Choosing the best cashback credit card can be overwhelming. There are so many options, each with varying benefits and reward tiers. The effort is worth it, however, as these programs allow you to earn real cash on your everyday purchases.
Aside from earning money just for buying the things you already buy, there are other benefits as well. For example, the cash you earn does not need to be declared on your tax return because it is technically a discount on a purchase, not taxable income. In order to help you make sense of all the different offers, I've reviewed the top 5 best cashback credit cards.
The Best Cashback Credit Cards: What to Consider
The Best Cashback Credit Cards
There are plenty of reputable cash back credit cards on the market to choose from and some are better than others. Several variables come together to make a good card and if you know what to look for the choice is easier to make. Here I've outlined some key points to look for:
- Before you look at a card's cash back features, make sure it is a good card in general. Are there fees involved, and if so do the card's other features make them worth paying? What are the interest rates? Are there penalty fees? Don't get a bad credit card just for the cash back.
- What is the cash back return rate? The majority of cards offer 1% cash back, but others offer as much as much as 5%. Many cards offer 5% on specific purchases and 1% on everything else.
- Choose a trusted cash back credit card that offers cash back on purchases that you actually make. Sometimes cards are geared towards specific people. For instance, you don't need a card that offers excellent returns on college related purchases if you are not in school, no matter how good the rate is. Make sure the program matches your spending style.
- Check for restrictions. Are there limits to the amount of cash you can earn? Can your earnings ever expire?
Look at these factors and choose a rewards card that works for you. Not every good card will work for every person. Don't sign up for an offer unless you're actually going to be able to make use of it.
How to Use the Best Cashback Credit Card Wisely
There is definitely a love/hate relationship for many people when it comes to the use of credit cards. Typically, however, it is not the cards that are intrinsically bad, it is the poor management of credit cards that leads to credit woes down the road.
If you have a credit limit of $1,000, then this means that your outstanding balance on the card at any given time should remain between $300 and $500.
Avoid Carrying a Balance
Whenever you use a credit card, you should always spend exactly what you are able to pay within 30 days. If you cannot repay your credit card bill within 30 days, then you need to rethink your purchase. This is because carrying a balance not only has a potential impact on your credit score, it also means you'll be paying extra for your purchases in the form of interest charges. According to Nasdaq, 34% of Americans carried credit card debt from month to month in the year 2014, resulting in billions of dollars worth of debt (debt you pay your card issuer fees to carry).
Watch Your Credit Utilization
You also need to remember that just because your credit limit is a certain number, it does not mean that you should spend the amount of your credit limit all the time. A key factor in responsible credit card usage is minding your credit utilization. This number reflects the amount that you have charged on your card versus your credit limit, and your utilization rate should ideally remain between 30% and 50%. If you have a credit limit of $1,000, then this means that your outstanding balance on the card at any given time should remain between $300 and $500.
Improve Your Credit Score
If your creditworthiness is less than optimal, spend some time and effort bringing your score up. This will allow you to qualify for better APRs, even within your current issuer's terms. It can take six months to a year to really see a significant jump in your rating but the effort is worth it in saved interest charges.
If you follow these rules and responsibly use your card, then you should think about using a credit card that offers you cash back rewards. Each credit card company is different in how they reward points and how much cash back you are eligible to receive; however if you are going to spend the money anyway, shouldn't you get some of this back from your card provider?
What Is the Best Cashback Credit Card?
The answer to this question depends on your lifestyle, spending habits, and even where you bank, as some cards can be combined with your financial provider's other services to maximize rewards. For most people, however, the best credit card for cash back is one which gives you bonus points for everyday expenses.
Several variables come together to make a good card and if you know what to look for the choice is easier to make.
For most people, after their mortgage or rent payment, their food costs are the next highest monthly line items in their budget. There are cash back rewards cards that specifically cater to grocery spending and they will give you a higher percentage back when your dollars are spent in a grocery store. According to Gallup, the average American family spends $151 per week on food. Imagine earning just 1% of that back, which amounts to roughly $78 of cold hard cash each year. You're going to spend this money no matter what, so it only makes sense to capitalize on reward offers.
Another large monthly expense for households is gas for their cars. My research showed that there are many cash back rewards cards that give an extra percentage back when you spend your money on gas. If you cannot avoid making your regular commutes and you need to drive as much as you do, choosing the best cash back credit card for gas rewards is a wise financial move.
Even just a basic cash back rewards card will typically reimburse you around 1% of every dollar that you spend using the card. If you spend $1,000 a month, this translates to $10 that you will get back from your credit card company. This may not sound like a lot to you, but I bet if you found $10 on the street, you would be happy to pick it up. If you are going to spend the $1,000 anyway, shouldn't you get rewarded for it?
