What Are the Different Types of Cash Back Credit Cards?

You can choose from three types of cash back credit cards: flat rate, tiered cash back and rotating category cards. Here’s what you need to know about the different kinds of cash back cards:

Flat-rate cash back cards. A flat-rate card pays the same amount of cash back on every purchase. You might earn 1.5% back on all spending, for example.

Your options for redeeming cash back rewards with flat-rate cards are statement credits, checks or bank deposits. Some cash back cards provide other ways to redeem rewards, such as travel bookings, gift cards or shopping deals.

Flat-rate cards to choose from include:

  • Citi Double Cash Card, which earns 1% when you make a purchase and 1% when you pay it off and offers a 0% intro APR on balance transfers for 18 months. After that, the variable APR will be 13.99%-23.99%, based on your creditworthiness.
  • Capital One Quicksilver Cash Rewards Credit Card, which pairs a flat cash back rate of 1.5% with a long 0% intro APR on purchases and balance transfers for 15 months; 16.49% to 26.49% (variable) APR after that; 3% fee on the amounts transferred within the first 15 months.

Tiered cash back cards. These cash back credit cards offer different cash back rates for different types of purchases. Most cards let you earn 1% to 6% back on eligible purchases. You might get 3% back on groceries, 2% at gas stations and 1% on all other purchases, for instance.

You could earn a lot of rewards if you select a card that fits your spending habits. But read the fine print because card categories may have dollar limits and other restrictions.

Tiered cash back cards to choose from include:

  • Chase Freedom Unlimited, which earns 5% cash back on travel purchases through Chase, 3% back at restaurants and drugstores, and 1.5% back on all other purchases.
  • Blue Cash Everyday Card from American Express, which offers 3% cash back on up to $6,000 in annual spending at U.S. supermarkets, then 1%, and 3% back at U.S. gas stations, on up to $6,000 per year, then 1%. The card allows you to redeem rewards as statement credits.

Rotating category cards. Several cash back credit cards have 5% bonus categories that rotate quarterly. Common categories include groceries, gas stations, home improvement stores, and even Amazon and Uber purchases.

Some caveats: You have to activate the bonus categories online every quarter or you won’t earn the bonus rewards. Also, you will need to track your spending because the 5% bonus categories have dollar limits.

Rotating category cards to choose from include:

  • Discover it Cash Back, which features 5% cash back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate.
  • Bank of America Customized Cash Rewards credit card, which allows you to pick a 3% cash back category monthly, plus earn 2% back on up to $2,500 in quarterly purchases at grocery stores and wholesale clubs. Other purchases receive 1% cash back, and you can boost your earnings by enrolling in Bank of America’s Preferred Rewards program.

How to Compare Cash Back Credit Cards

You might feel overwhelmed as you try to pick the right cash back credit card. Follow these steps to make comparing cash back cards easier:

1. Calculate your earning potential. You can earn rewards at different rates depending on what type of cash back card you use, where you make purchases and whether a category bonus applies. Analyze your spending, and then look for a credit card that earns bonus rewards in the categories where you spend the most.

  • Flat-rate cards: Generally, the rate is 1% to 2% for all purchases, although you may find a card promotion for a higher rate. A flat-rate card can be valuable if your spending is evenly spread across multiple categories or if you don’t want to track which credit card will earn the most for your purchases.
  • Tiered cash back cards: These credit cards offer different cash back rates on certain categories. Common bonus categories include travel, dining, gas, and grocery and department stores.
  • Rotating bonus category cards: Most have a base 1% cash back rate, along with bonus categories that change quarterly. The rotating categories typically offer 5% cash back, one of the highest cash back rates you’ll get on a credit card. But the categories almost always have limits on how much you can earn each quarter.

2. Factor in sign-up bonuses. A cash back card with a large sign-up bonus can certainly help boost your earnings, but you’ll need to know the spending requirement to receive it. If you can’t get the bonus without spending more than you normally would, then the card probably isn’t a good match for your wallet.

3. Subtract annual fees. Some cash back credit cards charge an annual fee, and the average fee is almost $110, according to U.S. News research.

Consider whether the card rewards and benefits will more than offset an annual fee. If they don’t, you likely will be better off with a no-fee card.

4. Understand cardholder benefits. Many credit card issuers and card networks offer benefits beyond a rewards program. Benefits could include free credit score access, extended warranty coverage, concierge service, travel accident insurance, purchase protection and price protection.

Chase Sapphire Preferred Card users, for example, can get trip cancellation and interruption insurance, extended warranty protection, and auto rental collision damage waiver coverage, among other benefits.

