Credit cards can be a valuable tool for earning cash back on your everyday purchases. With the right credit card, you can earn a percentage of your spending back as cash rewards, helping you save money or even fund your next vacation. In this blog post, we will explore some of the best credit cards that offer the highest cash back rewards, allowing you to make the most of your spending.
How Cash Backs Work on Credit Cards
Cash back on credit cards is a reward system that incentivizes you to use your card for purchases. Here's how it works:
Earning Cash Back
When you use your card to make a purchase, you typically earn a percentage of the purchase amount back in cash back rewards. This percentage varies depending on the credit card you have.
Flat Rate vs. Category Cash Back
There are two main types of cash back cards: flat-rate and category cash back. Flat-rate cards offer a single cash back percentage on all purchases, while category cards offer a higher cash back percentage on specific spending categories, like groceries or gas, with a lower rate on everything else.
Rewards Tracking
Your credit card company keeps track of your purchases and calculates your cash back based on the applicable rate(s).
Redemption Options
Once you've accumulated enough cash back, you can redeem it in several ways. Common options include:
- Statement credit: Reduce your credit card balance by the amount of your cash back.
- Direct deposit: Have your cash back deposited into your linked bank account.
- Gift card: Redeem your cash back for a gift card to a participating retailer.
- Travel statement credit: For some travel cards, you can use your cash back towards travel purchases.
Also Read: 7 Best Rewards Credit Cards No Annual Fees
5 Best Credit Cards for Highest Cash Back Rewards
1. Wells Fargo Active Cash® Card
- Earn an unlimited 2% cash back on all purchases.
- No categories or spending caps to worry about.
- Comes with a generous sign-up bonus and an introductory APR period on purchases and balance transfers.
2. Chase Freedom Unlimited®
- Offers all-around cash back rewards.
- Earn 1.5% cash back on all purchases, with bonus rewards on travel, restaurants, and drugstores.
- New cardholders can enjoy a 0% introductory APR period and a sign-up bonus.
3. Discover it® Cash Back
- Provides cash back rewards in quarterly categories that you activate.
- Earn up to 5% cash back in rotating categories, with a matching bonus for the first year.
- No annual fee and a generous introductory APR period.
4. Capital One SavorOne Cash Rewards Credit Card
- Ideal for those who enjoy dining out and staying in.
- Earn unlimited cash back on dining, entertainment, and grocery store purchases.
- No annual fee and a solid sign-up bonus.
5. Citi Double Cash® Card
- Offers simplicity and a high cash back rate.
- Earn 2% cash back on every purchase, with 1% when you buy and 1% when you pay it off.
- No bonus categories or introductory APR period, but the high rewards rate compensates for it.
Also Read: 8 Best Travel Credit Cards No Annual Fees
Cash Back Strategies: Fixed vs. Flexible
There are a couple of strategies you can adopt to maximize cash back on your credit card, of which some are fixed and others flexible strategies. They include:
1. Flat-rate Cash Back
These cards offer a single cash back percentage on all purchases. The simplicity of this approach makes it popular, with cards like the Wells Fargo Active Cash® Card offering a consistent 2% cash back on everything you buy.
2. Rotating Categories
Some cards entice users with higher cash back rewards in specific spending categories that change quarterly. The Discover it® Cash Back, for example, offers a rotating 5% cash back bonus on categories like gas, groceries, or restaurants.
3. Bonus Categories
These cards combine a flat-rate cash back with bonus rewards in specific categories that don't change. For instance, the Blue Cash Preferred® Card from American Express offers 6% cash back on groceries and streaming services, alongside a baseline 1% cash back on everything else.
Matching Your Card to Your Lifestyle
1. High Spenders
If you consistently rack up a high monthly bill, flat-rate cash back cards like the Citi Double Cash® Card (earns 2% cash back—1% when you buy, 1% when you pay) can be highly rewarding.
2. Category Champions
For those with predictable spending habits, cards with rotating or bonus categories can be lucrative. For example, if you dine out frequently, a card with a restaurant bonus category would be ideal.
3. Simplicity Seekers
If you prefer a no-fuss approach, flat-rate cash back cards are your friend. No need to track changing categories or maximize rewards in specific areas – just swipe and earn!
Rewards Beyond Cash Backs on Credit Cards
Cash backs are not the only rewards that can come with a credit card—there are many more—some of which include:
1. Welcome Offers
Many cards lure you in with a tempting welcome bonus, often in the form of a cash back windfall after meeting minimum spending requirements. This can be a great way to jumpstart your cash back journey.
2. Sign-up Bonuses
Some cards offer a flat cash back bonus simply for signing up and being approved. This is free money for minimal effort, making it a great option for those new to the credit card game.
3. Rewards Redemption Flexibility
Look for cards that offer multiple redemption options, such as transferring cash back to a linked savings account or using it towards travel. This allows you to tailor your rewards to your needs.
Your Final Take
When it comes to maximizing your cash back rewards, choosing the right credit card is crucial. The Wells Fargo Active Cash® Card, Chase Freedom Unlimited®, Discover it® Cash Back, Capital One SavorOne Cash Rewards Credit Card, and Citi Double Cash® Card are all excellent options for earning the highest cash back on your purchases. Consider your spending habits and preferences to select the card that aligns with your needs. Remember to pay off your balance in full each month to avoid interest charges and make the most of your cash back rewards.