Flat-rate cash back credit cards for simple rewards
There's a charm to keeping it simple. And keeping it simple can be its own reward.
Many rewards credit cards require you to understand where and when you can earn rewards or how to best redeem them if you want to get the most value. Not so with these cards. Flat-rate cash back cards give cardholders a straightforward percentage of their spending back in the form of cash back or statement credits.
It really doesn't get easier than that.
In recommending cards in this category, I look for a competitive flat rate of cash back. Right now, 2% is a very good rate. But, depending on the other features, a card with a flat rate of at least 1.5% could still be a good choice.
Because the idea is to keep it simple, I focus almost entirely on cards with no annual fee. A card with an annual fee may squeak its way onto the list occasionally if the flat rate rewards rate is high enough.
Optimizing credit card rewards with travel rewards cards and rotating categories
While simple is good, there's an allure to optimizing your rewards. Not only can you actually earn more and more valuable rewards, but it can be fun as well.
The good news is that you don't need to give up your other hobbies to start maximizing rewards. Some simple spending habits and a bit of time redeeming points and miles can go a long way.
Travel rewards credit card or cash back rewards?
While it's possible to chop up rewards cards into a whole bunch of categories, my experience is that there are only really two that matter: travel rewards cards and cash back rewards cards.
You don't have to stick to just one or the other, but it pays to understand the differences between the two.
Travel rewards cards have rewards in the form of points or miles. Often they're associated with the credit card issuer, like Chase's Ultimate Rewards points, Capital One miles, or American Express's Membership Rewards. These cards often have rewards points tiers in which you earn more points for travel-related spending like flights, rideshare, or dining out.
These points and miles are generally very flexible in terms of how they can be redeemed – it's often everything from flights and merchandise to gift cards and statement credits (basically cash back). However, the best value is generally from redeeming on travel like flights and hotels. And you can often get even more value from redeeming for travel through the card issuer's travel portal (like Chase Ultimate Rewards).
So while you don't have to travel to benefit from a travel rewards card, you'll typically earn more from travel purchases, get more value from travel-related redemption, and the perks on the cards are generally more travel focused.
Cash back credit cards with rewards tiers and rotating categories (also sometimes called "bonus categories") usually offer a bit less potential value versus travel rewards credit cards. But, they are a bit simpler. Instead of needing to redeem points, you just get cash back or statement credits.
Unlike the flat-rate cash back cards covered above, these cards offer different rates of cash back for different spending categories. Cash back cards with rewards tiers generally have fixed rates of cashback for different categories – for example, 5% for dining, 3% for groceries, and 1% for everything else.
Cash back cards with rotating categories usually have a relatively low baseline rate of cash back (often 1%), but offer a higher rate (like 5%) for categories like entertainment, travel, dining, and groceries. The high-rewards-rate category changes on a monthly or quarterly basis.
Maximizing value from travel rewards credit cards
If you're going the route of a travel rewards card, and in particular, choosing one of the cards here, it's helpful to consider how to make the most of your card.
Note that you don't have to do all of this – even doing some of it can help you get more value from your rewards card though.
Rewards program structure
Many of the cards we've listed here reward travel spending. Makes sense, since they're travel rewards cards. Even so, the structure of the rewards isn't exactly the same.
Since these are travel cards, most have higher rewards rates for travel, but in some cases travel is hotels and rental cars, while in others it's flights or a combination of all. Other cards have higher rates for grocery shopping, dining, or streaming services. Still others have somewhat higher baseline rates for all spending.
If you want to maximize what you're earning, it's important to understand these differences. It's true to say that some categories are more broad, but it's hard to say that one card is better or worse in this regard – it's more about matching well to your spending habits.
My wife and I used to travel a lot, but with small children at home, that's changed a bit. That means that while cards that rewarded flights were previously valuable to me, now I'm getting more rewards from groceries, gas, and online shopping.
Understanding the rewards program structure can also allow you to pair cards. These are all great cards listed here, but used in combination, they can be even better. As long as you know where each card's high rewards rate falls, you can earn higher rates across more categories.
Points and miles programs
Different travel rewards cards have different points and miles systems. You'll want to consider which program or programs to use. Knowing the value of points and miles in each program is one thing, but it's also important to simply consider whether you want to collect rewards across multiple programs.
If you are a frequent traveler, you may already have status or a high rewards balance with a particular airline or hotel chain. Some points programs from card issuers will allow you to transfer their points to a loyalty program at a travel provider. This can be a good option to make the most of your rewards.
This is especially key to think about if you are considering using multiple cards. Collecting points across more than one card into more than one rewards system can dilute how much value you're able to get from your rewards. To deal with this, you can consider transferring rewards from both cards into another loyalty program to consolidate there. You can also go the multiple-card route by pairing points-based card with a cash back card – meaning that you won't have to figure out how to pool and redeem rewards across two systems.
Bagging sign-up bonuses
Many top rewards cards have sign-up or welcome bonuses. In nearly every case, the cardholder is required to spend a certain amount on the card in a specified amount of time. For example, you might get 50,000 points after spending $2,000 on the card in the first three months.
To get the most out of your card, you want to make sure you'll get the bonus. That means a few things. For one, you need to make sure that your normal spending would meet the threshold for the bonus. I stress "normal" here, because it's not a great practice to spend extra just to hit a welcome bonus threshold.
