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Getting the Most Out of Credit Card Cash Back Bonuses

Written By Sunday, December 19, 2021 Add Comment Edit

Methodology

Forbes Advisor combed through dozens of bank profiles of cash back credit cards. The concentration was on major banks and standout credit cards at lesser known banks with online accessibility. We looked for credit cards that outperformed other cards in terms of cash back rates and categories, fees, welcome bonus, and other rewards and features.

Best Cash Back Credit Cards

Factors to Consider When Choosing a Cash Back Card

When you consider a new credit card, no matter the type, it helps to ask yourself some questions. The best cash back credit card is the one that best fits into your lifestyle. The right cash back card for someone else may not be the right cash back card for you.

Forbes Advisor aims to help you by identifying what each cash back card is best for, but you should always do the math yourself and consider not only how much cash back you could earn but also how you might use the other card benefits.

Once you've identified how much you spend in different areas and what other card features could benefit you, you're ready to compare credit cards and shop for the best one for you. As you compare cards and credit card issuers, there are some things that you should incorporate into your evaluations.

  • Fees: Is there an annual fee? How much would you have to spend on the card to earn enough cash back to at least cover the annual fee? How does that compare to a similar card that doesn't charge an annual fee? What other fees might you have to worry about?
  • Annual percentage rate (APR): Credit card interest rates are typically higher than other types of loans. If you don't think you'll be able to pay off your credit card in full each month, a credit card may not be the right fit for you. If you want a credit card but don't think you'll be able to pay it off, you should pay close attention to how much interest you might incur on purchases and balance transfers. If this sounds like you, you should consider a card with an introductory 0% APR offer or a card that's good for balance transfers.
  • Cash back rate: Cash back rates vary from card to card. Consider the areas of your life that you spend the most money in and choose a card that will reward you accordingly.
  • Bonus categories: Will you be able to take advantage of the bonus categories? If the card offers 3% on gas and groceries, but you take the train and prefer to dine out then that's not the cash back card for you.
  • Redemption and rewards: Can you use the cash back the way you want to? Many cash back cards offer various ways to redeem what you earn, such as statement credit, a check, a deposit into a savings or investment account, discounted travel packages and so on. Some cards are more restrictive than others. Make sure you know how you will be able to redeem your hard-earned rewards.

Finding the Best Cash Back Card for You

There are many great cash back cards on the market, but the card that will earn you the greatest rewards depends on your spending habits. Before committing to a card, take a look at your budget and see where you spend most frequently. Then choose the card that best fits your lifestyle.

To view rates and fees of the Blue Cash Preferred® Card from American Express, please visit this page.

To view rates and fees of the Blue Cash Everyday® Card from American Express, please visit this page.

Frequently Asked Questions

What Is A Cash Back Credit Card?

A cash back credit card is one that allows you to earn a percentage back on your credit card spending. Typically, you can redeem those rewards for money. The reward can be issued either as a statement credit, a check sent via mail or deposited directly into a qualifying bank account.

There are many types of cards that offer cash back rewards including ones that earn the same flat rate on everything you buy, ones that offer tiered rewards where certain areas of spending earn higher rewards than other categories and cards that offer elevated rewards in specific categories that can change quarterly.

If you aren't sure how to pick, see Forbes Advisor's guide on choosing the best cash back card for advice you can trust.

How Does A Cash Back Credit Card Work?

Every time you make a purchase with your card, you'll earn a percentage back on your spending. The exact amount you'll earn depends on your particular card's terms. Those earnings are accumulated in your card's account and you can redeem them according to your card's protocols. Some cards let you redeem your cash earnings in any amount, at any time while others require a minimum balance to cash out.

The exact way you'll receive your money also varies by card, with some letting you take those rewards as a statement credit against your balance and others also allowing you to take actual cash back.

Which Credit Card Gives The Most Cash Back?

There's no one best cash back card that will earn the most rewards for everyone. The credit card that will earn you the highest cash back rewards will depend on your spending habits and tolerance for tracking rewards.

If you spend a fair share of your budget on groceries, for example, you might want to look to a card with elevated rewards on spending at supermarkets, like the $0 introductory annual fee for the first year, then $95.-annual-fee Blue Cash Preferred® Card from American Express (Terms apply. See rates and fees), which earns 6% cash back on up to the first $6,000 in spending at U.S. supermarkets and after that 1%.

If you prefer a simple cash back scheme, a card that earns the same flat rate on all your spending could be a fit. Consider the Citi® Double Cash Card which carries no annual fee and earns a net 2%—1% when you make a purchase and another 1% when you pay the bill.

What Kinds Of Cash Back Credit Cards Are There?

Generally there are three kinds of cash back cards:

  • Flat rate cash back cards. These types of cards earn the same percentage back on your spending, typically anywhere from 1% to 2%, without any spending caps or category restrictions.
  • Tiered rewards cash back cards. These cards earn different amounts back in different areas of spending. For example, some cards offer elevated rewards on dining or travel and a lower rate on other areas of spending.
  • Rotating bonus category cards. With this cash back structure, a card will earn higher-than-average rewards, typically about 5%, on specific areas of spending up to a quarterly maximum. After that, the rewards rate will drop to 1%. All other spending on the card typically earns 1% cash back. Bonus categories change every three months.

What's The Highest Paying Cash Back Credit Card?

The highest-paying cash back card available today depends on how you spend money and how many cards you want to have.

For example, a card might earn 6% cash back up to the first $6,000 in spending at U.S. supermarkets and after that 1%. But if you rarely shop for groceries, you might get more utility out of a card that  earns an unlimited 4% cash back on dining and entertainment, 2% on groceries and 1% on all other spending.

If you're looking for the highest paying flat rate cash back credit card, the Alliant Cashback Visa Signature Credit Card is hard to top. The card pays 2.5% cash back on the first $10,000 per billing cycle. It carries a $ 0 annual fee (waived the first year) and requires you to join Alliant's credit union to apply for the card.

If joining a credit union is unpalatable to you, you routinely spend more than $10,000 a month on your card or you don't want to pay an annual fee, another option is the Citi® Double Cash Card which earns a net 2%—1% when you make a purchase and another 1% when you pay the bill.

Is Cash Back From A Credit Card Taxable?

In general, the IRS treats cash back rewards on a credit card as a discount and not earnings, especially if you take your cash back rewards as a statement credit on your credit card. This means that your cash back rewards are not taxable.

There is one caveat: If you use your cash back rewards to pay for a business expense, you can't deduct the cost of that purchase from your taxes since you used your rewards to purchase the item.

Does Cash Back Expire?

The expiration date, if there is one, on any cash back rewards you've earned on your card depends on your credit card's policies. Some cash back rewards never expire and others may require card activity to keep your rewards from expiring. Check your card's terms and conditions to make sure you don't accidentally lose any earnings. In addition, be sure to cash out your rewards before you close a credit card account.

Next Up In Credit Cards

Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results.

Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author's alone and have not been provided, approved, or otherwise endorsed by our partners.

Getting the Most Out of Credit Card Cash Back Bonuses

Source: https://www.forbes.com/advisor/credit-cards/best/cash-back/

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