Best Cash Back Credit Cards of 2016

If you're going to use a credit card, you might as well earn some rewards, right?

That's what we think!

Cash back credit cards are a great source of rewards. More often than not, they help you earn rewards for the spending you would have done anyway. And, unlike cards that earn points or miles, cash back is extremely flexible. You can use it for cash, gift cards, merchandise, even travel.

As if that weren't great enough, most cash back credit cards offer rewards that don't expire. That means you can earn without worrying about losing your redemption capability.

To get the most out of cash back rewards, find the card that rewards your particular spending patterns. Here's a list of some of the best out there so you can quickly find one that's perfect for you.

1. The Best Card for the Most Cash Back

Fidelity® Rewards Visa Signiture® Offers the Top Cash Back Rate On All Purchases

The Fidelity® Rewards Visa Signature® credit card provides the top cash back rate that can apply to any kind of purchase. You earn 2% cash back on everything that you buy.

There are restrictions on how you can redeem your earnings with this card. They must be redeemed into a Fidelity account. That could include a brokerage account, IRA, 529 savings plan, or cash management account.

These are all accounts that could actually multiply your earnings since they're interest-bearing accounts. And with the cash management account, you get even more flexibility. You can use that account any way you want, not just for investing or retirement. There's no annual fee to use this card.

Picking the Right Cash Back Credit Card

Many of these credit cards offer 1% to 5% cash back on purchases. Why the variance? Because the percentage usually varies based on the type of purchase. Usually, cash back credit cards offer a base 1% cash back on all purchases. Then you can get a bonus (higher percentage) for specific spending categories.

If you can line up your natural spending with these bonus categories, you can greatly boost your rewards. If the idea of going after variable spending categories is unappealing to you, then a general cash back card may be best.

Different Ways to Redeem Cash Back

Depending on the card’s program, how you can redeem your cash back will vary. Some mail a check, some give you direct deposit, and some offer statement credits. Some even allow you to redeem for gift cards, merchandise, travel, charitable donations, and more.

If you get a credit card from a brokerage, you may be required to deposit your rewards into a brokerage account. Fortunately, they also provide checking accounts that can be used to redeem cash back.

2. The Best Card for Shopping

Citi® Double Cash Card Feature

Most cash back credit cards offer a basic 1% cash back with bonus cash back on certain purchases. Not the Citi® Double Cash Card. This card stands out with an unlimited cash back program. It delivers up to 2% cash back on everything that you buy. This is ideal for shoppers who don’t have any sort of recognizable spending pattern. It pays 1% cash back on all purchases while you earn another 1% cash back when you pay the credit card bill. The card has no annual fee.

A cash back credit card is most appropriate for you if you're able to pay off the balance on a monthly basis. (The easiest way to do this is to set up automatic payments.) Otherwise, the interest charges that you pay will negate or exceed your earnings. If that was the case, you would be better off with a low-interest credit card.

No Bonus or Changing Categories

Some cash back cards limit how much cash back you can earn during a certain time or on a certain spending category. Some even cap the purchase categories after a certain percentage is hit. Not Citi Double Cash.

The Citi® Double Cash Card is simple, clear, and straightforward.

3. The Best Card for Grocery Shopping

Blue Cash Preferred® Card from American Express Feature

If you're in charge of stocking up the food at home, the Blue Cash Preferred® Card from American Express could be great for you. With this card, you can earn 6% cash back at supermarkets up to $6,000 per year (1% thereafter). You can also earn 3% cash back at gas stations and select department stores and 1% back on everything else. Although the card has a $75 annual fee, this fee can be offset if you spend $1,250 at supermarkets.

Getting the Most Cash Back on Groceries

If you spend a lot on groceries, you can earn a lot of cash back if you use the right credit card. With the Blue Cash Preferred® Card from American Express, the average household would get back about $240 per year.

Cash back credit cards are subject to merchant categorization of purchases. If a purchase category on your credit card doesn't match that of the merchant, then you won't get cash back on that purchase. And, in most cases, where you buy matters.

For example, a box of cereal at the supermarket may be categorized as “groceries.” But that same box of cereal at a drug store may be categorized as “drug store.” If your credit card offers cash back for groceries, buying that box of cereal at the drugstore won't get you cash back.

How to Find a Retailer's Spending Category

Knowing the categorization method merchants use will help you maximize your cash back. Each merchant (restaurant, retailer, website, etc.) has its own merchant category code (MCC). This code may vary based on the card network (American Express, Discover, MasterCard or Visa). Furthermore, each merchant location could have a different MCC.

The MCC of a merchant can be identified in one of 3 ways:

  • Use the online Visa supplier locator tool. Visa is the only one of the major card networks that provides a searchable public directory of merchants and their MCCs. You can use it to look up your most-visited merchants.
  • Review past credit card purchases. If you go to your credit card statement, you can look at a purchase category for any credit card transaction. You may consider making a small purchase at a retailer as a test to find the MCC of that particular location.
  • Ask an associate at the merchant location. A sales clerk or store manager can often provide the store’s MCC.

