What does cash back mean?
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® Cash Back, offers 5% cash back on rotating categories up to the quarterly maximum each time you activate, and 1% unlimited cash back automatically 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.
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.
What credit card gives the most cash back?
The Blue Cash Preferred® Card from American Express has one of the highest rewards rates of any cash back card: 6% cash back at U.S. supermarkets (up to $6,000 per year, then 1%). It also earns 3% cash back at U.S. gas stations and at select U.S. department stores, and 1% back on other purchases.
Three types of cash back cards
There are three types of cash back credit cards: flat-rate cash back cards, tiered cash back cards, and bonus category cards. Of the three, bonus category cards usually offer the highest rewards rates.
|Type of cash back card||How it works|
|Flat-rate cash back card||Earns unlimited, flat-rate rewards on all purchases (usually around 2%)|
|Tiered cash back card||Earns rewards in specific categories, often with a earning limit, and a lower rate (usually 1%) on all other purchases|
|Bonus category card||Earns high-rate rewards (some as much as 6%) on spending categories that change periodically, and a lower rate on all other purchases (usually 1%)|
Flat-rate cash-back cards. If you like keeping things simple, go with a flat-rate card. This type of cash back card earns unlimited rewards (usually 2%) on every dollar you spend on eligible purchases. It’ll take you longer to earn the same amount of rewards as a bonus category cash back card, but you have the flexibility of using whenever, and however you want.
Tiered cash-back cards. Tiered cash-back cards like the Blue Cash Preferred® Card from American Express are usually best for families that regularly shop for groceries or at department stores. The rewards are higher than flat-rate cards (usually from 3% to 6%), but usually accompanied with an earning limit. If you plan to spend more than the earning limit, consider whether you might be better off with a flat-rate card.
Bonus category cards. If you have the flexibility to adjust your purchasing habits every few months, a bonus category cash back card may be for you. Bonus categories rotate multiple times a year, usually every quarter, earning high-rate rewards on things like gas, groceries, and restaurants. Keeping track takes discipline, but the rewards rates are higher than with flat-rate cards — and the signup bonuses are often easy to earn.
Pros and cons of cash back credit cards
They’re easy to understand.
Not everyone will qualify credit-wise.
Easy to redeem cash back.
Chasing signup bonuses.
A wide range of bonus categories.
Tracking bonus categories.
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.
Does it make sense to pay an annual fee?
Applying for a credit card with an annual fee doesn’t always make sense. If your spending habits don’t align with its reward structure, you might net a loss — even if you earn the signup bonus.
For example, the Capital One® QuicksilverOne® Cash Rewards Credit Card earns a flat 1.5% cash back on every purchase. It also has a $39 annual fee. To recoup that fee, you need to spend $2,600 on eligible purchases with your card annually, or $216 a month. Only once you spend more will you begin to earn net rewards.
Can I get my interest rate lowered on my credit card?
Your credit card interest rate isn’t written in stone. In face, 69% of people who asked their issuer for a break got a lower rate.
If you pay your balance in full every month (which we highly recommend), interest rates don’t matter. But if you’re trying to pay down debt, asking for a lower rate could save a significant amount of money in the long run.
Before you call, look for better offers from other lenders that you can use as leverage. If you get a “no” the first time, don’t give up. Instead, ask to speak to a manager and try again.
Here are the best cash back credit cards of 2018
- Discover it® Cash Back: Best overall
- Blue Cash Preferred® Card from American Express: Best for families
- Capital One® Quicksilver® Card – 0% Intro APR for 15 Months: Best for fixed-rate cash back
- Chase Freedom®: High-reward bonus categories
- Chase Freedom Unlimited®: Best 0% intro APR