offers two percent unlimited on all purchases.

If you buy a lot of clothes, perhaps even more than the cap on the higher rate card, you may want to use that card for all your clothing purchases (until reaching the cap, if you can).

Likewise, you can make all other purchases, including any clothing purchases beyond the cap, with the lower rate unlimited cash back card.

Some of the most popular credit cards that offer cash back options include:


  • Chase Freedom Unlimited.
  • U.S. Bank Cash+ Visa Signature Card.
  • Citi Bank Double Cash Card.
  • Discover IT Cash Back.
  • Capital One Quicksilver.
  • Blue Cash Preferred American Express.
  • Bank of America Cash Rewards Credit Card.

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