Get money back on all your spending. You're going to make that purchase anyway. Why not use a cash back credit card to earn money back? 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 credit cards with the best cash back rewards, find the card that rewards your particular spending patterns. In our opinion, these are the best cash back credit cards that will surely match the way you spend.
Best Cash Back Card for Shopping
Our Pick: Santander® Ultimate Cash BackSM MasterCard®
The Santander® Ultimate Cash BackSM MasterCard® credit card stands out with its unlimited cash back program and no transaction fees -- applies to balance transfers, cash advances, foreign transactions, and returned payments. It pays a generous 1.5% cash back on all purchases. You don’t have to deal with complex rewards programs that involve different categories and earnings limits. This is ideal for shoppers who don’t have any sort of recognizable spending pattern and seek a card that they can always have with them. The card has no annual fee.
To sweeten the deal, you can even earn a $100 bonus when you spend $500 in net retail purchases within the first 90 days of account opening.
Best Card for Seasonal Spending
Our Pick: Discover it®
The Discover it® card has the best combination of a great cash back program, no annual fee, low APR and card benefits.
The card offers 5% cash back on certain categories that change every quarter. 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).
It also has a number of other perks such as free FICO scores, no penalty APR, and no foreign transaction fees.
Best Credit Card With the Most Cash Back
Our Pick: Fidelity® Rewards Visa Signature®
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.
Your earnings 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 multiply your earnings since they are interest-bearing accounts. And with the cash management account, you get even more flexibility. You can use that account how you want, not just for investing or retirement. Another great perk to this cash back credit card is that there is no annual fee.
Who Should Use This Type of the Credit Card
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 credit cards with the best cash back rewards 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.
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.
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.
What is Cash Back?
Cash back can be seen as a type of rewards currency. When you’ve saved up enough cash back, you redeem it as actual cash (or something equivalent to it).
Redemption options of include:
- Direct deposit into a bank account
- Mailed paper check
- Statement credit
You can choose whichever redemption options is best for you. Credit cards companies may require you to save up a minimum amount of cash back before you can redeem it.
One common concern is the tax burden of earning cash back. Because cash back is the result of buying something, it is seen as a rebate. It is not an upfront bonus for doing nothing. Therefore, you don’t have worry about taxes.
Tradeoffs for Cash Back Programs
Credit card companies need to make a profit and support their bottom lines, after all, so it pays to know just how cash back cards really work, and if you’re getting the most out of your money by signing up for one.
Watch for Fees
Though it may seem like free currency, cash back rewards do come at a price.
Credit card companies earn a great deal of their money through merchant fees and cardholder fees. Merchant fees are also known as interchange fees. It is a cost paid by a retailer or merchant to accept credit card transactions. Merchant fees may average between 2 percent to 4 percent per transaction. They may vary according to the type of merchant and transaction, location, and card provider. (For example, Discover and American Express conventionally carry higher fees than Visa or MasterCard.)
Essentially, it’s these fees earned by card providers that they share with their card holders in the form of cash back. It’s a give-and-take process: by offering consumers cash back on their purchases, cardholders are poised to spend more on their card (instead of using cash), so the card company earns its merchant fees, and then gives back a portion to their customers.
So, when a bank like Citi earns a substantial amount of money from merchant fees, for one, it can translate that back into rewards for the consumer, especially when a unique cash back program -- like the Double Cash card -- is offered.
Many cash back credit cards may start with a $0 annual fee for a limited period of time.
In addition, account holders may be subject to balance transfer fees for importing funds from one card to another, and penalty fees if payments aren’t on time -- more big revenue streams for card companies.
Of course, then there’s the big money maker for card companies: interest rates. All credit cards derive income from the interest rates they charge to consumers. For credit cards that offer rewards, such as cash back, expect higher APRs.
How We Picked
Before applying for a cash back card, consider these questions:
What’s the interest rate?
If you tend to carry a balance from month to month, a 0 percent intro APR may be a nice perk, but those double-digit interest rates can counteract any cash back rewards you might receive.
How are the cash back rewards organized?
You’d be remiss to open a new card that doesn’t emphasize your spending habits. If general spending is how you like to use credit, go for the Citi® Double Cash Card or Chase Freedom® cards for more versatility. But if a large portion of your monthly spending is on groceries, a card like the Blue Cash Preferred would suit you better.
How is the cash paid out?
Not all cards give back cold, hard currency. Fidelity’s Visa Signature card is ideal for the budding investor who wants their cash back to benefit from compounding interest. Likewise, it’s not wise to redeem your cash on the Citi® Double Cash Card card as a statement credit because it could reduce the value of your earnings.
What are the fees?
Some cards carry zero annual fees. Others offer the same deal for the first year, and others still charge a fee from the start. You want to make sure that you're able to earn enough cash back to cover the fees
Ultimately, cash back credit card is a good choice if you like cash rewards and you don't carry a balance. If you carry a balance, the interest charges will exceed the value of the cash back. At that point, we would suggest a low-interest credit card instead.
How to Earn Cash Back Rewards
With most cash back credit cards, you’ll earn on nearly everything you buy. However, your card may have a program that pays more in certain spending categories. Some consumers may carry different cash back credit cards for different kinds of spending in order to earn the most cash back.
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.
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.
Earn Bonus Cash Back on Certain Categories
There are ways to earn more cash back on specific spending categories.
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 provide 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.
Get Cash Back Bonuses When You Sign Up
Introductory bonus cash back credit card 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.
Consider Investing Your Rewards
Let your credit card rewards grow into something more with a high-yield savings account. 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 = 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.
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 credit cards is to read the terms and fine print to avoid being hit with surprise expiration dates. 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.
Many banks provide 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. Some 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. 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.
What Credit Score is Needed?
Credit Cards that offer cash back tend to require better credit scores than credit cards that don't have any type of rewards program. Generally, for the best chances of qualifying for a top-notch cash back credit card, you need a good credit score.
Your credit score is calculated from the data on your credit reports held with the three major U.S. credit bureaus: Experian, TransUnion, and Equifax. These bureaus compile reports on individual credit status based on details such as payments history, the range of credit options used, the length credit accounts are active, the amount of activity, and credit debts accumulated. The report also includes any legal actions, court judgments or tax liens relating to that person’s finances.
The standard credit score used by 90% of major U.S. lenders is the FICO credit score. The score can range between 300 for those with the most problematic credit records to 850 for a top credit rating. Using this scale, a good credit score is considered 700 or higher.
We'd like to remind borrowers that lenders want to know about your income and employment history. And, each lending institution has their own criterion for determining loan eligibility and the generosity of terms the borrower may be offered.
How to Check Your Credit Before You Apply
You can retrieve a free copy of your credit report from the three major credit bureaus each year through AnnualCreditReport.com. This right is independent of whether or not you have been denied credit. With all the efforts they put into producing accurate reports, due to the amount of data handled the possibilities of confusing people with similar names or social security numbers and a myriad of other variables means there is always the possibility of error.
It pays to check the report carefully to verify that all the details are accurate. If a decision to deny credit is based on your credit report, the lender has to notify you from which bureau they received the report and you have two months to request a free copy.
Although credit history stays on the reports for 7 years and in the event of a personal bankruptcy for 10 years, the negative impression and score resulting from irresponsible actions and business setbacks can be erased if subsequent actions show responsibility and financial stability.
Cash Back Credit Cards
|Cash Back Credit Cards||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.|