Comparing Cashback Credit Cards Which One Is Right for You?

When it comes to selecting the right cashback credit card, it can be challenging with so many options available. The key to finding the best card for you is to understand your spending habits and how each card rewards you for those purchases. In this article, we'll break down everything you need to know about cashback cards, including how they work, top cards on the market, and tips on maximizing rewards.

Understanding Different Cashback Structures

Cashback credit cards reward you with a percentage of your spending as cash, which you can later redeem.

There are different cashback structures you should be aware of:

• Flat-Rate Cashback Cards: These cards give you the same cashback percentage on all purchases. For example, the Citi® Double Cash Card offers 2% cashback on all purchases (1% when you buy and another 1% when you pay the bill).
• Tiered Cashback Cards: These cards offer different cashback percentages depending on the category. For example, a card might give 3% cashback on groceries, 2% on dining, and 1% on all other purchases. The Blue Cash Preferred® Card from American Express is a popular choice for groceries, offering 6% back at U.S. supermarkets (up to $6,000 per year).
• Rotating Category Cashback Cards: These cards offer higher cashback rates (usually 5%) on categories that change every quarter, like gas, restaurants, or department stores. The Discover it® Cash Back card is a classic example, where the categories rotate every three months and need to be activated by the user.
• Sign-Up Bonuses and Introductory Offers: Many cards come with sign-up bonuses, such as "$200 after spending $1,000 in the first three months." These bonuses can offer a significant boost to your rewards in the short term. Be sure to check whether the card offers a 0% intro APR for balance transfers or purchases, which can be a helpful feature.

Top Cashback Cards Reviewed

Here’s a breakdown of some of the top cashback credit cards currently available:

Citi® Double Cash Card

• Best for flat-rate cashback
• Rewards structure: 2% cashback (1% on purchases, 1% when you pay)
• Pros: No caps or categories to worry about.
• Cons: No bonus categories for higher rewards.

Blue Cash Preferred® Card from American Express

• Best for grocery shoppers
• Rewards structure: 6% back on groceries (up to $6,000 per year), 6% on select U.S. streaming services, 3% on transit and gas stations, 1% on everything else.
• Pros: Great for families with high grocery bills.
• Cons: $95 annual fee (waived the first year).

Discover it® Cash Back

• Best for rotating categories
• Rewards structure: 5% cashback on rotating categories (up to $1,500 each quarter), 1% on other purchases.
• Pros: Cashback Match feature – Discover matches all the cashback you've earned at the end of the first year.
• Cons: Requires activation each quarter to maximize 5% rewards.

Chase Freedom Unlimited®

• Best for flexible rewards
• Rewards structure: 5% on travel purchased through Chase, 3% on dining and drugstores, 1.5% on all other purchases.
• Pros: No annual fee, generous rewards on everyday categories.
• Cons: 1.5% on everyday purchases is lower than some flat-rate cards.

Capital One SavorOne Cash Rewards Credit Card

• Best for dining and entertainment
• Rewards structure: 3% cashback on dining, entertainment, popular streaming services, and grocery stores (excluding superstores like Walmart and Target), 1% on everything else.
• Pros: No annual fee and strong rewards for social outings.
• Cons: Lower cashback on everyday non-entertainment categories.

See also: Credit Card Fraud: Prevention and Protection Strategies

How to Maximize Cash Back Rewards

Maximizing your cashback rewards is all about strategic use of your card.

Here are some tips to get the most out of your cashback credit card:

• Know Your Spending Categories: If you spend a lot on groceries, travel, or dining out, choose a card that offers higher rewards in those categories. For instance, the Blue Cash Preferred® Card is excellent for groceries, while the Capital One SavorOne is perfect for dining and entertainment.
• Take Advantage of Sign-Up Bonuses: Many cards offer sign-up bonuses if you meet a spending threshold within the first few months. Make sure to use the card for your regular purchases to hit that bonus.
• Pair Multiple Cards: Sometimes, using more than one cash back card is a good strategy. For example, you could use a card like Citi® Double Cash for general purchases (earning 2%) and a card like Discover it® Cash Back for rotating categories where you can earn 5%.
• Watch for Seasonal Promotions: Some cashback cards offer promotions or special rewards during specific times of the year. For example, you might get extra cashback during the holiday shopping season or in summer travel categories.
• Set Reminders for Rotating Categories: If you use a card with rotating categories like Discover it® Cash Back, set reminders to activate the 5% categories each quarter. Forgetting to activate these categories means missing out on the best rewards.

