Posted on Leave a comment

The best cash back credit cards for October 2020 – CNET

Among the growing abundance of rewards credit cards available today, the best credit cards with cash back stand out for their simplicity. When you use a cash back card, the rewards you generate don’t need to be converted, transferred or strategically redeemed to maximize value — you simply get bonus cash as a deposit into a designated bank account or as a statement credit on your monthly bill.

Hassle-free, cash back rewards usually get automatically applied to your balance by credit card issuers after one or two billing cycles and — depending on your spending — can put a lot of money back in your wallet. Most consumers can earn anywhere from 2% to 5% overall using one of the best cards. So, if you spend $15,000 annually, that would translate to between $300 and $600 a year of cash back rewards.

The benefit of cash back cards is that they make it easy to earn rewards with less effort by getting a percentage of cash back when you spend in various categories, such as groceries, restaurants or gasoline. But some offer fewer rewards than certain reward credit cards, including those made specifically for travel.   

Read more: Best tax software for 2020: TurboTax, H&R Block, TaxSlayer and more  

To figure out which cards make sense for you, I’ve chosen eight high-value options from the crowded market. Some are no-fee, flat-rate credit cards that earn the same amount on all purchases. Some offer a sign-up bonus reward as well as cash back. Some are limited to specific spending categories (such as groceries, dining, gas, transit or travel) but have a higher rewards rate, while others charge an annual fee. I’ve also outlined important information for each card, including whether it has a transfer fee, bonus redemption thresholds and introductory APR. I also mention general credit requirements for eligibility.

I’ve organized the list by group, starting with the most straightforward cluster and ending with the ones with the most complicated reward structures.

To approximate the value of each card for an individual and assess which spending situations make sense for each, I used data from the Bureau of Labor Statistics’ Consumer Expenditure Survey.  

Best cash back credit cards

Card Best for Reward rates New member bonus
Chase Freedom Unlimited Best overall cash back card Unlimited 1.5% cash back on every purchase, 5% back on travel, 3% back on dining, 3% back on drugstore purchases $200 after spending $500 within the first three months
Citi Double Cash Card Best flat-rate card for higher spenders Unlimited 2% on every purchase (1% at purchase, 1% when you pay off the purchase), and 1% back on all other purchases $0
Wells Fargo Propel American Express Card Best no-fee category card Unlimited 3% cash back on dining, travel, transit and select streaming services, 1% back on all other purchases $200 after spending $1,000 within the first 3 months
Bank of America Cash Rewards Credit Card Best quarterly rewards card / best for online shopping 3% cash back in choice category (gas, dining, travel, online shopping, drug stores, home improvement/furnishings) and 2% back at grocery stores/wholesale clubs up to $2,500 per quarter, 1% back on all other purchases $200 after spending $1,000 within the first 90 days
Amazon Prime Rewards Visa Signature Card Best for Amazon and Whole Foods shoppers 5% on Amazon, Whole Foods; 2% at restaurants, gas stations, drugstores, 1% back on all other purchases $100 Amazon gift card upon approval
Apple Card Best for regular Apple shoppers, instant rewards and privacy 3% on Apple, Uber, Uber Eats, Nike, T-Mobile and Walgreens purchases as well as select gas stations, 2% on Apple Pay purchases, 1% back on all other purchases $0
Capital One Savor Cash Rewards Credit Card Best for dining and entertainment Unlimited 4% cash back on dining and entertainment, 2% at grocery stores, 1% back on all other purchases $300 after spending $3,000 within the first 3 months
Blue Cash Preferred from American Express Best for big grocery bills 6% cash back on groceries at US supermarkets up to $6,000 per year, then 1%. 6% on select US streaming services, 3% on transit and US gas stations, 1% back on all other purchases $250 after spending $1,000 within the first 3 months

The simplest: No-fee, flat-rate cards

Best overall cash back card

Chase

Reward rates: Unlimited 1.5% cash back on all purchases and 5% back on travel, 3% back on dining, 3% back on drugstore purchases
Annual fee: $0
New member bonus: $200
Bonus redemption threshold: $500 in first three months
Credit requirement: Good to Excellent
Intro APR: 0% on purchases and balance transfers (15 months)
APR for purchases: 16.49% to 25.24% variable
APR for balance transfers: 16.49% to 25.24% variable
Balance transfer fee: 5% (minimum of $5)

Most of the best cash back cards offer a simple, flat rate and no fees. Until recently, the Chase Freedom Unlimited card gave you all of that — a flat rate of 1.5% cash back on all purchases, without a spending limit, no annual fee and flexible redemption policies. In September 2020, however, Chase improved on that deal, adding a little bit of worthwhile complexity and ratcheting up the reward rates on travel (5%), dining (3%), and drugstore purchases (3%). While it’s no longer the simplest, we think it’s the best cash back card for most people.

