Cash back credit cards offer consumers a great way to get money back every time they shop. If you’re considering getting one, compare several cash back cards before you settle on one.

With 2020 already well on its way, you may be asking yourself the question that we’re all asking which is this: how can I spend the amount of money I need to spend, and also get at least some of that money back?

Here’s what’s we all know at this point in time: credit card rewards offer an excellent way to get value back every time you shop. But with so many types of rewards credit cards, it’s not always easy to know which type is best for you.

The simplest and most straightforward form of credit card rewards is cash back. Since you can use cash for anything you want, it’s often preferable to complicated points and miles programs.

If you’re considering a cash back credit card, here’s what you need to know.

What are cash back rewards?

As the name suggests, cash back credit cards offer cardholders cash back on everyday purchases, typically in the form of a statement credit, direct deposit, or a paper check.

There are three types of cash back credit cards: flat-rate cards, bonus rewards cards, and rotating bonus rewards cards.

Flat-rate rewards cards

With these cards, you’ll get a flat rewards rate on all of your purchases. Among the best cash back credit cards, the rate is 1.5% or higher.

Flat-rate rewards cards are best for people who want a straightforward rewards program and for those who don’t spend a lot in any one specific spending category.

Bonus rewards cards

Bonus rewards cards offer extra cash back on certain spending categories, such as groceriesgas, or dining. Depending on the card, you can have one bonus category or many, and the base rate for non-bonus spending is typically 1%

Bonus rewards cards are excellent for people who spend a lot in certain areas of their budget. But it can get complicated if you have to remember when to use that particular card instead of cash, debit, or another credit card.

Also, the 1% base rewards rate isn’t ideal, especially if most of your spending doesn’t align with one of the card’s bonus categories.

Rotating bonus rewards cards

These cards offer a high rewards rate on certain categories that rotate every three months, giving cardholders a chance to earn bonus rewards on several different categories throughout the year.

Other ways to earn cash back

Depending on the cash back credit card you choose, you may get a chance to earn cash back on more than just your everyday purchases.

For starters, many cash back credit cards offer sign-up bonuses. You usually need to spend a certain amount in the first few months to qualify for it, but the minimum spending requirement is rarely more than $1,000.

Credit cards with the best cash back rewards

With so many cash back credit cards on the market, it can be tough to narrow down your search to just one. To help, here are some of Money Under 30’s favorite cash back cards.

Discover it® Cash Back

The Discover it® Cash Back is one of the few cash back cards that offer rotating bonus categories. You’ll earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more up to $1,500 spent, when you activate.

You’ll also receive 1% cash back on all non-bonus spending. However, Discover will match all of the cash back you earn during your first year. Here’s what else you’ll get:

  • No penalty APR.
  • No foreign transaction fee.
  • No annual fee.

Chase Freedom Flex℠

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In A Nutshell

The Chase Freedom FlexSM offers an enticing $200 sign-up bonus after spending $500 in the first three months.  Plus cash back rewards on travel, dining, drugstore and every day purchases with rewards that never expire. All for no annual fee!

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Credit Score Requirements: Credit Score requirements are based on Money Under 30’s own research of approval rates; meeting the minimum score will give you the best chance to be approved for the credit card of your choice. If you don’t know your credit score, use our free credit score estimator tool to get a better idea of which cards you’ll qualify for. *Money Under 30 uses a FICO 8 score, which is one of many different types of credit scores. *A creditor may use a different score when deciding whether to approve you for credit.
Poor 500-599
Fair 600-699
Good 700-749
Excellent 750-850

What We Like:

  • Awesome $200 cash back bonus after spending $500 on purchases in the first 3 months from account opening.

  • Earn 5% cash back on travel booked through Chase Ultimate Rewards® and on up to $1,500 in combined purchases in bonus categories each quarter you activate. Enjoy new 5% categories each quarter, plus earn 1% on all other purchases.

  • 0% Intro APR on purchases and balance transfers for 15 months from account opening on purchases, then a variable APR of 17.24% – 25.99%.

  • Earn a $200 Bonus after you spend $500 on purchases in your first 3 months from account opening.
  • 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. Enjoy new 5% categories each quarter!
  • 5% cash back on travel purchased through Chase Ultimate Rewards®, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more
  • 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1% cash back on all other purchases.
  • No minimum to redeem for cash back. You can choose to receive a statement credit or direct deposit into most U.S. checking and savings accounts. Cash Back rewards do not expire as long as your account is open!
  • 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 17.24% - 25.99%.
  • No annual fee - You won't have to pay an annual fee for all the great features that come with your Freedom FlexSM card
  • Keep tabs on your credit health - Chase Credit Journey helps you monitor your credit with free access to your latest score, real-time alerts, and more.
Annual Fee
$0
Regular APR
17.24% - 25.99% Variable
Intro APR
Intro APR Purchases 0% Intro APR on Purchases for 15 months , 15 months
Intro APR Balance Transfers 0% Intro APR on Balance Transfers for 15 months , 15 months

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The Chase Freedom Flex℠ is a great choice if you’re looking for a flexible cash back card with no annual fee. This card features 5% cash back on up to $1,500 in combined purchases in bonus categories (which you activate) each quarter. These categories change quarterly, with options in the first quarter of 2021 that include wholesale clubs, internet, cable, phone services, and select streaming services.