Factors to Consider When Choosing a Cashback Card

Choosing the right cashback card depends on several personal factors:

• Spending Habits: The most important factor is your spending habits. If you primarily spend on groceries and gas, a card with high rewards in those categories will benefit you. If you spend evenly across different categories, a flat-rate cashback card might be a better fit.
• Annual Fees: Some of the best cashback cards come with annual fees. Make sure that the rewards you’ll earn will outweigh the cost of the fee. For example, the Blue Cash Preferred® Card from American Express has a $95 annual fee but offers 6% cashback on groceries, which could be worth it if you spend enough.
• Sign-Up Bonuses: Sign-up bonuses can give your rewards a big boost right away. However, be realistic about whether you can meet the spending requirements to earn the bonus.
• Redemption Options: Check how easy it is to redeem your rewards. Some cards allow you to redeem cashback as a statement credit, while others let you deposit it into your bank account or use it for gift cards.
• APR and Interest Rates: If you plan to carry a balance, make sure to pay attention to the APR. While cashback rewards are great, they won't outweigh high-interest charges if you're not paying your balance in full.

Real-Life Comparisons: User Experiences

It’s helpful to hear from real people who have used these cards.

Here are a few examples:

• Jessica (Chase Freedom Unlimited): "I love using the Chase Freedom Unlimited® for everyday purchases like groceries and gas. The 1.5% cash back adds up quickly, and I love the flexibility with Chase Ultimate Rewards for travel redemptions."
• Tom (Discover it® Cash Back): "I’m a fan of the rotating categories with the Discover it® card. Last year, I earned a lot of cashback during the holiday season when the 5% category was department stores. Plus, the Cashback Match at the end of the first year was a nice bonus."
• Sara (Blue Cash Preferred® Card): "My family spends a lot on groceries, so the Blue Cash Preferred® Card is a great fit. The 6% back at U.S. supermarkets saves us a significant amount every month. Even with the $95 annual fee, it’s been worth it for us."

Seasonal Promotions and Offers

Cashback credit card companies frequently roll out special promotions, especially around key shopping seasons like Black Friday, Cyber Monday, and the holiday season.

These promotions might include:

• Increased Cashback for Limited-Time Categories: For example, your card might offer 10% cashback on online purchases during the holiday season.
• Holiday and Travel Bonuses: Some cards increase cashback on travel and dining around peak vacation seasons. For example, a card might offer extra rewards on airline or hotel purchases during the summer months.
• Retailer Partnerships: Many cards have partnerships with specific retailers, offering extra cashback when you shop at stores like Amazon, Target, or Walmart.

To take advantage of these promotions, keep an eye on your card's email newsletters and offers within your account.

Conclusion

Choosing the best cashback credit card comes down to knowing your spending habits and which rewards structures align best with those habits. If you want simplicity, a flat-rate card like Citi® Double Cash might be right for you. If you like optimizing rewards, a card with rotating categories or higher rewards on specific spending, like the Discover it® Cash Back or Blue Cash Preferred® Card, could be a better fit.

FAQs About Cashback Credit Cards

What’s the difference between cashback and points rewards?

Cashback rewards are straightforward: you earn a percentage of your spending back in cash. Points, on the other hand, can often be redeemed for travel, gift cards, or merchandise and may offer better value depending on how you redeem them.

Is it worth paying an annual fee for a cashback card?

It depends on your spending habits. If the rewards you’ll earn exceed the annual fee, it can be worth it. Cards like the Blue Cash Preferred® Card with a $95 annual fee can still save you money if you spend a lot in the high-reward categories.

Can I combine rewards from different credit cards?

You can't combine rewards between different credit card issuers, but you can maximize rewards by using different cards for different purchases. For example, using one card for groceries and another for dining out can help you earn more.

How do rotating categories work?

Cards like Discover it® Cash Back offer rotating categories where you earn a higher cashback rate (usually 5%) on specific categories each quarter. You’ll need to activate these categories in your online account or mobile app each quarter to take advantage of them.

What happens to my cashback if I return an item?

If you return an item, the cashback you earned on that purchase will be deducted from your cashback balance. So, it’s important to keep this in mind when calculating your total rewards.