Rewards details

The Chase Freedom Unlimited offers a $200 bonus if you spend $500 or more during your first three months — that’s one of the lowest bonus thresholds among the cards profiled here. New card members also get 5% cash back on grocery store purchases (up to $12,000) during the first year. Note that the 5% cash back on travel is only for trips booked through the company’s Chase Ultimate Rewards service. Though it offers a lower standard rate (1.5%) than the Citi Double Cash Card (up to 2.0%), we think that flat 1.5% rate plus the higher category spending rates make it the better card overall for most people. 

When to use this card

The Chase Freedom Unlimited delivers the goods whether it’s the only card in your wallet or used to supplement a specific category card, like a travel credit card, which may offer higher bonuses for a particular type of purchase. It can also be useful when paired with a card that earns Chase Ultimate Reward points, because you can convert your rewards into points, which can increase their value. Keep in mind that cards that offer higher rates on certain categories, like the Capital One Savor’s 4% for dining and entertainment, offer only 1% back on all other categories, so it pays to have that flat 1.5% cashback from the Freedom Unlimited for everyday purchases that don’t fall into your other card’s bonus categories.

Redemption details

You can redeem any amount of Chase points either as a statement credit on your bill, or as a direct deposit into your bank account. The redemption flexibility is a nice advantage over other cards that only allow redemptions at certain levels, like 2,500 reward points or $25.

Best flat-rate card for higher spenders

CitiBank

Reward rates: Unlimited 2% cash back on every purchase
Annual fee: $0
New member bonus: $0
Bonus redemption threshold: None
Credit requirement: Good to Excellent
Intro APR: 0% on balance transfers (18 months)
APR for purchases: 15.49% to 25.49% variable
APR for balance transfers: 15.49% to 25.49% variable
Balance transfer fee: 3% (minimum of $5)

Rewards details 

The Citi Double Cash Card is as simple as the Chase Freedom Unlimited, but it’s one of the few cards that doesn’t offer a sign-on bonus. The trade-off with the lack of a sign-on or welcome bonus is an above-average cash back rate.

When to use this card 

Like the Freedom Unlimited, the Citi Double Cash Card can be the only card in your wallet, or your preferred card for whenever you buy something outside of a bonus category.

Worth noting is that this card does have a 3% transaction fee for anytime you make a foreign transaction. It does offer a cash advance, but the fee is either $10 or 5% of each cash advance.

Redemption details

Citi’s rewards can be redeemed starting at $25 and come in the form of either a check or statement credit. One redemption distinction to note for the Citi Double Cash Card is that you get 1% back when you make a purchase, and the second 1% when you pay off your bill. Given that I recommend paying off your bill in full every month, I don’t place much importance on this split.

Getting strategic: No-fee ‘category’ cards

From this point on, we’re getting into the strategic territory, so I’ll be evaluating cards based on how and when you use them. All of the remaining cards have different cash back percentages based on the type of purchase, so different spending habits will net different results. While there may be a card or two that makes sense as your only card, most of these will be best when paired with other cash back cards so you’re not making too many purchases outside of a bonus category.

Best no-fee category card

Wells Fargo

Reward rates: Unlimited 3% cash back (3x points) on dining, travel, gas stations, transit and select streaming services, 1% (1x points) on everything else
Annual fee: $0
New member bonus: $200 (20,000 points)
Bonus redemption threshold: $1,000 in first three months
Credit Requirement: Good to Excellent
Intro APR: 0% on purchases and balance transfers (12 months)
APR for purchases: 14.49% to 24.99% variable
APR for balance transfers: 14.49% to 24.99% variable
Balance transfer fee: 3% (introductory, first 120 days), up to 5% (minimum of $5) after

Rewards details 

Wells Fargo Propel has the best combination of rewards rate (unlimited 3% or 3x points) and breadth of categories (dining, gas, transit, travel and streaming services). The cash bonus (20,000 points, which is equivalent to $200, after spending $1,000 in the first three months, worth a $200 cash redemption) is right in line with the $150-$200 industry standard. 