Even if you can theoretically hit the minimum spend for the bonus, you still need to make sure to put that card at the top of your pile if you use multiple cards. Spending that might normally go to other cards may need to temporarily go on the new card in order to get the bonus. That may mean you're temporarily earning lower everyday rewards – since you're not optimizing between cards – but making sure you earn the sign-up bonus is almost always worth that temporary shift.
For many price-conscious travelers, comparison travel sites are often the first stop for planning vacations. I wouldn't suggest changing this.
However, when it comes to actually booking, it often pays big to use the travel portal for the issuer of your travel credit card. Portals like Chase Ultimate Rewards, the Amex Travel portal, Citi ThankYou, and Capital One Travel portal allow comparison shopping for things like flights, hotels, and rental cars, but also often allow credit card users to earn much higher rewards or get far higher rewards redemption value.
How much higher? In some cases it may be "just" 2x, but in other cases you could be seeing a 10x difference in the rewards earning potential or redemption value. That's no joke.
Naturally, if you see much better prices in non-issuer travel portals or directly from a travel company, don't pay more just to use the issuer's travel portal. But in very many cases, the issuers' portals are highly competitive and will get you the same or similar prices, plus the added rewards boost.
Maximizing your cash back card rewards
Getting the most out of a cash back card with a tiered rewards program or bonus categories system is a bit more straightforward than their travel-card cousins. Yes, you can typically squeeze more value out of the travel card programs, but for many people, the comparative simplicity of the cash back rewards is worth it.
Here are some ways to make the most of a cash back credit card with rewards tiers, rotating categories, or bonus categories.
Understand the higher-rate categories and whether they are right for you
Maybe this goes without saying, but start by making sure you understand which categories offer higher-rate rewards. Depending on the card, the categories that could offer higher rewards rates might include:
- Travel spending
- Gas
- Grocery shopping
- Dining out / takeout
- Streaming services
- Drugstores
- Online shopping
When you are clear on which categories offer higher rewards, you then need to consider whether those categories actually fit your typical spending.
For instance, I do a lot of grocery shopping for my family, but much of it happens at Costco and Walmart. So if I want to earn higher rewards for that spending, I have to match it up to a card that has higher rewards for groceries, but doesn't exclude retailers like Walmart and Target or club retailers like Costco (as some grocery rewards programs do).
When considering what this means for the card or cards you'll carry, you need to figure out what actually fits your lifestyle. I ended up with cards that specifically reward Costco and Walmart spending. This works well for me in my mix of cards, but the total number of cards you're juggling does increase complexity and the number of bills you need to manage. If you want to keep it simpler, sticking with a fewer number of cards that reward your very highest spend categories can work well.
Know the terms of your rewards program
Rewards programs do have rules, so it's important that you understand those rules. Here are a few that are critical to keep an eye on:
- Bonus category caps: In some cases, high rewards rates in bonus or high-rate categories are capped. This might mean, for example, that the first $1,000 in a quarter can earn at the higher rate, but everything after that bumps down to a lower rate.
- Bonus category enrollment: Some cards, especially when it's a rotating bonus category, require that you enroll to actually get the higher bonus-category rates.
- Bonus category definitions: This may fall into the "understand the rewards program" bit, but it bears repeating. You will only get the higher rewards rates on spending that actually qualifies, so it's important to really understand what qualifies for certain bonus categories. If the bonus category is "travel" it may or may not include flights, so you need to know that. If the category is "groceries" it may or may not include big-box retailers like Target that also sell groceries, so it's important to know this as well.
Planning big or non-urgent purchases
Don't spend money that you don't need to in order to earn rewards. That's an important one. But, when you do need (or want) to spend on something that isn't urgent, a little planning can make a big difference in your card rewards.
If you have a cash back card with a tiered rewards program and no caps on earning rewards, this shouldn't be an issue – if the spending fits into a high-rate category, you should be good to go.
On the other hand, if you have rotating bonus categories or a choice of bonus categories, larger, non-urgent purchases, you could delay those until you are in a window where those purchases would qualify for a higher rewards rate. Likewise, if the higher-rate category where your planned purchases fall has a monthly or quarterly cap, you could spread out the purchases so that you earn the higher rate for all of the spending, rather than getting capped after some and earning a lower rate on the rest.
(As an added advantage of doing this, I've often found that when I put off any spending, I tend to find that some of it wasn't as necessary as I thought it was. Extra savings win!)
Using multiple cash back cards
One other great way to maximize your rewards when using cash back systems is to use multiple cards. What this allows you to do is overlap cards so that you earn higher rates on more categories than any single card offers. This works a lot better for cash back cards than travel cards because you don't have to worry about sticking within points systems.
The way I think about this is to start with a card with a solid everyday rate of cash back. This is the card I can pull out whenever my spending doesn't fit a high-rate category. Then I put together cards with higher-rate categories that fit my biggest spending categories. In my case, I have cards that offer higher rates on travel spending, gas, Costco shopping, Walmart shopping, Amazon.com shopping, non-Amazon online shopping, and dining out. One of my bonus category cards has a good enough baseline rate that I use it for the spending that doesn't fit these categories.
Note that while many programs have high-rate categories that are chosen for you or pre-defined, some allow you to choose. This can be particularly helpful when trying to put together multiple cards that work together because you can use the choice-category card to fill in a gap from the other cards' programs.
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