How can I maximize my cash back credit card?

The keys to maximizing your cash back credit card are using it for every purchase and always paying off the full balance. By using your card for every purchase, you'll collect the most possible cash back. When you pay off your full statement balance every billing period, you never incur interest charges on your purchases. That means you're making money from your card's cash back without paying any interest to the card issuer.

Best Cash Back Credit Cards for May 2021 | The Ascent by Motley Fool

With cash back credit cards, you can save money every time you shop. These cards give you a set percentage back on every purchase, and that money can be used to lower your credit card bill or boost your bank account. A big part of maximizing your cash back is choosing the right card. The best cash back credit cards could help you double or even triple how much you earn. In the list below, you'll find all the top cash back cards on the market today.

What is a cash back credit card?

A cash back credit card is one that gives you a certain percentage of money back on your purchases. The amount you earn depends on the card and the spending category. Some cash back cards earn the same amount on every purchase, such as a flat rate of 1.5%. In that case, $1,000 in spending would get you $15 back. Others have bonus categories where they earn extra, such as 4% back on dining.

How does a cash back credit card work?

Here's a complete look at the entire process behind how cash back credit cards work:

You use your cash back card. Whenever you use your cash back card to pay for eligible purchases, you earn cash back. With most cash back credit cards, all purchases earn cash back. Many of these cards also have bonus categories where you'll earn a higher rewards rate.
The credit card issuer deposits your cash back. Your card has a cash back balance, and all the cash back you earn will go there to start. Card issuers automatically calculate your cash back as you use your card. They then deposit that cash back to your card's cash back balance. This usually happens at the end of every statement period, although there are some card issuers that deposit cash back daily.
You redeem your cash back rewards. Once you're ready, you can redeem your cash back through your online account or by calling the card issuer. Depending on your cash back card, you may be able to use rewards as a statement credit on your credit card bill, deposit them to a bank account, or request a check. Note that some cards have redemption minimums, such as $20 or $25. Fortunately, many of the best cash back credit cards don't have redemption minimums.

Cash back vs points

Cash back and points are two types of credit card rewards. Points tend to offer more redemption options than cash back does. While you can only use cash back for cash, you may be able to use points for travel, a gift card, cash, or merchandise. The exact options depend on the rewards credit card you have. The advantage of points is that there are more ways to use them, but this also makes them more complicated.

Different types of cash back credit cards

There are three basic types of cash back credit cards: Flat-rate cash back cards, bonus category cash back cards, and rotating bonus category cash back cards. By understanding how each type works, you'll be able to figure out the best credit cards for maximizing your cash rewards.

Flat-rate cash back cards

A flat-rate cash back card earns the same rate on every purchase, typically 1.5% or 2%. This type of cash rewards credit card is ideal if your spending is fairly balanced and you don't have any particular big spending categories among your everyday purchases.

Consumers who do the math often find that they'll earn the most with a flat-rate cash back card. If you're interested in getting one, the Citi® Double Cash Card – 18 month BT offer is hard to beat. It can get you 2% cash back on every purchase. You earn 1% when you use it to pay for a purchase, plus 1% more when you pay your credit card bill on time.

Bonus category cash back cards

A bonus category cash back card offers a higher cash back rate in one or more categories, such as groceries, dining, or gas.

Those who spend a lot in certain categories could collect more cash back with the right bonus category card. For example, the Blue Cash Preferred® Card from American Express earns an industry-leading 6% back at U.S. supermarkets for up to $6,000 per calendar year. That's an extremely valuable offer if you have big grocery bills, even with the card's annual fee. There are bonus category cards to fit just about everyone, whether you need the best credit cards for gas, dining, or a different category.

On eligible purchases outside of bonus categories, these cards have traditionally earned 1% back. But not all bonus category cards are like this anymore.

Rotating bonus category cash back cards

A rotating bonus category cash back card offers a higher cash back rate in a changing mix of categories. You typically get new bonus categories every quarter with this type of card. In most cases, cardholders must activate their bonus categories before or during the quarter to earn the bonus rate.

The advantages with these cards are a very high cash back rate in bonus categories and the fact that you get new bonus categories regularly. But the latter can also be a downside, because you may occasionally get stuck with bonus categories that you won't spend much money in.

Two of the most popular rotating bonus category cards are the Discover it® Cash Back and the Chase Freedom Flex℠. Each offers 5% back on your first $1,500 spent in rotating bonus categories you activate every quarter. The Chase Freedom Flex℠ is unique in that it also offers several fixed bonus categories.

How to compare cash back credit cards

As you shop for reward credit cards, there will probably be multiple cards that you like. To pick the best one, you'll need to compare them. The Ascent's tool to compare credit card offers can help with this. You'll be able to get a feature-by-feature comparison of multiple cash back cards. Here's what to look at to decide on the right card:

Cash back rate: This is the most important feature. A higher cash back rate will save you more money whenever you use your card. The card you choose should have either bonus categories that match your spending habits or a high flat rate on every purchase.
Annual fee: Most cash back cards are no-annual-fee cards, although there are some exceptions. Cash back cards with annual fees tend to have higher cash back rates. Those higher rates can make up for the annual fee if you spend enough, but you'll need to do the math on the rewards you'll earn to make sure.
Sign-up bonus: Quite a few credit cards include introductory bonus rewards, such as $200 if you spend $500 in the first three months. A welcome bonus like this is an easy way to collect cash back. If there are a couple cards you like, you may want to pick the one offering the most bonus cash.

There are other things you may want to consider. You could look for cash back cards that also have 0% intro APR offers, free credit score monitoring, or any other perk that would be useful to you. But the three features above usually determine which cash back card offers the most value.

