If you are looking for useful rewards that are flexible, cash-back credit cards are where you should start.
When you break it down, cash-back cards are the most simple type of reward out there. Simply put, you get money back for making purchases that you were going to make anyway. Sure, with other reward programs you can get miles, points, and other options - but that doesn't put cash back in your hand. Many cash back cardholders like to think of their rewards as discounts when they buy goods or services, and if used everyday, they can add up fast.
WalletGeek's Best Cash Back Card Picks
The Three Types Of Cash-Back Credit Cards:
With tiered cards, you earn a higher rate spending in certain categories. Gas and groceries are common and there is also usually a 1% cash-back reward on everything else. Some of these types of cards even give you the option to choose which categories earn you higher rewards.
Flat Rate –
Flat rate cards are a popular choice because you’re able to earn cash-back no matter what you buy on the card. 1.5% is a good percentage to shoot for. However, there are cards that give you 2% back and sometimes more.
Rotating Category –
These types of cash-back cards often offer higher rates, sometimes as high as 5% in certain categories. However, these categories often change, sometimes as frequently as every three months. There are usually 1% rewards on everything outside of the promoted categories. Usually, you have to activate your bonus categories online each quarter.
Common Bonus Categories:
With cash-back cards, you are going to see a variety of options for higher rewards on certain purchases. Usually, you can get higher rewards based on where you use the card rather than what you’re actually buying.
This could be a perfect option if you and your family eat out often. Fast-food restaurants, fine dining, and even pizza delivery places can count. Usually the entire bill, including gratuity, will count towards your rewards.
Many grocery chains reward you for the food and supplies you buy everyday. Cleaning supplies, food, gift cards, virtually anything that counts towards your cash-back reward. If you purchase a lot of groceries and have a larger household, you can really get a lot of cash back with this type of bonus.
Get rewards for the gas stations you already frequent. Whether you have a lengthy commute or you happen to own larger trucks or SUVs, this is a fantastic option for those who tend to fill up more.
Other bonus categories include streaming services like Netflix or Spotify, drugstores, home improvement stores, wholesale clubs, and even mobile wallet purchases. Rotating category cards sometimes give rewards for specific retailers like Amazon.
You may even earn higher rewards based on which retailers are in bonus categories. Decide what you spend the most on and go from there to determine which rewards are going to benefit you the most.
Comparing Cash Back Credit Cards
What do you actually spend your money on?
When it comes down to it, the best bonus category for you is going to be where you tend to spend the most money. Other bonus categories like streaming services aren’t going to give you as much bang for your back as the grocery, restaurant, or gas station options.
If you spend a larger amount in a specific category, consider the tiered or bonus category card. If you don’t really feel like remembering the categories, a flat-rate card may be best for you.
Other Things To Consider
Although rare, some of these cash-back cards will have an annual fee. The annual fee may even be worth it if you’re going to get higher cash-back rates for where you spend money the most. Do the math and see if the fee will offset the cash back you think you’ll receive.
Sign Up Bonus
Many cards will offer an incentive for signing up. Sometimes you will have to spend a certain amount of money to receive additional bonuses but they may be worth it.
Rules & Flexibility
Understanding the rules as to how you are going to get your cash-back rewards is critical. Some cash-back rewards cards will have caps or thresholds. Others may require you to earn a certain amount of rewards before you can actually use them. Rewards can also be issued to you in a variety of ways like a paper check, a bank transfer, or a lower payment on your next bill. Some may even allow you to transfer your rewards to specific gift cards or even to purchase merchandise.