When to use this card 

Since the bonus categories aren’t rotating and the card covers a lot of ground, I recommend it paired with the Citi Double Cash Card or Chase Freedom Unlimited for non-bonus category spending. Remember that there’s little reason to log a purchase that only earns you 1% when no-fee 1.5% and 2% earners exist.

Redemption details

Propel’s cash rewards can be redeemed as either a deposit into a Wells Fargo account or as a statement credit. The minimum threshold for redemption is 2,500 points ($25).

Rewards comparison 

The closest card on the list to the Wells Fargo Propel is probably the Capital One Savor card, which earns 4% on dining and entertainment, 2% at grocery stores, 1% on everything else and charges a $95 annual fee. For the extra 1% to cover the $95 fee, you’d need to spend almost $800 monthly ($9,500 per year) on dining and entertainment. So unless you’re spending that much on dining and entertainment specifically, the Wells Fargo Propel is the better choice for a cash back rewards card.

Best category card/best for online shopping

Bank of America

Reward rates: 3% cash back in choice category (gas, dining, travel, online shopping, drug stores, home improvement/furnishings); 2% back at grocery stores/wholesale clubs up to $2,500 per quarter; 1% on everything else
Annual fee: $0
New member welcome bonus: $200
Bonus redemption threshold: $1,000 in first 90 days
Credit requirement: Good to Excellent
Intro APR: 0% on purchases and balance transfers (12 months)
APR for purchases: 13.99% to 23.99% variable
APR for balance transfers: 13.99% to 23.99% variable
Balance transfer fee: 3% (minimum of $10)

Rewards details 

The Bank of America Cash Rewards card is one of the “rotating bonus category” cards, meaning that the category that generates the 3% reward changes over the course of the year. However, unlike most other bonus cards that have set quarterly rotations or a rewards program, the Bank of America version lets you choose your category (up to once a calendar month) from a list of six: gas, online shopping, dining, travel, drug stores or home improvement and furnishings. 

When to use this card 

Given the flexibility of the rewards program, I recommend using this card to fill a gap in your spending strategy. If you have a flat-rate card, a card for groceries and one for dining and travel, but you spend over $100 a month shopping online, you can sign up for the Bank of America Cash Rewards card, choose “online shopping” and treat it as your online spending card. I use the online shopping category specifically because it’s less common than categories like gas or dining, but you can obviously pick the category that makes the most sense for your spending habits.

I don’t recommend this card if you’re doing a lot of overseas travel. It has a 3% foreign transaction fee.

Redemption details

You can redeem BankAmericard cash rewards for any amount at any time and have them deposited into a Bank of America or Merrill account, or redeem them as a statement credit. 

Rewards comparison

Other bonus category cards, like the Chase Freedom or Discover It Cash Back, rotate through three or four different categories over the course of the year, making it difficult to maximize rewards or pair the card with other cards. That makes the flexibility and choice of the Bank of America card stand out.

Tech cards

While Netflix doesn’t have a credit card (yet), most of the other FAANG group members have made significant efforts in recent years to channel payments through their systems. Facebook is going the cryptocurrency route, Google Pay is a thing and now both Amazon and Apple have their own cash back credit cards. Even Verizon is getting into the credit card game.

Best for Amazon and Whole Foods shoppers

Amazon

Reward rates: 5% on Amazon, Whole Foods; 2% at restaurants, gas stations, drugstores; 1% on everything else
Annual fee: $0
New member bonus: $100 Amazon Gift Card
Bonus redemption threshold: Card approval
Credit requirement: Fair
Intro APR: None
APR for purchases: 15.74% to 23.74% variable
APR for balance transfers: 15.74% to 23.74% variable
Balance transfer fee: 5% (minimum of $5)

This card is a must-have for anyone who shops regularly on Amazon. I’m not even going to offer a minimum recommended threshold as there’s no downside and few other cards offer Amazon-specific discounts.