TIP

How to maximize your cash back credit card

Always pay with your cash back card: You earn cash back on every purchase. Get in the habit of paying with your card so that all your expenses add to your cash back.

Take advantage of bonus opportunities: Use your card often in its bonus categories, and don't forget to activate rotating bonus categories if you have that type of cash back card. If your card has a sign-up bonus, make sure you reach the spending requirement.

Don't carry a balance: You should pay your credit card bill in full every month. If you don't, the card issuer can charge you credit card interest, which could cost you more than the cash back you've earned.

What credit card gives the most cash back?

Citi® Double Cash Card – 18 month BT offer earns the highest flat-rate cash back. It gives you 2% back on every purchase you make if you pay the bill on time. You get the first 1% back when you make a purchase and the other 1% when you pay your bill by the due date.

Counting bonus categories, the Blue Cash Preferred® Card from American Express is the winner. It earns 6% back at U.S. supermarkets, up to a spending cap of $6,000 per calendar year. You won't find a bigger cash back rate among grocery credit cards. It also earns that same rate on select streaming subscriptions.

Should I get a cash back credit card?

A cash back rewards card could save you money. If you have good or excellent credit and can qualify for the best cash back cards, then they're definitely worth checking out. But this type of credit card has its perks and its drawbacks.

Pros

Cash back on every purchase

Easy to use

Most cash back cards don't charge an annual fee

Cons

Usually have smaller sign-up bonuses

Fewer travel perks and other extras

Can't get any extra value on cash back redemptions

The great thing about cash back cards is how simple and affordable they are. Anyone can benefit from cash back, and there's no learning curve involved like there can be with travel credit cards. You can find plenty of no-annual-fee cards that earn cash back. Even the ones with annual fees usually cost less than $100 per year.

There is a tradeoff to those benefits. Cash back cards are affordable, but they also generally have smaller bonuses and fewer features than you could get from a higher-priced travel rewards card. And while cash back means rewards redemptions are a breeze, there's no way to get more value out of cash back. With rewards credit cards that earn points, it's sometimes possible to extract more value from those points if you know how to use them.

Alternatives to consider

Cash back cards are great, but they aren't right for everyone. You may find that one of the following alternatives works better for you.

Travel rewards credit cards: Frequent travelers usually benefit the most from travel rewards credit cards. If you go on trips multiple times per year, the travel perks and rewards that these cards offer can be big moneysavers. They also almost always have no foreign transaction fee, a benefit many cash back cards lack.
Balance transfer credit cards: You can stop paying interest on credit card debt with balance transfer credit cards. This type of card offers a 0% intro APR on balance transfers. There's almost always a balance transfer fee, but that's well worth it to pay down your debt at zero interest.
Student credit cards: If you're attending college, then a student credit card is a good way to get started on building your credit. While some of the best student credit cards offer cash back or other rewards, they're aimed at adults who don't have much credit history yet. You won't need good or excellent credit to get them like you would with many popular cash back cards.

The Picks
Card	Rating	Great For
Discover it® Cash Back	Rating image, 5.00 out of 5 stars. 5.00 stars	Great For: Bonus cash back and no annual fee
Citi® Double Cash Card – 18 month BT offer	Rating image, 5.00 out of 5 stars. 5.00 stars	Great For: Balance transfers
Chase Freedom Flex℠	Rating image, 5.00 out of 5 stars. 5.00 stars	Great For: Cash back versatility with a big bonus
Chase Freedom Unlimited®	Rating image, 5.00 out of 5 stars. 5.00 stars	Great For: Unlimited cash back and 0% intro APR
Discover it® Student Cash Back	Rating image, 5.00 out of 5 stars. 5.00 stars	Great For: Students
Blue Cash Preferred® Card from American Express	Rating image, 5.00 out of 5 stars. 5.00 stars	Great For: U.S. supermarkets and gas
Discover it® Secured Credit Card	Rating image, 5.00 out of 5 stars. 5.00 stars	Great For: Bad credit
Bank of America® Customized Cash Rewards credit card	Rating image, 4.50 out of 5 stars. 4.50 stars	Great For: Cash back of your choice
Capital One® Savor® Cash Rewards Credit Card	Rating image, 4.50 out of 5 stars. 4.50 stars	Great For: Restaurants and groceries
U.S. Bank Cash+™ Visa Signature® Card	Rating image, 4.50 out of 5 stars. 4.50 stars	Great For: Bonus cash back program

FAQs

A cash back credit card earns a percentage back on every purchase. When you pay for a purchase with your card, the card issuer calculates the cash back you've earned and adds it to your rewards balance. If you make a $100 purchase and your card earns 1.5% cash back, then the card issuer would give you $1.50.
How you redeem cash back depends on the card you have. You may be able to redeem cash back as a statement credit on your credit card bill, as a deposit to your bank account, or as a check. Some cash back cards have redemption minimums, such as $25, but others have no minimum amount.
The credit card that gives the most cash back on every purchase is the Citi® Double Cash Card – 18 month BT offer. It offers a rate of 2% back on all your spending, broken down as 1% upon making a purchase and 1% after paying the bill on time.
In terms of bonus cash back, the Blue Cash Preferred® Card from American Express gives the most. It has a cash back rate of 6% on up to $6,000 in U.S. supermarket spending per calendar year. It also offers 6% back on select streaming subscriptions.
The keys to maximizing your cash back credit card are using it for every purchase and always paying off the full balance. By using your card for every purchase, you'll collect the most possible cash back. When you pay off your full statement balance every billing period, you never incur interest charges on your purchases. That means you're making money from your card's cash back without paying any interest to the card issuer.

Best Cash Back Credit Cards for May 2021

The Ascent's best cash back credit cards: