Cash back credit cards reward you for every purchase you make with money back in your pocket. That’s like getting a discount everywhere you go.But before you dive into an application, find out how to get the most from your cash back credit card.
What Is a Cash Back Credit Card?
A cash back credit card is a type of rewards card that earns back a percentage of what you spend on it.Generally, you’ll earn at least 1% cash back on every purchase with a basic cash back card. If you spend $100, you will get $1 back. That doesn’t sound like much, but it adds up.“There are excellent ways to make your spending work for you in a time when the cost of goods and services has risen,” says Jeff Richardson, senior vice president of marketing and communications at VantageScore Solutions. “Getting some cash back is very beneficial, as it can make your money go a little bit further than it would otherwise.”You can earn cash back in dollars or points, and common ways to redeem it are for statement credits, checks or direct deposits, or gift cards.
Types of Cash Back Credit Cards
Generally, you will find three types of cash back credit cards: flat rate, tiered and rotating category:
Flat rate. With a flat-rate cash back card, you will receive the same cash back percentage on every purchase. For example, a card that earns a flat 2% cash back offers that fixed amount back on all spending. You can typically earn unlimited rewards at the flat cash back rate.
Tiered. A tiered card earns cash back at higher rates in certain spending categories and usually 1% back on everything else. For example, you might get 3% back on gas or 6% on groceries. You may be limited in how much you can earn at the bonus rate, such as up to $6,000 annually.
Rotating category. These cards have bonus categories that change each month or quarter, generally earning a much higher rate than other purchases, but the categories require activation. You might get 5% cash back on up to $1,500 in Amazon purchases for one quarter and then switch to grocery purchases the next quarter. Like tiered cards, rotating bonus category credit cards generally earn an unlimited flat rate of about 1% that kicks in for purchases that don’t qualify for quarterly bonus earnings.