Best cash back credit card
Cash back is proven to be one of the best incentives to encourage customers to use a credit card. Basically with a credit card that offers cash back you can benefit from taking 1-5% of your spending back to your account for the other customers expense. Read below how it happens and what are the best cash back options for you to consider.
Credit card reward programs today typically offer 0.5-2% cash back, it is not much compared to th 5% that was accessible on the market recently, but you can still find the cards with 5% cash back even in today’s economy (with some fancy rules and restrictions though).
There are several types of cash back cards – some of them offer you a flat percentage, about 1% of all money you spend back, one of the best offers now is
American Express Blue Cash Everyday Card
- no annual fee
- 0% intro APR for 1st 12 month
- great 3% cash return on supermarkets (unlimited), 2% on gas and department stores (unlimited), 1% for other purchases (unlimited)
Bank of America Cash Rewards VISA
- 3% cash back on gas, 2% on groceries ($1500 quarterly maximum for the 3% and 2% rewards), 1% for other spending (unlimited).
- no annual fee
- 0% introductory APR
But most credit cards now has quite complicated rules for earning cash rewards. The kickback amount is usually calculated differently for every transaction, depending on where the money was spent, the total sum of the transaction or more typically just a category of spending (e.g. travel expenses, grocery stores, gas stations, dining). Participating merchants or brands usually have a preference over other spending in the % of cash back returned on your account. Rules and restrictions are getting more and more complicated since banks and customers are getting more involved into cash back game. It becomes more and more popular among credit card issuers to change a category with a maximum cash back return through a year (e.g. restaurants in the 1st quarter, gas on the 2nd and so on). The negative side of that type of cards is that it is difficult for you to follow the changes and you usually will earn less overall cash back than with fixed benefit terms.
As a good example of that type of cards:
Discover More Card
- no annual fee
- a very good introductory 0% APR on purchases and balance transfer for first 15 month
- 5% cash back on one of the featured categories, changing every month. you need to sign up for every category to start earning 5% cashback
- 1% cash back for all other purchases or purchases after you reach the limit
- quarterly maximum for the cash back applies
Chase Freedom Card
- no annual fee
- 0% APR for the 1st 15 month
- 5% cash back up to $1500/month for the special featured categories that vary every quarter. you need to register for that categories to earn additional cashback
- 1% cash back for all other spending
How cash back credit cards work? When a merchant accept payment from your credit cards, they pay commission to the payment processing company or directly to the bank. For the cash back credit cards, the bank usually takes 1-2% more in commission and then shares this part with a customer.
For some cards customers receive cash back rewards at the end of the year or after the 12 month of using a credit card but for some cash back programs you get your rebates each month (recently it was for gas station rewards only, but it is getting more and more popular option now). Some cash back cards offer you a flexible redeem option – you can choose yourself when to get your rewards available for spending. The amount of cash back earned in the previous month is shown in your monthly statement or online.
The best cash back credit cards usually have higher APR and may have annual fees. They can also put some complicated restrictions on rewards earning: e.g. rewards start only after you have spent the certain amount of money or reward points will be valid for limited time.
As an example of a good cash back card with the annual fee you can consider
Blue Cash Preferred from American Express
- huge 6% on supermarkets, 3% on departments stores and gas, 1% for other purchases
- $75 annual fee
- 0% APR for first 12 month
If you know your spending habits well, you can pick up the right cash back card that will you help you most. If you spend more on gas monthly, you can get the card with better gas cash return (like AmEx Blue Cash described above), if you travel a lot, there are several credit cards that offer advanced travel expenses rewards (Capital One Master Card Platinum offer 2% for travel expenses). It can be a good idea even to have several credit cards that will cover all your biggest spending categories and combined will let you earn the highest cash back. In that case the only complication will be to remember which credit card is best for which type of payments – it is better to balance the benefit of cash back option with the problem of having a stack of credit cards in the wallet.
As more of the customers are aware of the cash back advantages, it becomes very popular – nearly every bank has now several options to choose from. There are different offerings on the market –high limit credit cards or cards with a better APR, with better rewards or with lower credit score required to qualify. Today as the supply extents you can find an easy to get credit cards with a good cash back options (e.g. Discover Cards are considered as easier to apply for).
If you are shopping around for cash back credit card, consider the following:
- Evaluate your most valuable spending categories (restaurants, gas, travel, shopping, etc.) to find the cash back solution that is most suitable for you. Fixed cash back categories are more preferred since it is easier for you to get used to it.
- Depending on the number of different categories that you will find out, decide how many credit cards you can manage in your wallet without a confusion.
- Think about your current card APR and annual fee in comparison with the cash back offers – especially if you are carrying a balance, the cost of higher APR can outweigh the benefits of the cash back. But there are a lot of relatively low APR and no annual fee credit cards on the market now that offer cash back as well, so you probably can find the best option.
- Some credit cards put limits on the cash back rewards, so you need to take it into consideration as an another search criteria
- Pick up a credit card, choose cards with a low to zero introductory fees and low to zero annual fees. Choose the best cash back credit card and enjoy your rewards with no hassle.
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