What's a Cash Back Rewards Credit Card?
With cash back rewards credit cards, users make purchases using their credit cards, and afterward, a percentage of the total amount they spent is given back to them as rewards. The most common types are flat-rate and rotating rewards categories
Flat-rate cards allow you to earn a fixed rate on all purchases. Conversely, cards with rotating rewards categories give users a higher rate on bonus categories, e.g., at restaurants, supermarkets and gas stations; and 1% on all other purchases (the bonus categories are rotated monthly or quarterly).
The rewards may be redeemed as they are earned, or you may choose to accumulate them and get paid at the end of the year. Cardholders that use their credit cards actively stand to earn as much $350 in cash back every year
How to Maximize Cash Back Rewards with Your Credit Card
The most important factor when it comes to maximizing cash back rewards is to make as many purchases as possible with your credit card. The more money you spend, the more cash you get back. Here are some more tips to help you maximize your card:
1. Pick Your Card Carefully
Never settle for a card that only gives 1% cash back for all purchases; look for one that offers at least 1.5% along with other bonuses. Secondly, read the fine print before deciding on a card. Some cards offer higher rates for specific categories, e.g., grocery stores. However, users only get cash back if they shop at participating stores. Make sure you pick cards that suit your shopping habits.
Other cards come with great sign-up offers with rewards of up to $600. Also, be mindful of monthly/quarterly maximums; they limit how much cashback can be earned on a card. By picking the right card, you increase your earning potential right from the start.
2. Focus More on Food Rewards
The standard rewards categories
are gas stations, grocery stores, restaurants, wholesale clubs and retail stores. Out of them, the only ones you are sure to visit regularly involve food and gas. If you’re not a long-haul trucker, then you must prioritize food rewards. Look for cards that give high cash back rates for purchases at restaurants, food chains and grocery stores; they offer the most value.
3. Use Your Card for Monthly Bills and Big Purchases
In addition to bonus categories that have higher cash back rates, most reward credit cards offer a flat 1% cash back for other purchases. By using your card to pay off your monthly bills, e.g., car lease, health insurance, phone and internet bills, etc. you can quickly rack up rewards. Furthermore, if your card has a large enough limit, you can also use it to for significant payments like your kids’ school fees or to buy new gadgets.
4. A Relationship with the Issuing Bank May Mean More Rewards
If they offer cash back rates that compare favorably with that of close competitors, always opt for cards provided by a bank with which you already have an account. For example, some HSBC cards come with an extra 1% cash back bonus and annual fee waivers for HSBC Advance Banking customers.
Top 5 Cash Back Rewards Credit Cards
After factoring in general cash back rates, bonus rewards categories, sign-up offers and quarterly limits, here are the top 5 cash back rewards credit cards in the market:
1. Capital One® Savor Cash Rewards Credit Card
The Capital One Savor Cash Rewards Credit Card comes with a $500 sign-up bonus if you spend $3,000 within three months of opening an account. It also offers 4% cash back on dining and entertainment, 2% cash back for purchases at grocery stores, and 1% cash back for all other purchases.
There are no cash back limits, and rewards remain valid throughout the life of the account. The only wrinkle as far as the Savor card is concerned is a $95 annual fee; however, the fee is waived for the first year.
2. Blue Cash Preferred® Card from American Express
The Blue Cash Preferred carries an annual fee that is not waived for the first year, but it makes up for it with some of the highest cash back rewards available in the US.
Firstly, you can earn a $250 statement credit after you spend $3,000 in purchases on your new Card within the first 6 months. Then you get 6% cash back for purchases at US supermarkets (capped at $6,000 in purchases every year), 6% cashback for payments made to certain US streaming services, 3% at gas stations, and 1% for other purchases. Terms apply.
3. Chase Freedom Unlimited®
The Chase Freedom Unlimited is a good option for people who want simple cash back rewards with no annual fees and no special categories. Cardholders get a flat 1.5% cash back on all purchases (unlimited). In your first year, you get an extra 1.5% cash back (with a $20,000 limit on purchases).
If you use this card to make purchases worth $1,300 every month, you stand to earn cash back of over $300 at the end of the year. Not bad at all.
4. Wells Fargo Cash Wise Visa® Card
The Wells Fargo card offers 1.8% cash back on purchases from Google Pay and Apple Pay within 12 months of account opening. Then a flat 1.5% cash back for all other purchases with no limits.
There is also a $200 sign-up bonus if $1,000 is spent on the card within the first three months. No annual fee is charged on the card, and Wells Fargo customers can redeem rewards through the bank’s ATMs.
5. HSBC Cash Rewards Mastercard® Credit Card
Not as popular as similar cash back cards from bigger banks, but the HSBC Cash Rewards card carries a lot of value. There is a 3% cash back reward for all purchases made within 12 months of opening an account (capped at $10,000). Afterward, there is a 1.5% reward for all purchases (no limits), and every year, cardholders also get an anniversary bonus (10% of all cash back rewards earned during the year).
While these cards offer some of the best cash back rewards in the market, you must remember only to pick a card that offers rewards that you can maximize based on your spending habits. Furthermore, be on the lookout for one-time promotional offers that are ideal for you, for example, the Capital One Savor card offers 8% cash back through leading online ticket marketplace, Vivid Seats (offer expires in May 2020).