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If you're interested in earning something back every time you spend money, cash back credit cards are by far the simplest option. There are no complex points or redemptions with this type of rewards card. You pay with your credit card, and you get some cash back on your purchase.
It's normal to have a few questions before you open a cash back card, like how it will work and the types of cash back cards that are available. In this guide, you'll learn all about cash back rewards and how to pick from the best cash back credit cards.
Cash back credit cards are one of those products where the name gives you an accurate idea of how it works. When you use a cash back card, you earn a percentage of the transaction amount as cash back. The exact percentage depends on the card and, with certain cash back credit cards, the spending category of the purchase. For example, a card could earn a higher percentage back when it's used at an office supply store or a restaurant.
Let's say you spend $100 with a cash back credit card that earns 1% cash back. You'd earn $1 in cash back. If that card had a 2% cash back rate, you'd earn $2. You'll continue accumulating cash back until you decide to redeem what you've earned.
Most, but not all, transactions will be eligible for cash back. Card issuers typically don't let you earn it on cash advances and balance transfers. You may also not earn cash back on purchases of cash-equivalent items, such as gift cards, and person-to-person payment services, such as Venmo. Any of these exceptions will be spelled out in your card's terms and conditions.
You can redeem cash back through your online credit card account or by contacting your card issuer. Some credit card companies have redemption minimums, such as $20 or $25. Fortunately, quite a few card issuers now let you redeem any amount of cash back with their credit cards.
Redemption methods vary, but generally include one or more of the following options:
There are three types of cash back cards, with the difference being how their cash back rates are set up.
A popular choice if you're only looking to carry one credit card, a flat-rate cash back card earns the same rate on all your spending. While 1% used to be the most common cash back rate, 1.5% has become the new standard for flat-rate cards.
The drawback with these cards is that there's no potential to earn a higher bonus rate. You could be leaving money on the table if you usually spend a lot in a specific spending category. The good news is that you'll earn a solid rate every time you use your card.
With bonus category cash back credit cards, the amount you earn depends on the purchase. These cards can earn 2%, 3%, or more on qualifying purchases in select, fixed spending categories. For example, if you have a credit card that earns 3% back on gas, you'd earn $3 on a $100 gas purchase.
Some cards put limits on how much bonus cash back you can earn. You may find cash back credit cards that offer bonus rates on up to $1,500 in purchases per quarter or $6,000 per year. Others have unlimited bonus categories. Either way, all non-bonus spending will earn a flat rate, which is usually 1%.
If you find a card with bonus categories that fit your spending habits, then you could earn quite a bit extra using it.
These cards work the same way as the cards above, only the bonus categories change at predetermined intervals, most often quarterly. So, your card could earn 5% back at restaurants for three months, and then earn 5% back at grocery stores for the next three months.
Your credit card company may provide all the bonus categories for the year ahead of time, or they might only release them at the start of a new quarter. You will usually need to activate those categories with the card issuer to earn the bonus rate for that quarter.
The biggest benefit with these cards is that they often have the highest bonus rates. However, there's no guarantee the bonus categories will be areas where you spend much money. For this reason, consumers often get a flat-rate cash back card to pair with a rotating bonus category card.
With all the cash back credit cards available, it can be overwhelming trying to choose one. You can make the decision easier by boiling it down to a few important features.
Cash back rate: Everyone wants the card that will earn them the most back. I recommend going over your monthly expenses, figuring out where you spend your money, and picking a card with cash back rates that match your spending.
Annual fee: If you're not too keen on paying an annual fee for a credit card, you'll be happy to know that most cash back cards are no-annual-fee cards. There are a few that charge an annual fee, but they also typically have higher cash back rates.
Sign-up bonus: Many cash back cards have sign-up bonuses. A sign-up bonus can also be called a welcome bonus or welcome offer. These are a nice way to earn even more back shortly after you get the card. The most common type of sign-up bonus involves meeting a spending minimum. For example, certain cards offer $200 in bonus cash if you spend $500 in the first three months from opening the account.
Here are a few cash back cards we love that might be a good fit for you. If you'd like to learn about more cards, take a look at our list of the Best Cash Back Credit Cards for other options.
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Blue Cash Preferred® Card from American Express | Discover it® Secured Credit Card | Wells Fargo Active Cash® Card |
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Rating image, 5.00 out of 5 stars.
5.00/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Rating image, 5.00 out of 5 stars.
