What does cash back mean?
When you’re at the grocery store and the cashier asks if you’d like cash back, that typically means you can use your credit or debit card to receive actual cash, similar to an ATM. For instance, if you’re purchasing $30 in items and want $20 in cash, the cashier will ring your purchase up as $50 and hand you a $20 bill. However, with credit cards, cash back means something different.
Credit card cash back refers to the rewards program offered by certain credit cards that allows you to earn a percentage of “cash” back on your purchase. This usually ranges from 1-6%, depending on the card.
For instance, the top card on our list, the Discover it® Cashback Match™, offers 5% cash back on rotating categories, and 1% cash back on all other purchases. If you spent $1,500 at Amazon.com and Wholesale Clubs from October to December this year, you’d receive $75 in cash back. You receive this “cash” back as a statement credit on your bill rather than actual currency.
If you’re trying to receive cash from an ATM, bank teller, or convenience check with your credit card then that’s actually considered a cash advance. In those cases, you’ll need to contact your card’s customer service center to set up a PIN number. Once you have a PIN, you can withdraw money from your credit card as you would a debit card.
How do I redeem cash back?
Redemption options vary from card to card, but here are the most common methods for redeeming rewards:
- Bank Deposit. All the cash back that you earn goes straight into a checking or savings account.
- Statement Credit. This form of cash back is only applied to your credit card balance — you can’t spend it anywhere else.
- Gift Cards. Some credit cards offer cash back in the form of physical gift cards or eCertificates for popular retailers and merchants.
- Charitable Donations. Other cards offer you the opportunity to donate your earnings to charities and disaster relief programs.
What type of cash back card do I need?
All the top credit cards on our list use one of two rewards systems: rotating rewards categories or designated rewards categories. To determine which one offers the most earning potential, you need to evaluate your spending in a variety of common categories.
Maximizing each cash back category
Creating a single fixed scenario to judge these cards is next to impossible. Instead, let’s look at each card at a category level to examine the return you could get from the rewards program. The table below shows an overview of the best type of cash back card to get for each of the various purchases you might make.
|Type of purchase||Best cash back card type|
|Groceries||Designated category card|
|Gas (less than $6,000/year)||Rotating category card|
|Gas (more than $6,000/year)||Designated category card|
|Shopping||Rotating category card|
|Dining and entertainment||Rotating category card|
|Variety of purchases||Rotating category card|
|Household purchases||Designated category card|
A real-life spending scenario
Consider this: The Blue Cash Preferred® Card from American Express is one of the best choices for big-time shoppers because it offers a designated 6% rewards category for U.S. supermarkets (groceries) on up to $6,000 per year. It’s also a top card for U.S gas station purchases, as there is no cap on the 3% you can earn.
If you were to consistently spend $10,000 in purchases per year with the Blue Cash Preferred® Card from American Express in the card’s two best rewards categories ($6,000 on groceries at U.S. supermarkets and $4,000 on gas at U.S. gas stations) without spending anything at the standard 1% rate, your four-year earnings would look something like this:
Blue Cash Preferred® Card from American Express
|1 Year||2 Years||3 Years||4 Years|
With a rotating category card — even one that doesn’t have an annual fee — the earning potential is much lower for this spending arrangement because you’d probably only earn high-rate rewards on groceries for one quarter of the year.
Here are the best cash back credit cards of 2018
- Discover it® – Cashback Match™: Best overall
- Blue Cash Preferred® Card from American Express: Best for families
- Bank of America® Cash Rewards Credit Card: Great for Bank of America customers
- Capital One® Quicksilver® Cash Rewards Credit Card: Best for fixed-rate cash back
- Chase Freedom®: High-reward bonus categories
- Chase Freedom Unlimited®: Best 0% intro APR
- Capital One® QuicksilverOne® Cash Rewards Credit Card: Best for average credit