Credit card issuers are strict with their cash back rules in terms of the matching of merchant codes. You must agree to this policy when you sign up for the card. You won't be able to dispute your case if the merchant code doesn't match.

Cash Back Bonuses When You Sign Up

Introductory bonus cash back offers are commonly used to attract new credit card customers. To earn the bonus, new customers have to spend a specified amount on new purchases during a certain period of time. It's another way to earn bonus

4. The Best Card For Everyday Spending

Discover it® Card Feature

The Discover it® Card has the best combination of a great cash back program, no annual fee, low APR and card benefits. The card also has a number of other perks such as free FICO scores, no penalty APR and no foreign transaction fees.

Earn 5% Cash Back on Seasonal Purchases

Discover it®’s program offers 5% cash back on certain categories that change every quarter (starting in January). All other purchases earn a flat 1% cash back. These categories may not be identical year to year, but they’re generally been similar. Usually, the categories are season appropriate. (For example, 5% cash back on gas during the summer months. Or 5% cash back on online shopping during the holiday season).

“Discover it®” is one of a handful of credit cards that runs a program with this cash back format. However, credit cards can be more useful than just providing a way to earn rewards on your spending. Before you choose the credit card you want to use every day, first consider the card's other features.

Convenient Perks Such as Free Credit Scores and No Foreign Transaction Fees

In 2014, banks started to give out free FICO credit scores to their credit card customers. These are the credit scores that are often used by lenders to measure your creditworthiness. Normally, a FICO credit score costs roughly $20 each. Discover it®, among some other credit cards, offer it for free on a monthly basis.

Most credit cards apply the penalty APR when a credit card customer doesn’t pay the bill on time. It overrides whatever existing interest rate may be on the card. Typically, this penalty APR is 29.99%, which is very high for a credit card. Only a few credit cards will waive this penalty APR.

A foreign transaction fee is charged whenever you use your credit card to pay for a purchase outside of the U.S. Most credit cards charge a 3% fee for these foreign transactions. But some credit cards (especially travel credit cards) will not impose this fee. Frequent international travelers can save a lot if they use a card that doesn't charge this fee.

No Taxes on Cash Back Earnings

Under current U.S. taxation code, consumers do not have to report cash back earnings on their credit cards. According to IRS Publication 550, taxpayers are only required to report account-opening bonuses if these bonuses involved deposit accounts at a savings institution.

How to Get the Most Out Of Your Cash Back Rewards

Credit card rewards can be a huge perk for your finances, but go for a good cash back card and it’s a win-win all around. The right piece of plastic will put the most green in your wallet, simply from you being a frequent and responsible borrower.

But how can you tell if you’re getting the most out of your rewards? Here are a few ways you can maximize your rewards and get more cash in hand.

Consider Investing Your Rewards

Most cash back cards reward users an average 1-5% on their purchases. While it’s nice to pocket that cash, why not use the power of compound interest to increase your earnings?

One basic option is to open a high yield savings account or a short-term CD, both of which offer more competitive APYs than a standard deposit product. You can even use the cash you get back to jumpstart more critical investments such as an IRA or HSA (bolstering your retirement and healthcare savings).

Make Cash Back Equal A Zero Card Balance

If you keep a rolling balance on a cash back credit card, you’re going to lose any money you earn in rewards (and then some) to high interest rates.

Like any credit card, don’t spend more than you can afford to pay back by the end of your billing cycle. And if you keep your spending manageable this way, you may even be able to use your rewards to help pay down your monthly balance. Who knows? There may be some months where your rewards foot the entire bill.

Choose Your Cash Back Card Wisely

Not all rewards cards are exactly alike. It’s best to choose the one that best fits your lifestyle and rewards you for the things you already do.

For instance, some cash back rewards cards are perfect for everyday spending and may even give you a boost during the holiday shopping season. However, if you’re an avid traveler, a miles card may be the better choice for you, since the points may prove more valuable in the end.

Don’t Let Your Cash Rewards Expire

Sometimes, we’re so busy racking up rewards that we assume they’ll be there to redeem when we need them. That’s not always the case.

Your best bet when vetting the best cash back card is to read the terms and fine print to avoid being hit with surprise expiration dates. Go in asking these questions: When do your rewards expire? Do they expire at all? Are there any spending limitations?

If you already have a card with a rewards expiration date, you don’t necessarily need to give it up if it works for you in every other way. Rather, make a habit of cashing out your rewards quarterly or annually (even if you don’t need them yet) so you don’t miss out on a dime of your rewards.

Credit Card Notable Feature Who It's Best For
Fidelity Rewards Earn 2% cash back on all spending. People who want to earn cash back and plans to use save it towards retirement.
Citi Double Cash Earn up to an effective 2% cash back on all spending. People who want cash back, but don't have major spending in any specific categories.
American Express Blue Cash Preferred Extremely high bonus cash back rates on groceries and department stores. People who spend more than $132 per month on groceries and prefer cash back rewards.
Discover it® Earn 5% cash back on certain categories that change every quarter. People who want to earn high amounts of cash back on season-appropriate items.