Cardholders will also earn 5% cash back on travel expenses purchases through Chase Ultimate Rewards®, 3% cash back on dining and drugstores, and 1% cash back on all other purchases. This means that even after you’ve maxed out the rotating 5% cash back category each quarter, there are still plenty of ways to earn. Cash back rewards never expire, and there’s no minimum to redeem them.

In addition to the lucrative cash back rewards, cardholders can also earn a welcome bonus of $200 cash back when they spend $500 in the first three months from account opening. Other perks include a 0% Intro APR on Purchases for 15 months and 0% Intro APR on Balance Transfers for 15 months. There is no annual fee.

How to evaluate cash back rewards credit cards

If you’re still not sure which cash back credit card is best for you, it’s important to compare them in context. Here are a few things to think about as you shop around.

Your credit score

Most cash back credit cards require good to excellent credit to get approved. This typically means having a credit score of 700 or higher.

If your score doesn’t meet that requirement, you may still qualify for a credit card for fair credit, which you can use to build your credit so you can get approved for a better card in the future.

Your spending habits

Since cash back credit cards offer various rewards rates or combinations of bonus rewards rates, it’s important to get a card that fits your spending habits well.

If you spend a lot on groceries, for instance, you’d do well to pick a card that offers bonus rewards on grocery purchases. The same goes for gas, dining out or any other everyday spending category.

Your preferences

You may spend a lot on groceries, but you might find it easier to use a flat-rate rewards card over a bonus rewards card. There’s no right or wrong answer to this decision, so it’s important that you know what you want.

You can also apply this factor to other card features. For example, if you want a bigger sign-up bonus, go with a card that offers more than a couple hundred dollars. And if you’re completely against paying an annual fee, limit the scope of your search to those cards that fit those criteria.

Who shouldn’t get a cash back credit card?

Because cash is universal, you can’t really go wrong with a cash back credit card. But if you’re more interested in earning travel rewards or getting special travel perks, you may be better off getting a travel rewards credit card.

Also, if you generally have issues with overspending and you think the idea of earning rewards on every purchase you make could tempt you to spend more than is necessary, it might be better to skip credit cards altogether for now.

Cash back credit card FAQs

While cash back credit cards are relatively simple, you may still have some questions about how they work. Here are a few, along with their answers:

How can I redeem my cash back rewards?

It depends on the card, but common redemption options include a statement credit, direct deposit, and paper check. Some cards also allow you to use your cash back to purchase gift cards.

Before you get a credit card, make sure you know what the redemption options are. Also, read the fine print to find out if there’s a minimum redemption amount. Some cash back cards won’t allow you to access your rewards until you’ve reached $25 or $50 earned.

Does my cash back expire?

Typically, no. As long as you keep your account open and in good standing, you shouldn’t worry about losing the cash back you’ve earned.

That said, you could forfeit your points if you fall behind on payments or if you close your account.

Are cash back cards with an annual fee worth it?

It depends. As with any credit card with an annual fee, it’s important to do some math to make sure you’re getting more value out of the card than you’d get from one with no annual fee.

For example, if a card offers a sign-up bonus after you spend a certain amount in the first few months,  this might cover a large chunk of your annual fee.

Beyond that, calculate how much you spend on average within a card’s bonus categories, then determine whether the end result is better than what you could get with a no-annual-fee card.

Are cash back rewards taxable?

Typically, no. The IRS considers cash back rewards as a rebate, not income. There are still rare instances, though, where you might receive a 1099-MISC form for earned credit card rewards. In this case, you’ll need to report it because the card issuer reported it.

What other benefits do cash back credit cards offer?

Different credit cards offer different benefits. But in general, a lot of cash back credit cards offer an introductory 0% APR on new purchases, balance transfers or both.

Also, many of these cards offer basic credit card benefits, such as rental car insurance, price protection and purchase protection, and more.

Summary

Cash back credit cards offer consumers a great way to get money back every time they shop. If you’re considering getting one, compare several cash back cards before you settle on one.

Specifically, consider how each card can serve your needs and preferences and pick the one that best fits the bill.

And if you’re really brave, consider getting more than one card so you can maximize your rewards. For example, you can use a bonus rewards card on categories that offer extra rewards, then use a flat-rate rewards card with a rate higher than 1% on everything else.

Regardless of what you choose, it’s important to take the time to find the card that works best for you.

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About the author

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Ben Luthi is a personal finance and travel writer who covers credit cards, debt, credit, investing, and more. He's currently studying to become a CFP® and trying to keep up with his two young kids. You can connect with Ben on Twitter or his website.