Rewards details 

Given that you can buy just about anything on Amazon, 5% back on the popular online retailer is pretty sweet. The card also throws in 2% at restaurants, gas stations and drug stores, plus 1% on all other everyday purchases. While Amazon offers a basic, non-Prime member card with 3% back on Amazon purchases, I’m focusing on the Prime rewards card since I assume that if you’re making a significant amount of purchases each month (over $250) at Amazon or Whole Foods, you’re most likely a Prime member.

When to use this card 

If you shop a ton at Amazon and Whole Foods and most of the rest of your spending is at restaurants and on gas, the Amazon Prime Rewards card could be your only cash back card. Outside of that specific spending profile, though, I recommend using this card like the others — as a supplement to a flat-rate card to earn cash for Amazon and Whole Foods purchases. 

Redemption details

You can redeem points at checkout while shopping on Amazon for any amount, or redeem them as a statement credit through Chase starting at 2,000 points ($20). Note that Amazon encourages the Amazon redemption option (obviously) and doesn’t mention cash, but it is in fact a no-fee option that can be redeemed at the same rate.

Rewards comparison

The only other card you might want to use for Amazon purchases is the Bank of America Cash Rewards card, which offers 3% back on online shopping (if you select that bonus category that quarter) and includes Amazon and a bunch of other online retailers. The percentage is 2% less than Amazon’s card, but if you shop at a variety of online retailers, this could make more sense. With some quick math, you’ll see that if more than half of your online shopping is non-Amazon, the Bank of America Cash Rewards card reaps the most rewards. Alternatively, to get the most cash back, sign up for both no-fee cards and use the Bank of America version for non-Amazon shopping. 

Best for regular Apple shoppers, instant rewards and privacy

Apple

Reward rates: 3% on Apple, Uber and Walgreens purchases; 2% on Apple Pay purchases; 1% on everything else
Annual fee: $0
New member bonus: $0
Bonus redemption threshold: None
Credit requirement: Fair
Intro APR: None
APR for purchases: 12.49% to 23.49% variable
APR for balance transfers: Not offered
Balance transfer fee: Not offered

Rewards details

The Apple Card has a unique rewards program structure, offering 3% on Apple, Uber and Walgreens purchases (an eclectic combination of categories to say the least), 2% on purchases made with Apple Pay and 1% on everything else. Unless you’re an Apple super shopper and everyday Uber user, the 3% category isn’t going to stand out much. Plus, having to use Apple Pay to hit 2% compares poorly with the Citi Double Cash Card, which offers up to 2% on everything, no matter how you pay. There are some advantages to Apple’s card, though.

Other benefits

The Apple Card’s privacy policy states that it will “never share or sell your data to third parties for marketing or advertising,” a significant gesture for those concerned with their personal data. The Apple Card’s reward structure is also distinct in that the cash back appears immediately in your account, hitting your balance at the end of each day. So if you can’t wait a month or two to redeem points and another four to five days for a statement credit to post to your account, the Apple Card’s instant rewards could be appealing. 

When to use this card 

If the primary 3% category (Apple, Uber and Walgreens) applies to a lot of your purchases, this is a good cash back option. But, the 2% for Apple Pay is a little flimsy given not all retailers accept Apple Pay, while the Citi Double Cash Card offers up to 2% no matter what. This card is primarily for those who are interested in the card’s privacy policy and instant rewards. 

Finally, I should point out that Apple has made a big deal out of the low APR and lack of fees for things like late payments, but given our operating assumption that you’re paying off your balance every month on time anyway, I see that as less of a differentiating factor. Note that the Apple Card doesn’t report credit activity to all three major credit bureaus (only TransUnion), so if you’re trying to build your credit score, it will have less of an impact. 

High-yield, annual fee ‘category’ cards

Ah, now we’re getting deep into each cash back credit card. These two cards will rarely be your one-and-only cards, unless your overall spending is heavily tilted toward one category. However, they can get you 2% to 4% extra on certain categories, making them worth the annual fee if you hit certain spending thresholds in those categories. 

