There are few incentives that draw people in quite like the allure of free money. Yet, that is exactly what card issuers that offer cash rewards are doing – and with only mediocre results. Despite the popularity of cash-back rewards, a recent study from Cardhub.com estimated that Americans left roughly $57 billion dollars in credit card rewards on the table in 2014 and are projected to miss out on at least $60 billion in rewards in 2015.
Considering how easy these rewards are to earn and redeem, that’s a shame. In most cases, the only requirement to earn cash back is that you use your card to make a purchase. It’s as simple as that. And if you never want to pay interest (as you shouldn’t), you don’t have to either. All you need to do is pay your bill in full before it’s due and your rewards will be free.
Most rewards credit cards offer points based on a percentage of your everyday spending – usually somewhere between 1 and 5%. However, certain cards also offer a sign-up bonus to customers who spend a certain amount of money on the card within a time period of a few months. Since sign-up bonuses can be worth anywhere from $100 – $500, and you earn them in addition to regular rewards, it’s easy to see how using a cash rewards credit card can be a lucrative endeavor. You can also look into great sign up bonuses right now with a free Chase Checking account!
Featured Cash Back Credit Cards
I’m a big fan of using cash back credit cards, and try to make as many purchases as possible with my cash rewards card. If you are similar, then check out the following featured credit cards which offer a variety of cash rewards. It’s important to pay attention to the rewards structure, as these cards feature different cash back rewards. Some offer a flat cash back rate, while others offer additional cash back in bonus categories, rotating categories, and more.
Best Cash Back Credit Card with Bonus Categories – Discover it® – Cashback MatchTM
The Discover it® – Cashback MatchTM offers 5% cash back in rotating categories each quarter (with activation and up to the quarterly maximum of $1,500 in purchases each quarter), and 1% cash back on all other purchases with no limits. 5% cash back is among the best you will find for most credit card companies. You do need to activate the rewards each quarter, which is quick and easy. The bonus cash categories change each quarter, and include places such as gas stations, restaurants, wholesale clubs, grocery stores, and more.
There is no annual fee, your rewards never expire, and you can redeem your rewards in any amount and at any time. You can even use your rewards as a form of payment at Amazon.com. This card is eligible for a free FICO® Credit Score (based on TransUnion data). You can view your credit score on your credit card statement or in your Discover.com account.
Limited Time Intro Offer: New cardholders will receive a match on all cash back earned in the first year. This can be a huge bonus, depending on your spending habits.
You can compare this and other cash back credit cards on this page.
Best No-Hassle, No-Fee All-Around Cash Back Credit Card
Some people prefer simplicity to trying to maximize each penny they can save. If you are that type of person, then check out the Chase Freedom Unlimited®, which offers an automatic 1.5% cash back on all purchases. You don’t have to try and remember which bonus category is effective this quarter, and you don’t have to track your spending to make sure you maximize each purchase.
All purchases automatically earn 1.5% cash back. There are no spending limits, no rotating categories to worry about, and no limits on the amount of cash back you can earn. There are also no minimums for redeeming your rewards. There is no annual fee, and your rewards don’t expire as long as you keep your account open.
Limited time bonus: The Chase Freedom Unlimited® currently offers a $150 cash bonus after you spend a minimum of $500 on purchases within the first 3 months of account ownership. This is a very low minimum spending requirement to get the bonus.
To top it off, this card offers a 0% Intro APR on both purchases and balance transfers for 15 months from the time you open your account. There is a 5% balance transfer fee, making this an acceptable, but not great option for balance transfers. (see our list of best balance transfer credit cards for lower cost balance transfer options).
Overall, this is a dependable card that offers very good rewards without having to jump through hoops.
You can compare this and other cash back credit cards on this page.
Different Types of Cards
It’s true that these offers can be highly profitable, but the big pay-off comes when you’re able to pick the optimal card for your needs and spending pattern. Although most cash rewards cards work the same way, several cards break the mold and offer unique perks and earning tiers. Here are a few of those unique cards, plus the most common types of cash rewards cards currently on the market:
Fixed Cash Rewards Cards – Some cards offer a fixed percentage of cash back on all of your purchases in every category – usually between 1 -2%. While these cards generally aren’t as lucrative over the long haul, some consumers prefer the simplicity of this earning strategy.
No Annual Fee Cards – No annual fee cards offer a ton of perks without charging an annual fee for use. This type of card usually works best for someone who is opposed to paying an annual fee or just wants to earn casual rewards on their everyday spending.
Rotating Rewards Cards – While some cards offer a set percentage of cash back on purchases, others offer more cash back on categories that rotate each quarter. Rotating rewards cards usually offer 1% cash-back on all purchases and up to 5% cash back on rotating “bonus categories.” Those categories change every quarter – and even from year to year.
Cards with Bonus Categories – While rotating rewards cards offer a higher bonus on categories that change each quarter, other cards offer bonus categories that don’t change. For example, some cards that fall under this umbrella might offer 1% cash back on everything, 2% cash back on dining and entertainment, and 3% cash back on travel. Some cards with bonus categories even let you select your own bonus category.
How to Select a Cash Rewards Credit Card
While any cash rewards credit card is better than nothing, choosing a card that is tailored to your needs will ultimately lead to more rewards. Here are some factors to consider as you narrow down your selection of cash rewards credit cards:
Consider your spending – If you spending tends to be high in areas like groceries or gas, it usually makes sense to choose a rewards card that offers more cash back in those categories. Look at the different cash rewards offers available and select the card with more earning potential where you spend the most.
Take annual fees into account – Paying an annual fee on a rewards card might make sense if you spend enough on your card each year. However, an annual fee can quickly eat away at your earnings if you don’t use your card very often. When weighing the pros and cons of choosing a card with an annual fee, always run the numbers. Only choose a card with an annual fee when you plan on earning more than enough rewards to make up for it.
Don’t forget the sign-up bonus – A card with a healthy sign-up bonus can help you earn a higher percentage of rewards over the course of a year – even when compared to a card that offers a higher percentage of cash back, but no bonus. Always do the math and make sure the sign-up bonus is a perk, not a hindrance.
Explore the rewards program – While some cash rewards cards offer several ways to redeem your points, others only allow you to redeem them for a statement credit. If you want a rewards card that lets you redeem your points for gift cards, travel rewards, merchandise, or airline miles make sure you know that ahead of time.
Know your limits – In addition to knowing the limit you can spend on your card, you also need to be aware of any limits on cash-back offers as well. These limits on “bonus category” earning can seriously diminish the rate of rewards you earn with your card. With most rotating rewards cards, for example, you only earn 5% cash-back on the first $1,500 you spend in the bonus category each quarter. That’s only $75.
Know your credit score – Almost all of the best rewards credit cards require excellent credit. If your credit score is mediocre, it might be wise to spend some time rebuilding your credit – and your score – before pursuing a card that offers rewards.
The decision to use a rewards credit card to earn cash-back on your everyday spending is almost a no-brainer. But, finding the best one? Now, that’s the hard part.
Just remember, the best cash rewards cards will provide you with a steady stream of fun rewards you can use for almost anything – and with minimal effort.