The Best Cashback Credit Cards
- 0% APR for first 15 months
- 5% cash back up to $1500 (on qualifying purchases)
- Unlimited 1% cash back on all other purchases
- $150 bonus after spending $500 in first three months
- Superior mobile support
- Not optimal for international travel due to foreign transaction fees
- Activation required each quarter for 5% cash back bonuses
Chase Freedom is one of the all-around best cashback credit cards with no annual fee. It features wide acceptance, rotating bonus cash back categories, and a $150 bonus just for spending $500 within the first three months of card ownership.
The 5% cash back tier is good on qualifying purchases on a number of everyday purchases in categories like gas, groceries, and dining. You can earn up to $1500 on your combined purchases in these categories, and they change every quarter so that you have an opportunity to earn that extra amount no matter what types of expenditures you typically make.
The only downside of this program is that you must log into your account and activate the option by the deadline or else you'll be stuck at the normal 1% cash back level. The deadline is generous however, usually falling around the second week of the third month of the current quarter - meaning your 5% bonus is retroactive as long as you opt in by the deadline.
Another attractive feature of Chase Freedom is that fact that you transfer your cash back points to your Chase Sapphire, which boosts their value by 25%. This makes it easier and faster to earn travel rewards with your Sapphire card. If you already have a checking or savings with Chase, you'll also find the aggregation of your accounts in one place to be convenient. Plus, your rewards never expire.
The one case in which Chase Freedom might not be the best cashback credit card for you is if you do a considerable amount of international traveling. There are fees for international transactions, so you'd be better off with a card that waives these fees if your lifestyle demands this kind of travel.
If you travel mostly domestically and are simply looking for a solid way to earn cash back with your credit card, my analysis shows Chase Freedom to be a good fit for most consumers. It gives you a balanced suite of benefits, easy to redeem rewards, and great customer service.
- Sign-up bonus: You'll earn a $150 bonus for spending $500 within your first three months of membership.
- Key fees: Balance transfers cost the greater of $5 or 5%, while cash advances are the greater of $5 or 5%. Foreign transactions cost 3% of the amount of each transaction. Late payments range between $15 and $37, and returned payments can cost up to $37.
- Introductory APR: The intro period gives you a generous 15 months at an APR of 0% on purchases or balance transfers.
- APR: After the introductory period expires, your APR will be 14.24% to 23.24%, depending upon your creditworthiness. The cash advance APR is 25.24%.
- Other perks: You also get zero liability protection, purchase and price protection, and extended warranties.
Blue Cash Preferred
- 6% to 1% on purchases in everyday categories
- 0% APR for the first 12 months
- $250 signing bonus (for spending $1,000 in first three months)
- Hefty annual fee
- $6,000 earning limits at supermarkets
American Express' Blue Cash Preferred Card is a solid entry in the cashback sector. You can earn 6% cashback on groceries, 3% cash back on gas and at some department stores and 1% on everything else. The fact that these rewards are in categories that most people spend a lot of their money on is excellent. There are limits, however - you can't earn 6% on more than $6,000 in purchases per year at supermarkets. After $6000 your bonus drops to 1% on groceries.
The cash back in practical categories is great but the spending limit puts a damper on that feature, although it is relatively high. Still, given the high return on groceries and the generous promotional offers, such as the current Amazon offer, Blue Cash Preferred by American Express earns a well-deserved top spot in my cash back credit card comparison.
- Sign-up bonus: Spend $1000 in your first three months and you'll receive a $250 rewards bonus. Plus, you'll get 10% of your Amazon purchases for the first six months of ownership, up to $200 if you apply by January 11, 2017.
- Key fees: The annual fee is $95. Balance transfers and cash advances cost the greater of $5 or 3%. Foreign transactions cost 2.7% of the amount of each transaction. Late or returned payments can cost up to $38.
- Introductory APR: The intro period gives you 12 months at an APR of 0% on purchases or balance transfers (transfers must be requested within the first 30 days).
- APR: After the introductory period expires, your APR will be 13.24% to 23.24%, depending upon your creditworthiness. The cash advance APR is 25.49% and the penalty APR is 29.49%.
- Other perks: Unique benefits of Blue Cash Preferred include a lowest hotel rates guarantee, the Global Assist Hotline, and presale event ticket access. You also get zero liability protection, purchase and price protection, and extended warranties.
Capital One Quicksilver
- 1.5% cashback on everything
- $100 signing bonus (if you spend $500 in first three months)
- No earning limits
- 0% APR for 9 months
- Redeem cash any time
- No high return rotating categories
- Short 0% APR term compared to others
The Capital One Quicksilver Cash Rewards Credit Card is great for anyone who doesn't like the idea of rotating cash back categories. This card simply offers 1.5% cash back on everything.
This return rate is slightly higher than the return rate on non-rotating items on other top cards. However, it isn't as high as the 3-5% returns that are typical for rotating programs. There is no limit to how much you can earn in rewards. You have the choice of having your rewards credited to your account, by check or by gift cards.
Though the return rates aren't as good as some other cards with rotating categories, the flexibility and ease of use persuaded me to include Quicksilver in my review of the top 5 best cash back credit cards.
- Sign-up bonus: You'll earn a $100 bonus for spending $500 within your first three months of card membership.