With a $95 annual fee for each card, you need to be a little more circumspect when deciding if a card is worth it. Usually, having extra cards in your wallet carries little downside (unless you’re not paying them off each month) and even helps your credit score by increasing your total available credit. But with these fee cards, you’re charged the $95 every year regardless of how much you use it, so take a beat to ensure it makes sense before applying. 

I recommend two in this category: The Capital One Savor card, which is great for dining and entertainment and the Blue Cash Preferred card from American Express for groceries. Both offer a decent sign-on bonus ($250 and $300, respectively), but the Blue Cash Preferred threshold is much easier to hit ($1,000 in spending in the first three months, vs. $3,000 in spending in the first three months for the Savor). 

Best for big grocery shoppers

American Express

Reward rates: 6% cash back on groceries at US supermarkets up to $6,000/year (less than 1%). 6% on select US streaming services, 3% on transit and US gas stations, 1% on everything else
Annual fee: $95
New member bonus: $250
Bonus redemption threshold: $1,000 in first three months
Credit requirement: Good to Excellent
Intro APR: 0% on purchases and balance transfers (12 months)
APR for purchases: 13.99% to 24.99% variable
APR for balance transfers: 13.99% to 24.99% variable
Balance transfer fee: 5% (minimum of $10)

Rewards details

The headline rate is the 6% at US supermarkets, with a cap limit of $6,000 annually, after which the rate goes to 1%. If you’re hitting the limit, that 6% will reward you with $360 per year. The rewards cap is a little annoying, but given that it works out to $500 per month on groceries, it usually won’t come into play unless you’re a family of three or more. The Blue Cash Preferred card also offers 6% back on streaming services, but with most Americans maxing out at about $40-50 per month on select US streaming services (and many spend less than that), that part of the reward only amounts to around $35 of annual value. 

For most, the $250 bonus threshold is very easy to hit, so you can basically count it as a sure thing. But, unlike the Capital One Savor’s current offer, the annual fee isn’t waived for the first year.

When to use this card

Given the very generous 6% cash back rate, you only need to spend about $140 per month on US supermarket purchases to make up for the fee and about $200 per month to earn the same amount of rewards as you would with a 2% cash back card. So if you spend more than $200 per month on groceries and streaming subscriptions, this becomes a profitable card. The real sweet spot is between about $350 and $500 monthly grocery spend, where you’re maxing out that 6%. 

I should also note that there’s a no-fee version of the Blue Cash card, called Blue Cash Everyday. But considering the bonus difference ($250 for Preferred vs $175 for Everyday) and the huge cash back difference (6% at US supermarkets vs. 3%, respectively), I was hard-pressed to find many situations where the free card would be better.

Redemption details

You can redeem AmEx points only as statement credits, with no option to redeem them for travel, gift cards or deposits into a checking account. The minimum threshold for a redemption is $25. 

Best for dining and entertainment

Capital One

Reward rates: Unlimited 4% cash back on dining and entertainment, 2% at grocery stores, 1% on all other purchases
Annual fee: $95 (waived first year)
New member bonus: $300
Bonus redemption threshold: $3,000 in first 3 months
Credit requirement: Good to Excellent
Intro APR: None
APR for purchases: 15.99% to 24.99% variable
APR for balance transfers: 15.99% to 24.99% variable
Balance transfer fee: None (“3% of the amount of each transferred balance that posts to your account at a promotional APR that we may offer you.”)

Rewards details

The $300 bonus is a nice incentive to sign up and effectively cancels out the annual fee for the first three years. But keep in mind that the $3,000 bonus threshold is fairly high, so you might need to use the card for non-bonus category spending in those initial months to make sure you hit it. You’ll be sacrificing a few percentage points of rewards from other cards, but it’s worth it to make sure you don’t forgo $300 — just do the math to ensure it makes sense.

The Savor card’s headline rate is the 4% you get on dining and entertainment, which includes bars and restaurants for dining and “tickets to a movie, play, concert, sporting event, tourist attraction, theme park, aquarium, zoo, dance club, pool hall or bowling alley” for entertainment. If you’re like most American consumers who spend more on dining than entertainment, then note the emphasis on that part of the bonus. 

