Credit cards can often provide an opportunity to accumulate travel rewards such as airline miles or hotel points. But if simple and solid profit spending are your top priorities, you can’t go wrong with cashback credit card.
Before you start shopping for a new cardHowever, you should think about what you want in a cashback card and which card is best for you. Here are four things to consider.
Earning Rate Study
Not all cashback cards work the same, and it’s important to know what approach you want to take with how you earn rewards. There are three main ways cashback credit cards structure their rewards programs:
- Fixed rate cashback card: With this type of card, you will get the same percentage of rewards for every purchase you make. The Citi® Double Cash Card is the top pick in this category, giving you 2% back on every purchase (1% back when you make a purchase and 1% back when you pay it off).
- Proportional cashback card: These cards offer higher earning rates on select categories, then typically 1%-1.5% cashback on everything else. The Blue Cash Preferred® Card from American Express is a prime example, giving you 6% cash back in the US supermarket (up to $6,000 to be spent per calendar year, then 1%) and over choose to subscribe to streaming in the US. You will also earn 3% back in the US the gas station and more transit and 1% cashback on everything else.
- Revolving cashback card type: A handful of cashback cards earn high cashback rates over daily expenses The portfolio rotates every quarter. They usually give back 1% on non-bonus spending, but some also offer some tiered bonuses. For example, the Chasing Flex Freedom earn 5% back up to $1,500 spent on quarterly rotating portfolio5% cashback on travel purchased through Chase Ultimate Rewards, 3% cashback on pharmacies and foodservice (including eligible and takeout delivery) and 1% cashback on everything else.
With tiered and rotating bonuses, you’ll have a better chance of maximizing your cashback with some bonus catalog. But in many cases, most of your purchases will give you the lowest percentage of rewards, and you will need to keep an eye on different reward categories.
On the other hand, fixed rate rewards card They can give you a steady rate of return on all your spending, but they lack the flexibility to maximize your rewards in some of your top spending categories.
Review your budget
To determine which card will benefit you the most, you need to know where you spend the most money. You can then choose a card that rewards those purchases the most.
For example, if you have a large family and spend a lot on groceries, a tiered rewards card is a great size. income when buying groceriessuch as Blue Cash Priority Card from American Express, should be on your radar. Likewise, if you spend a lot of your budget on entertainment and dining out, you’ll benefit from cards that earn cashback in those categories, such as the Capital One SavorOne Cash Rewards Credit Card.
However, if you find that your spending habits are more spread out, or if you spend the most in a category that doesn’t earn rewards rewards, you’re better off using a fixed rate rewards card. with Citi Double CardIt doesn’t matter what your spending looks like, for example, as you’ll get 2% cash back on everything (as long as you’re paying off your balance).
Related: TPG’s 10 Commandments of Rewarding Credit Cards
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Review welcome offer and annual fee
Cashback credit cards are more than just their earning rate. Many of them also offer signup bonuses, 0% referral annual percentage (APR) promotion (allows you to make purchases or balance transfers and pay them off within a certain period of time, with no interest) and other perks that can add value to your experience. As you compare cash-back credit cards, think about other benefits that align with what you want.
For example, if a big purchase is coming up, you might want to look for a card with a sign-up bonus or a 0% APR referral offer. Some cards, such as Chasing Freedom Flex and Blue Cash Everyday® Card from American Expressoffers both, making them a great choice at a great cost.
You’ll also want to consider whether the card charges an annual fee — fortunately, did there are many people — and how that will affect your ability to earn rewards. For example, the Capital One QuicksilverOne Cash Rewards Credit Card earn 1.5% cash back on all purchases but charge $39 annual fee. This means you need to spend at least $2,600 annually just to break even with the annual fee.
The Unlimited pursuit of freedomon the other hand, also earn 1.5% back on all purchases but no annual fees, allowing you to earn without worrying about recoup your annual costs.
Consider having multiple credit cards
There is no single best cash-back credit card for everyone, and even if one card gives you more value than another, the best way to maximize your rewards is to use many cards for different spending categories.
For example, you can opt in Blue cash priority for groceries and gas thanks to a higher percentage of earnings across these categories, Chasing Freedom Flex for travel, dining, pharmacy and its rotating categories, and Citi Double Card for everything else (because it gives you 2% cash back).
This approach can take some getting used to, and you’ll need to keep an eye on your due dates and balance to avoid interest and late fees. Still, it’s a great way to get the most out of your day-to-day expenses.
bottom line
The best cashback credit card offers flexible rewards and a chance to get a lot of value on daily expenses. While choosing the right cashback card can be daunting, you can easily narrow down your list of options using these tips to choose the right card (or multiple cards) with me.
Additional reporting by Emily Thompson.