- Key fees: Balance transfers cost 3% of the amount for each transfer which posts within your first nine months, while cash advances are the greater of $10 or 3%. Foreign transactions cost 3% of the amount of each transaction. Late payments may cost up to $35.
- Introductory APR: The introductory APR is 0% on purchases or balance transfers for nine months.
- APR: After the introductory period expires, your APR will be 13.24%, 18.24%, or 23.24%, depending upon your creditworthiness. The cash advance APR is 23.24%.
- Other perks: You'll also enjoy no foreign transaction fees, fraud protection, extended warranties, and travel savings and upgrades. In addition, your rewards will not expire and you can redeem your cash back at any time.
BankAmericard Cash Rewards
- No annual fee
- Three rewards earning tiers, from 1% to 3%
- 0% APR for first year, including balance transfers in the first 60 days
- Bonus for redeeming into your BoA account
- $100 bonus after spending $500 in first 90 days
- Not the most lucrative card for high spenders with flawless credit
BankAmericard Cash Rewards is an excellent choice for the average family person who spends a considerable amount of their money on things like gas and groceries. It offers three tiers for earning cash back - 2% at grocery stores and wholesale clubs, 3% on gas up to $2500 in combined purchases, and 1% on all other expenditures.
The feature that gives this program an edge for BoA and Merrill Lynch customers is the 10% bonus for depositing your cash back rewards into your Bank of America checking or savings account. On top of that, BoA Preferred Rewards customers receive a boost that puts them at a 25% - 75% bonus depending upon their three-month average combined account balances.
While there are other top cash back credit cards with higher return rates for those with stellar credit and high expenditures, BankAmericard Cash Rewards is one of the best cash back credit cards that I looked at for the average consumer.
- Sign-up bonus: Spending just $500 in the first three months will net you a $100 bonus.
- Key fees: Balance transfers are the greater of $10 or 3%. Cash advances cost $10 or 5% for over-the-counter, ATM, same-day online, or cash equivalent. Direct Deposit and Check Cash Advances cost $10 or 3%. Overdraft advances are $12 per transaction. The late fee is up to $37, and returned payments cost up to $27.
- Introductory APR: The introductory rate is 0% for the first 12 months on purchases, as well as balance transfers made within your first 60 days.
- APR: The APR on purchases and balance transfers ranges between 13.24% and 23.24% depending upon your creditworthiness. Cash advance APRs range between 16.24% and 25.24%. The penalty APR is 29.99%.
- Other perks: Other features include EMV chip technology, digital wallet protection, and optional overdraft protection. Plus, you'll get a 10% bonus on all purchases if you have a BoA checking or savings account. BoA Preferred Rewards status boosts that bonus to between 25% and 75%.
Discover it Cashback Match Review
- 5% Cash back on quarterly rotating categories
- Up to 20% on Discover's Online Shopping Mall
- Double the cash back on certificates from certain retailers
- No annual fee, foreign transaction fee, or penalty APR
- 0% APR on balance transfers for one year
- Not as universally accepted
Discover's Discover it® card offers 5% cashback on rotating quarterly categories. That means you get a 5% return rate on specific purchases that change each quarter. Typically, the categories that rotate each quarter are practical purchases. They will be things like gas, hotels, restaurants and any other things a typical person might spend money on. If you shop with Discover's online shopping mall, a collection of online retail affiliates, you can earn up to an astonishing 20% cash back. Finally, you can receive double the cash back when you redeem it for certificates at participating retailers.
This card has an excellent cash back rewards program and on top of that its balance transfer feature makes it the number one choice. The only obvious drawback is that Discover cards are not as universally accepted as other cards. Take a look at the quarterly cash back categories to see if Discover it® is right for you.
- Sign-up bonus: Discover matches every dollar in cash back earned at the end of your first year.
- Key fees: Balance transfers are charged at 3% of the amount transferred, cash advances cost the greater of $10 or 5%, and late and returned payments cost up to $37 (first late payment is free).
- Introductory APR: The intro period includes a 0% APR on purchases and balance transfers for the first 12 months.
- APR: Following the introductory rate, your APR will be 11.24% to 23.24% and 25.24% for cash advances. There is no penalty APR.
- Other perks: You get standard Discover benefits like free FICO scores, 24/7 U.S.-based customer service, and fraud protection. There's no annual fee and no foreign transaction fees.
Get Advice on the Best Cashback Credit Cards and More
If you're shrewd enough to know that you want to make the most of your typical credit card purchases, then you will definitely benefit from checking out our other advice columns. Worried that hidden fees may be eating away at your bank account? We've got you covered. Need to find the best credit card for your college student? Find out how.
Finding the best cashback credit card for you is a simple and practical way to earn free rewards on purchases you already make every day. If you pay your credit cards on time they can really be worth your while. However, if you routinely miss due dates you can forfeit your earnings according to the terms of most cards. Spend wisely, pay your bills and find a cashback card that works for you.