When it comes to finding a cash back credit card to suit your needs, there are almost too many options to choose from. Not only will you find cards with different earning structures, but welcome bonuses and cardholder benefits also vary by quite a bit. From there, you’ll notice that all the major card issuers have at least one cash back credit card on offer, and that some issuers like Chase and American Express feature several different cash back credit cards to choose from.
With all this being said, one major difference in the top cash back credit cards comes in the way you earn rewards. Are you better off earning a flat rate of cash back, or would you prefer a card with cash back categories that give you more than the regular rewards rate?
At the end of the day, it’s up to you to do some research and figure out which type of card might leave you better off.
Flat-rate cash back vs. bonus categories: The basics
How does cash back work? That really depends.
Types of cash back credit cards you’ll find run the gamut, but some cards prefer to keep their rewards rates simple. With a flat-rate cash back credit card, you’ll earn the exact same amount of cash back on every purchase you make regardless of the type of purchase you charge. Generally speaking, flat-rate cards dole out between 1 percent and 2 percent back on all your purchases depending on the card you sign up for.
Conversely, you’ll find cash back credit cards with bonus categories that let you earn more rewards on specific purchases. Some cash back categories can remain the same for as long as you have your card, while others might rotate every quarter. Cash back categories tend to fall in areas where consumers spend a lot of money, such as dining, groceries, travel or transportation.
Pros and cons of flat-rate cash back cards
When it comes to cash back cards that offer a flat rate of rewards for every dollar you spend, there are some advantages and disadvantages to be aware of. The factors below are worth keeping in mind as you decide between the top cards.
You don’t have to keep track of which credit card to use for each purchase. With a flat rate of rewards for each dollar you spend, you never have to juggle cards or worry if you’re maximizing your rewards.
Flat-rate rewards credit cards often offer a higher rate of rewards for regular spending. Where most cards with bonus categories only offer 1 percent back on regular non-bonus spending, flat-rate credit cards frequently offer as much as 1.5 percent back or 2 percent back on regular purchases.
You won’t be able to maximize rewards with bonus category spending. With no cash back categories to take advantage of, you’ll only be able to earn more rewards by spending more with your credit card.
Pros and cons of bonus category cash back cards
Cash back credit cards with bonus categories can be a good choice, yet there are still some considerations to keep in mind before you sign up for one. Here are the main advantages and disadvantages to be aware of.
You get the chance to maximize your rewards on specific purchases. Credit card rotating categories can help you earn more rewards over the course of a year.
You can pair different cards and earn more rewards in each one’s bonus category. If you have a few different cards with bonus categories, you can use them strategically to earn more rewards on different types of purchases.
Some rewards cards with cash back categories set caps on the amount of bonus rewards you can earn. Many cash back credit cards with bonus categories only offer more points up to a specific amount of spending. These caps can dramatically limit the benefit of bonus rewards categories.
You’ll probably only earn 1 percent back on non-bonus spending. Cash back credit cards with bonus categories tend to offer lower than the market rate in rewards on regular purchases.
Which type of cash back card is right for you?
If you’re struggling to decide on the type of cash back card to sign up for, it can help to take a look at your regular spending habits. If you spend a lot of money in a few different categories like groceries or gas, then it’s possible a card with bonus rewards categories could leave you better off. However, a flat-rate cash back card may be a better deal if you tend to spend in a lot of different categories and not just in a few.
Either way, make sure to compare the top cash back credit cards with different types of rewards rates before you decide.
Flat-rate cash back cards to consider in 2020
Citi® Double Cash Card
The Citi Double Cash offers a flat 2 percent back for each dollar you spend—1 percent when you make a purchase and another 1 percent when you pay it off. You can also qualify for an introductory 0 percent APR on balance transfers for 18 months, followed by a variable APR of 13.99 percent to 23.99 percent. There’s no annual fee, and you can redeem your rewards for a check, a statement credit or a credit to a linked account once your rewards balance reaches $25 or more.
American Express Cash Magnet® Card
The American Express Cash Magnet lets you earn a flat 1.5 percent back for each dollar you spend. You can also qualify for a $150 welcome bonus when you spend $1,000 within three months of account opening, as well as an introductory 0 percent APR on purchases for 15 months, followed by a variable APR of 13.99 percent to 23.99 percent. There’s no annual fee, either.
Bonus category cash back cards to consider in 2020
Chase Freedom FlexSM
The Chase Freedom Flex starts you off with a $200 bonus when you spend $500 within three months of account opening. You’ll also earn 5 percent back on activated bonus category purchases each quarter (up to $1,500, then 1 percent), 5 percent back on travel booked through Chase Ultimate Rewards, 3 percent back on dining and drugstore purchases and 1 percent back on everything else. There’s no annual fee.
Blue Cash Preferred® Card from American Express
The Amex Blue Cash Preferred offers a $300 statement credit after you spend $3,000 in purchases on your new card within the first six months (offer expires Dec. 10, 2020). You will also earn 6 percent back on the first $6,000 spent at U.S. supermarkets each year (then 1 percent), 6 percent back on select U.S. streaming services, 3 percent back on U.S. gas station purchases and transit and 1 percent back on other purchases.
A $95 annual fee typically applies, but for a limited time, get a $0 introductory annual fee for one year (offer expires Dec. 10, 2020).
The bottom line
Cash back credit cards are worth signing up for if you want to earn rewards on your spending and you don’t plan to carry a balance. However, the fact there are different types of cash back credit cards means you’ll need to do some research.
The cards on this list are a good place to start, but make sure to compare other rewards credit cards to see what’s out there.