How to Maximize Your Cash Back Rewards

Here is how you can reap more cash back rewards without necessarily spending more on your cash back credit card:

  • Avoid carrying a balance. This is the No. 1 rule with any rewards credit card.
  • Step away from your cash back credit card if you start carrying a balance. Revolving balances can lead to paying more in interest than you earn in cash back. But the worst part? You could end up with credit card debt.
  • Choose a card that matches your spending habits. A rewards card with bonus categories that align with your normal spending can help boost your cash back earnings.
  • Look for a sign-up bonus you can achieve. Sign-up bonuses can be a great way to earn a lot of cash back quickly, but don’t spend money you wouldn’t have otherwise.
  • Earn extra cash back. Some cards offer a bonus for referring new cardholders or extra cash back for adding an authorized user.
  • Remember the cash back card’s other benefits. Your cash back credit card might offer purchase protection, extended warranty coverage or other perks.
  • Ask for a retention offer. Your issuer gives you this incentive to keep your card, but securing one could take some good old-fashioned negotiating. You might be able to get an annual fee waived or reduced, for example, but you will need to call the issuer and request it. The higher your credit score, the better your chance of success.

What Are the Pros and Cons of Cash Back Credit Cards?

Pros of Cash Back Rewards Cards:

  • Understanding your earnings is easy. Tracking how much you’ve earned in cash back rewards and what those rewards are worth is not hard. Generally, 1% back means you will get 1 cent for every dollar you spend.
  • Redeeming cash back rewards is simple. Your card might require you to have a certain amount of rewards – say $25 – before you can redeem them.
  • Having a range of bonus categories provides many chances for rewards. Some cards pay the highest cash back rate when you make particular purchases. With certain cards, bonus categories change throughout the year, giving you different opportunities to earn extra rewards.
  • Referring friends could get you sign-up bonuses. Cash back credit cards may offer sign-up bonuses ranging from $100 to several hundreds of dollars. You might also be able to receive extra cash back by adding an authorized user to your account or for referring friends who become cardholders.
  • Using cardholder benefits adds extra value. These are not exclusive to cash back cards but often include special event access, zero fraud liability, extended warranty coverage, purchase protection, rental car insurance, roadside dispatch service and lost luggage reimbursement.

Cons of Cash Back Rewards Cards:

  • Good to excellent credit requirements. The best cash back credit cards generally require a good to excellent credit score, which is a FICO score of at least 670.
  • Sign-up bonus requirements. If you want to earn a sign-up bonus, then you will have to meet a spending requirement. The spending requirement varies by card but ranges from about $500 to a few thousand dollars, and you’ll usually have to accomplish this within three months of opening an account. But don’t increase your spending just to get the sign-up bonus. If you can’t meet the requirements within the bounds of your normal spending habits, then maybe this card isn’t the right one for you.
  • Monitoring bonus categories. If you want to earn the most cash back using a card with rotating categories, you will need to take time and effort to track the categories and their cash back rates.
  • Potentially less-valuable rewards than other cards. Your cash back card’s point value may be locked in at a certain level, which means you won’t have a chance to receive more value. This is different from co-branded airline and hotel cards that sometimes allow you to redeem points at different rates.
  • Fewer perks than other types of rewards credit cards. If travel deals and free checked bags appeal to you, then a travel credit card could be a better fit.
  • Fees. You might find that you’re spending more on annual fees than you’re earning in cash back rewards, depending on how you use a card. And if you think you might carry a balance, you could be better off with a plain lower-interest credit card. Carrying a balance with a rewards credit card can lead to credit card debt.

Is Cash Back From a Credit Card Taxable?

Credit card rewards, including cash back, are rarely taxable. As long as you spent your own money to earn them, credit card rewards are not considered taxable income by the IRS.

Does Cash Back Expire?

Check the terms and conditions of your account to see whether cash back rewards can expire and, if not, how you might lose them.

Many issuers let you keep rewards as long as your account is current. Check the fine print because this is not universal, and some may require you to use your rewards within a certain time frame.

Generally, try to redeem cash back often because inflation can cause it to lose value. If your points do not expire, be aware that you might risk losing them if your card is inactive for an extended time. You may also lose your rewards if you close your card.

Best Cards Summary

Chase Freedom Unlimited®

Why this is one of the best cash back credit cards: Chase Freedom Unlimited charges no annual fee. It earns 5% cash back on travel purchased through Chase Ultimate Rewards, 3% cash back on dining and drugstore purchases and 1.5% cash back on all other purchases. You can earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) – worth up to $300 cash back. See our full review.

Discover it® Cash Back

Why this is one of the best cash back credit cards: The Discover it Cash Back offers 5% cash back each quarter in rotating categories, such as Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate. All other purchases earn unlimited 1% cash back. There is no annual fee. At the end of your first year as a cardmember, Discover will match all the cash back you earned. See our full review.