5.00/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Apply Now for Blue Cash Preferred® Card from American Express
On American Express' Secure Website. Terms apply |
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Credit Rating Requirement:
Falling within this credit range does not guarantee approval by the issuer. An application must be submitted to the issuer for a potential approval decision. There are different types of credit scores and creditors use a variety of credit scores to make lending decisions.
Recommended Credit Score required for this offer is: Good/Excellent (670-850)
Good/Excellent (670-850) |
Credit Rating Requirement:
Falling within this credit range does not guarantee approval by the issuer. An application must be submitted to the issuer for a potential approval decision. There are different types of credit scores and creditors use a variety of credit scores to make lending decisions.
Recommended Credit Score required for this offer is: New/Rebuilding Under(579)
New/Rebuilding Under(579) |
Credit Rating Requirement:
Falling within this credit range does not guarantee approval by the issuer. An application must be submitted to the issuer for a potential approval decision. There are different types of credit scores and creditors use a variety of credit scores to make lending decisions.
Recommended Credit Score required for this offer is: Good/Excellent (670-850)
Good/Excellent (670-850) |
Welcome Offer: Earn a $250 statement credit after you spend $3,000 in eligible purchases on your new Card within the first 6 months. $250 |
Welcome Offer: Discover will match all the cash back you’ve earned at the end of your first year. |
Welcome Offer: Earn a $200 cash rewards bonus after spending $500 in purchases in the first 3 months. $200 cash rewards |
Rewards Program: 6% Cash Back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%). 6% Cash Back on select U.S. streaming subscriptions. 3% Cash Back at U.S. gas stations. 3% Cash Back on transit (including taxis/rideshare, parking, tolls, trains, buses and more). 1% Cash Back on other purchases. Cash Back is received in the form of Reward Dollars that can be redeemed as a statement credit or at Amazon.com checkout. 1%-6% Cash Back |
Rewards Program: 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. 1% unlimited cash back on all other purchases - automatically 1% - 2% Cashback |
Rewards Program: Earn unlimited 2% cash rewards on purchases. 2% cash rewards |
Intro APR: Purchases: 0%, 12 months Balance Transfers: 0%, 12 months |
Intro APR: Purchases: n/a Balance Transfers: 10.99%, 6 months |
Intro APR: 0% intro APR for 12 months from account opening on purchases and qualifying balance transfers Purchases: 0% intro APR, 12 months from account opening Balance Transfers: 0% intro APR, 12 months from account opening on qualifying balance transfers |
APR: 19.24%-29.99% Variable |
Regular APR: 28.24% Variable APR |
Regular APR: 20.24%, 25.24%, or 29.99% Variable APR |
Annual Fee: $0 intro annual fee for the first year, then $95. |
Annual Fee: $0 |
Annual Fee: N/A $0 |
Highlights:
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Highlights:
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Highlights:
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Apply Now for Blue Cash Preferred® Card from American Express
On American Express' Secure Website. Terms apply |
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• Eligibility and Benefit level varies by Card. Terms, Conditions and Limitations Apply. • Please visit americanexpress.com/benefitsguide for more details. • Card Members are responsible for the costs charged by third-party service providers. • Extended warranty, purchase protection warranty, and car rental loss & damage insurance underwritten by AMEX Assurance Company.
A common extra perk of cash back credit cards is a 0% intro APR offer. This can apply to purchases, balance transfers, or both. If a card has an intro offer like this, then you won't need to pay any interest on that type of transaction until after the intro period ends.
These offers open up new ways to use cash back credit cards, including:
While these intro offers can be useful, make sure you understand the terms and be careful about how you use them. You'll pay a balance transfer fee with most cards, so consolidating your debt will likely cost you money upfront. Once your intro period ends, you'll need to pay interest on any remaining balance.
You wouldn't want to get reckless and spend more just because you have a 0% intro APR. Only use one of these offers if you really need it.
Don't you wish you could take a peek inside a credit card expert's wallet sometimes? Just to see the cards they carry? Well, you can't look in anybody's wallet, but you can check out our experts' favorite credit cards. Get started here:
Just about anyone with sound financial habits can benefit from cash back credit cards. If you're a frequent traveler, then there's a good chance you'll get more value from travel rewards cards. But if you don't travel often or you prefer to keep it simple, you can't go wrong with a cash back card.
Here are some other questions we've answered:
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.