When to use this card

This card makes sense if you’re spending more than about $300 per month on dining and entertainment. If that’s the case, I recommend only putting those purchases on it. There’s no reason to take the 1% penalty on nondining and entertainment purchases. For those, use your 1.5% or 2% card. 

Redemption details

You can redeem your Capital One Savor points in the form of a statement credit or as a check, at any amount (no minimum thresholds or maximum earning caps). 

How we picked the best cash back credit cards

To determine the best cash back credit cards, we researched 18 popular cards and looked for those that offer the best overall financial value. This means we look at net overall value for each rewards credit card, rather than prioritizing perks or offers that quickly lose value after the initial sign-up. In the end, the rewards credit card with the largest sign-on offer will not always be deemed the best card. 

We prioritized the cash back credit cards that reward broad spending categories where Americans tend to spend significant amounts of money (like dining, travel and grocery shopping), instead of narrow categories like streaming services or “home improvement.” Then we compared reward offerings with potential returns based on hypothetical spending budgets. Those hypothetical budgets are based primarily on the Bureau of Labor Statistics’ Consumer Expenditure Survey, with several members of the CNET staff’s subjective input, as well. These evaluations are visualized in the form of graphs throughout our list.

How do cash back credit cards work?

Cash back credit cards offer cardholders rewards on their spending in the form of statement credits or cash. A statement credit is a reduction in the amount due to the credit card company on your monthly bill. Note that rewards are not always available the month you earn them — they are usually applied to your balance by credit card issuers after one or two billing cycles.

The redemption process for cash back credit cards is either automatic or very simple. Some cards, like the Bank of America Cash Rewards card, automatically apply cash rewards to your statement balance each month. Others, like the Wells Fargo Propel card, require you to log in and redeem available Go Far Rewards points for statement credits. Most points don’t expire, but you will lose them if you close the account before redeeming them. Some, like Citi, expire only after one year of account inactivity. 

Cash back credit cards generally fall into four primary categories: flat-rate, tiered, rotating or choose your own. 

Flat-rate cards offer the same rate for every purchase. Those are cards like the Citi Double Cash, which offers 2% back on every purchase or the Chase Freedom Unlimited, which offers 1.5% back on every purchase. 

Tiered cards offer different rewards rates for different categories of spending. One example is the Amazon Prime Rewards credit card, which offers 5% back on Amazon and Whole Foods purchases, 2% at restaurants, drug stores and gas stations, and 1% on everything else. 

Rotating category cards offer different rewards each quarter, determined by the card issuer. Choose-your-own category cards allow you to choose your rewards category, like the Bank of America Cash Rewards card, which offers 3% back on the category of your choice, 2% back on groceries and 1% on everything else. 

Should you get a cash back credit card?

We recommend cash back credit cards for everyone. Given that even the best cards don’t charge an annual fee, most of them offer a sign-up bonus and the redemption process is very simple, there are essentially no downsides to holding a cash back credit card. 

The principal drawbacks are paying interest on a statement balance (which we strongly advise against) and being compelled to increase your spending due to the rewards structure. Studies have shown that when paying with a credit card, consumers tend to spend substantially more than when paying with cash, up to 83% more in some cases. This is why it’s important to carefully monitor whether or not you’re spending more when you use a credit card. If you spend 50% more on dining after getting 4% cash back on a dining credit card, you’re ultimately not doing yourself any good.

Cash back credit cards are also ideal for those who want just one type of rewards card versus many. For instance, one of the flat-rate credit cards, like the Citi Double Cash card or the Chase Freedom Unlimited, would serve you well as the only credit card in your wallet. On the contrary, if you’re OK with paying multiple bills and using different cards for different purchases, cash back cards are complementary to other types of rewards cards. Say you have a travel rewards credit card, for example, that gives you 5x points on flights. You can use that card for your flight reservations, and your flat-rate cash back card for everything else.

How to choose a cash back credit card

To choose the right cash back credit card, the most important thing is to have a clear idea of how you’re already spending money each month. We recommend you chart your spending over the past three to six months and break out expenditures into categories, such as dining, groceries and gas. (Budgeting sites like Mint — or even your current bank — do this tracking automatically). Once you identify the categories in which you have the highest, most consistent spending, use the charts in our list to determine which card will net you the highest return. Then, after signing up for a credit card, compare your spending across the same time period with the period before having the credit card. If you notice discrepancies, especially large ones, consider using cash for those purchases or simply take note of how you used to spend and match it up. 