Blue Cash Everyday® Card from American Express

Why this is one of the best cash back credit cards: The Blue Cash Everyday Card from American Express rewards you with cash back on day-to-day purchases. You’ll earn 3% cash back at U.S. supermarkets on up to the first $6,000 per year in purchases, then 1% back. Purchases at U.S. gas stations earn 3% Cash Back, on up to $6,000 per year, then 1%. New! 3% Cash Back on U.S. online retail purchases, on up to $6,000 per year, then 1%. Cardholders earn a $200 statement credit after you spend $2,000 in purchases on your new Card within the first 6 months. See our full review.

Discover it® chrome

Why this is one of the best cash back credit cards: This card caters to consumers who want to earn cash back on gas and dining purchases. You’ll earn 2% cash back at gas stations and restaurants on up to the first $1,000 in combined purchases quarterly. After that, you’ll earn 1% back, along with unlimited 1% cash back on all other purchases. There’s no annual fee and rewards never expire. See our full review.

Chase Freedom Flex℠

Why this is one of the best cash back credit cards: Chase Freedom Flex delivers 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. You’ll also earn 5% back on travel purchased through Chase, 3% back at drugstores and restaurants, including takeout and delivery, and 1% back on other purchases year-round. See our full review.

Citi Custom Cash℠ Card

Why this is one of the best cash back credit cards: The Citi Custom Cash Card earns five ThankYou Points per dollar on up to $500 spent in a category that can shift according to your spending habits each billing cycle. Eligible categories include restaurants, gas stations and grocery stores. Other spending earns one ThankYou Point per dollar. The card does not charge an annual fee, and new cardholders can earn points worth $200 in cash back if they spend $750 in the first three months with the card. See our full review.

U.S. Bank Cash+® Visa Signature® Card

Why this is one of the best cash back credit cards: With the U.S. Bank Cash+™ Visa Signature® Card, you earn 5% on the first $2,000 in combined eligible purchases each quarter in two categories of your choice. You also earn 5% cash back on prepaid air, hotel and car rentals booked directly in the Rewards Travel Center, and 2% on one everyday category, such as gas stations and EV charging stations, grocery stores, or restaurants. You get 1% on all other eligible purchases, plus earn a $200 rewards bonus after you apply online and spend $1,000 in eligible purchases within 120 days of opening the account. See our full review.

Amazon Rewards Visa Signature Card

Why this is one of the best cash back credit cards: The Amazon Rewards Visa Signature Card is a cash back rewards credit card designed for frequent shoppers of Amazon.com and Whole Foods Market. The card earns 3% cash back at Amazon.com and Whole Foods Market, 2% at drugstores, gas stations and restaurants and 1% on all other purchases. When the card is paired with an eligible Amazon Prime membership, cash back earnings at Amazon.com and Whole Foods Market increase to 5%. This card does not charge an annual fee. See our full review.

Bank of America® Customized Cash Rewards credit card

Why this is one of the best cash back credit cards: The Bank of America Customized Cash Rewards card lets you pick one category to earn 3% cash back, including online shopping or gas. Grocery store and wholesale club purchases get 2% back. You’ll also receive a $200 cash rewards bonus after spending $1,000 on the card in the first three months. See our full review.

American Express Cash Magnet® Card

Why this is one of the best cash back credit cards: This card might catch your eye if you want to earn unlimited cash back with an uncomplicated rewards structure. All purchases earn 1.5% cash back that you can redeem for statement credit, gift cards and merchandise. See our full review.

U.S. News Survey

U.S. News Survey: Half of Respondents Don’t Follow a Budget When Shopping

While personal finance experts recommend creating a budget to keep spending on track, a U.S. News survey found that only 25% of respondents have a budget that they stick to when they shop, and 50.2% of respondents don’t even make a budget in the first place.

Additional Survey Insights

Fortunately, 61.4% of respondents say they don’t have post-pandemic debt they are trying to pay off.

This could be because 56.1% of respondents say their spending habits didn’t change during the pandemic. Only 4.5% say their habits got worse.

Almost 40% of respondents say they practice retail therapy – going shopping to make themselves feel better.

Despite soaring unemployment and massive layoffs in 2020, only 14.2% of respondents say they are in a worse financial situation today.

For the people who do expect their spending to increase over the next three months, most plan to spend more on travel.

U.S. News Survey Methodology

  • U.S. News ran a nationwide survey through Google Surveys in May-June 2021.
  • The survey sample came from the general American population, and the survey was configured to be representative of this sample.
  • The survey asked 10 questions related to cash back credit cards.

Survey Results

U.S. News has been helping consumers make money decisions for decades. For our Best Cash Back Credit Cards list, we factor in overall satisfaction data, cash back earning rates, annual fees, APRs and sign-up bonus values. The satisfaction data is based on an annual nationwide survey.

Our top picks may earn a flat cash back rate for all types of purchases or a bonus rate when you spend in certain categories. Consider how you spend to determine which card would be the best one for you.

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By Richard

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