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MyBankTracker
Monday, 02 May 2016 4:20 AM
<p>Katia, the student version of the Discover it card has a less attractive balance transfer intro APR than the regular version.</p><p>Credit card issues tend to offer less-friendly terms to people who are considered riskier borrowers (e.g., students and people who low or bad credit). Therefore, with the student version of the Discover it card, the introductory APR is for a shorter term and you'll even notice that the regular APR range tends to be a little higher as well.</p>
MyBankTracker
Monday, 02 May 2016 4:17 AM
<p>Ana, all purchases at a U.S. supermarket will earn the higher cash back rate through the Blue Cash Preferred card. This applies even if you are buying toiletries and gift cards at the supermarket.</p>
MyBankTracker
Monday, 02 May 2016 4:16 AM
<p>Lucy, you're referring to a secured credit card when you have to put money down as a security deposit. Even with a secured credit card, the rules for applicants under 21 years old still apply. So, you'll still have to show enough income (the lender decides how much income is enough) or you'll need a co-signer.</p>
katiayoung
Saturday, 30 Apr 2016 12:32 PM
<p>What is the difference between the Discover It card on here, and the one on the best card for Students page? On there, it says the balance transfer is 10.99% for 6 months. Here it says 0% for 12 months.</p>
disqus_IYKrUxW1Xy
Thursday, 28 Apr 2016 7:15 PM
<p>I will definitely have to look into the American Express Blue Cash Preferred Card, as I'm in charge of grocery shopping for my own , and extended family, groceries. But sound like you'd have to look at the list of what gets the cash back and match it to the stores, correct?</p>
disqus_IK833n1mzI
Monday, 25 Apr 2016 7:48 PM
<p>As a college student, would I have to put some money down on a new credit card? I don't have any credit as of now, and I DO have a job. Would I need a co-signer?</p>
MyBankTracker
Friday, 22 Apr 2016 3:17 PM
<p>Citi Double Cash is definitely one of those cash back credit cards that people cannot complain about -- it's so simple and easy to understand. If you were to have only one credit card, Citi Double Cash is definitely a great choice.</p>
Friday, 22 Apr 2016 2:52 PM
<p>We use the Citi Double Cash Card, and are very, very happy with it. And it's wonderful to be able to not have a time limit/cap on when you get or use the cash back. We've been able to pay for vacations with this, as opposed to using those cards that give you travel points. This is the only credit card we have and use, other than our normal bank cards.</p>
MyBankTracker
Tuesday, 19 Apr 2016 2:42 PM
<p>This is the tough decision to make because the quarterly 5% cash back categories are not identical from year to year. If you were to stick with Chase Freedom, you'd have to make a note to take advantage of the 5% cash back categories. But, if you do, it can easily outweigh the overall 1.5% cash back.</p>
MyBankTracker
Tuesday, 19 Apr 2016 2:34 PM
<p>Chase Freedom Unlimited was launched in March 2016, likely to compete with the many general cash back credit cards out there offer more than 1% cash back on all purchases. Among them include Citi Double Cash, Capital One Quicksilver, Barclaycard Cash Forward and Fidelity Rewards Visa Signature.</p><p>Existing Chase Freedom credit card customers can convert their cards to the Chase Freedom Unlimited card. However, not everyone would like to convert their accounts because they may be getting more cash back from the quarterly 5% cash back categories.</p>
Monday, 18 Apr 2016 6:20 PM
<p>Was wondering the same thing. Also have the Freedom card, and am realizing now that the Chase Freedom Unlimited may actually be a better fit.</p><p>Anyone have find the 1.5% cash back is working better than the rotating 5%?</p>
Monday, 18 Apr 2016 2:32 AM
<p>Hi, I have a Chase freedom credit card, I heard they have now a new card Chase freedom unlimited card. Why is Chase bank not just upgrading to current credit card holders to this card?!</p>
MyBankTracker
Wednesday, 13 Apr 2016 9:45 PM
<p>Maria, do you currently have any debt? If not, you are in a great position to earn rewards or cash back on your baby expenses.</p><p>The Citi Double Cash card is a good general cash back credit card for those expenses, especially if you are shopping at many different places for baby purchases. If you're going to be shopping through Amazon, the Amazon Rewards Visa is a good fit. Or, if you expect many baby-related purchases to be made through supermarkets, American Express Blue Cash Preferred is definitely worth it. (TRICK: use the card to buy branded gift cards at supermarkets, such as Baby R Us.)</p>
MyBankTracker
Wednesday, 13 Apr 2016 9:28 PM
<p>Which Chase cash back credit card are you referring to? (They have two now.)</p><p>As for a good alternative to the Walmart credit card, take a look at the Citi Double Cash card, which gives an effective 2% cash back on everything that you buy.</p>
Wednesday, 13 Apr 2016 8:49 PM
<p>I have a baby coming soon and I'd like to manage my expenses better, which specific card is best for my situation?</p>
Sunday, 10 Apr 2016 3:49 PM
<p>I have walmart cash back credit card and thinking to get a card with more options, how does it compare to Chase cash back credit card?</p>