Only after you determine which card has the best reward rate for your categories should you take a look at the additional perks and offers, like sign-on bonuses, foreign transaction fees or rental car coverage, and determine which — if any — of them apply to you and how important they are. Some might seem valuable but not actually save you any money, like a card that doesn’t charge foreign transaction fees when you never travel abroad. 

Annual percentage rates determine the amount of interest you’ll pay over the course of the year on any balance you keep on your credit card. Given that our advice is to use your rewards credit card in place of cash and to never carry a balance, APRs are the least influential factor. Most credit cards offer a variable APR in the 15% to 25% range depending on the card and your particular credit score. Compared to reward rates, those numbers are high. Like 5 to 10 times higher than average rewards rates. If you maintain a balance on your credit card statement, you’re erasing those rewards and then some, which is why we recommend paying off your balance in full each month.

However, 55% of Americans don’t pay off the balance of their credit card every month. If you have any trouble paying off your credit card bill each month, prioritize that before all else. Only after you’ve relieved yourself of debt and no longer pay interest fees should you consider a rewards card. 

Your credit card choice may also be affected by your credit score. Most of the cards we recommend require a good or excellent credit score, which is typically around 650 or higher. If you don’t meet the credit criteria required, there are credit cards available that are specifically for those trying to rebuild credit, like secured credit cards.

How to maximize cash back rewards

The most important strategy for maximizing cash back rewards might be surprising: don’t overspend. Once you start earning points and bonuses and rewards for spending, you may be tempted to try to rack up your rewards, but that will get you further away from your financial goals, not closer. Cash back rewards are a great way to earn a little money back on current spending, but as soon as you spend more than you normally would just to get rewards, the net value will be negative. One way to avoid overspending is by using a budgeting app that keeps you honest, like You Need A Budget

The second tip is to never miss a payment. If you have to pay a late payment fee or an interest payment for an outstanding balance, your losses will eclipse your rewards very quickly. We recommend paying off your credit card bill twice a month to be safe, or opting into automatic payments.

Finally, to maximize cash back rewards, consider adding two or three different credit card offers to your wallet. Cards often target just one or two categories, so you may need to enlist several cards to maximize the returns on your spending. That being said, you also need to factor in the time and energy you spend on credit card rewards. At a certain point, the perfect strategy may be too time-consuming and stressful.

Different types of credit cards to consider

Cash back credit cards are good for the majority of consumers, but there are also other types of rewards credit cards to consider. Travel rewards credit cards, for example, are great for those who travel often or who want to upgrade their travel experience with perks like airline lounge access or upgrades. Travel credit cards reward cardholders with points or miles, like Chase’s Ultimate Rewards points or American Express’ Membership Rewards points, that can be redeemed for travel purchases. 

For those who need to build or rebuild their credit score, secured credit cards and student credit cards are the best options. While many cash back and travel rewards cards require good to excellent credit, these other types of cards help those with lower scores build your credit over time. Secured credit cards require an up-front deposit in the amount of the credit line, so you’re basically making a loan to the bank in exchange for credit history. Student cards are designed to help young people without a credit history build credit for the first time. Both usually come with a low credit limit and higher likelihood of approval.

There are also “club” credit cards that are only available to people who are members of a credit union, brokerage, or other type of membership club. Those include credit union credit cards like the Alliant CU Visa, retail cards like the Costco credit card, the Target RedCard and the Sam’s Club MasterCard, or the Fidelity cash back credit cards for Fidelity account holders. 

Finally, business credit cards, like the Chase Ink Business line of cards or the Business Platinum Card from American Express, are for small businesses and even contractors and freelancers and geared toward logging business expenses. A business credit card will usually offer rewards for categories such as internet and phone bill expenses, office supplies and other business-related purchases.

More personal finance advice

Disclaimer: The information included in this article, including program features, program fees and credits available through credit cards to apply to such programs, may change from time to time and are presented without warranty. When evaluating offers, please check the credit card provider’s website and review its terms and conditions for the most current offers and information. Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.

The comments on this article are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved, or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

Leave a Reply