Cash Back Credit Cards and How to Use Them
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Cash back credit cards offer customers a percentage of their purchases back on certain qualifying purchases. Cash back options vary from one credit card issuer to another; some offer a flat percentage on all purchases, and others offer higher cash back rates on certain types of purchases in more popular spending categories, like gas, groceries, and so on.
Some credit cards reward their customers with points they can use in the same category. For example, a travel credit card may reward you with points that you can redeem for access to airport lounges, more miles, flights, hotel stays, and so on, depending on how you decide to use the points. On the other hand, cash back credit cards offer you a fixed cash value that you can, later on, redeem in the form of online purchases, statement credits, gift cards, and more.
Before choosing a credit card, there are a few things that you need to know and keep in mind. In this article, we will guide you through finding the best cash back credit card to fit your needs.
A credit card that offers cash back means that the issuer offers the cardholder a fixed percentage of cash value to be rewarded every time they make a qualifying purchase. So, for example, if a credit card offers 2 percent cash back, this means that for every dollar you spend, you get 2 cents back. And even though this may sound so little to you, every penny counts; this is because your cash back rewards will keep adding up and snowballing, especially on your everyday spending card, and your cash value will make a difference.
Some credit cards offer more on certain types of purchases; for example, some offer 2 percent on general purchases and 3 percent on grocery shopping. And since grocery shopping is the most common type of shopping, you will benefit from this the most. Let’s say your card offers 3 percent cash back on every purchase at qualifying supermarkets; if you spend $300 for groceries every month (that is $3,600 per year), you will get back $9 per month ($108 per year).
Your cash back rewards will be stored on your credit card account for as long as you want them to be and up until you decide to redeem them. When you decide to redeem your cash, you can do so in multiple ways; many people like to redeem their cash back rewards as statement credits. This is especially helpful as it would help you reduce the amount that you owe on your credit card statement.
Some credit cards offer more options for redeeming cash back rewards; you may be able to redeem cash back for PayPal or Amazon purchases. And it gets better; in some cases, you can even request to redeem your cash back rewards as a gift card or even in the form of a mailed check.
What makes cash back credit cards a great option for everyone is that no matter how you choose to redeem your cash value, your cash back rewards will most likely stay constant. And in addition to all of that, some credit card issuers offer even higher cash back values for certain redemption options.
Earning and redeeming cash back depends on the card issuer and the type of card you choose. As mentioned before, some credit cards offer cash back rewards in a flat percentage on all purchases; other credit cards offer higher rates of cash back on some more popular purchases, including gas, groceries, dining, travel, and so on. The third type offers a different rewarding program; these cards rotate their highest-earning cash back categories every quarter. Even better, some allow you to choose and change your bonus category to your liking; this way, you can choose the category where you spend the most so you can get back more cash.
So, if you want to understand how to earn cash back on your credit card, you need to start by understanding your issuer’s rewarding system. This means that you need to know whether your credit card offers flat-rate cash back, a bonus category, or if it is dynamic and either rotates the categories or allows you to choose the bonus category. According to this, you will know how to earn your cash.
Once you have accumulated a good enough balance from your cash back rewards, there are many ways in which you can make use of that cash. One of the most common ways to use one’s cash back balance is to redeem it for online shopping, gift cards, or statement credits. Another good option that you might find in some credit cards is to deposit your cash back balance into your bank account directly. You can also choose to use the money to make a charitable donation.
In some cases, the issuer may allow you to use your cash back money to book travel through their own online portal. And as mentioned before, sometimes you might be able to use your balance on PayPal or Amazon (or other online stores) to pay a part of your purchases.
So before getting a credit card, you need to understand all the ways your credit card issuer offers for redeeming your earned points; this way, you will be able to choose the one that fits your needs the most.
The options for cash back credit cards are many, so we have studied them to find the best ones and give you the answer to make things easier for you.
1. The Blue Cash EveryDay® Card from American Express
2. Chase Freedom Flex℠
3. The Citi® Double Cash Credit Card
American Express is the biggest credit card issuer internationally. It offers credit cards that have no limit on the amount of cashback that you can earn.
American Express’ best cash-back card is The Blue Cash EveryDay® Card:
- This card offers a promo period with an introductory 0% APR on all purchases made within the first 15 months from account opening. After the promo period, you get an ongoing variable APR of 18.99% to 29.99%.
- As an introductory bonus, you also earn a $200 statement credit after using your card to spend $2,000 in purchases within the first six months of account opening.
- You get 3% cash back at U.S. supermarkets on purchases up to $6,000 spent per year. After that, you get 1% cash back.
- You get 1% cash back on all other eligible purchases.
Terms and conditions apply.
All information about Blue Cash Everyday® has been collected independently by Several.com.
Chase is the second biggest credit card issuer that offers credit cards for every purpose; they offer an impressive variety of cash back credit cards. Our top pick would be the Chase Freedom Flex℠:
- This card has a promo period offer where you get an introductory APR of 0% on purchases and balance transfer for the first 15 months of account opening. Once the intro period is over, any remaining balance on the Chase Freedom Flex credit card will be subject to an ongoing variable APR of 15.24% to 23.99%.
- You get 5% cash back on up to $1,500 in purchases made in the bonus categories, which rotate every quarter.
- You get 5% cash back on all travel expenses paid through Chase Ultimate Rewards.
- You get 3% cash back on all dining and drugstore purchases across the United States.
- You get 1% unlimited cash back on all other purchases.
- In addition to all these general categories, you get 5% cash back points on Boxed purchases which can be used for future purchases.
- You also get a DoorDash complimentary three-month DashPass and a 50% discount for the next 9 months.
- This card has no annual fee.
Terms and conditions apply.
A great and well-established credit card issuer, Citi offers multiple options for cash-back credit cards. Our top pick is The Citi® Double Cash Credit Card; here is why:
- This card has a promo period offer of an introductory 0% APR on purchases and balance transfers for the first 18 months of account opening. You must note that all balance transfers must be completed within four months. After this 0% APR period, any remaining balance will be subject to an ongoing variable APR of 13.99% to 23.99% based on your creditworthiness.
- You get 2% cash back on groceries, 1% when you buy, and 1% when you pay.
- You get 2% cash back at gas stations; 1% when you buy, and 1% when you pay.
- You get the same 2% cash-back structure on all other purchases.
- To qualify for this card, you need to have a Good to Excellent credit score (670 – 850).
- This card has no annual fee.
Terms and conditions apply.
Disclaimer: Several.com may receive a commission from card issuers.
This article includes the author's opinions, reviews, and analyses alone that have not been reviewed, endorsed, or approved by any of these entities. Please note that the information regarding each card's offer is believed to be accurate as of the date it was written and as card offers change regularly; reasonable efforts are made to maintain accurate information.