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Are you confused by cash-back credit cards? At first glance, it shouldn’t be hard to choose the card with the highest rate of cash back, but it’s actually more difficult than it sounds. Some cards offer a fixed rate of rewards for different kind of purchases, while others offer an even higher rate of cash back on purchases from select categories of merchants and retailers that revolve each quarter.

How “Straight” Cash-Back Credit Card Rewards Work

Most cash-back credit cards offer the same rate of return for various types of purchases throughout the year and are sometimes called “straight” cash-back rewards. Many will offer the same percentage of cash back for all purchases, while others will offer varying degrees of cash back depending on the type of purchase. For example, Citi offers its Double Cash card (reviewed here) that features a total of 2% cash back on all purchases and has no annual fee (you get 1% cash back when you make a purchase and another 1% when you pay your bill). Alternatively, the American Express Blue Cash Preferred offers 6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%), 3% at U.S. gas stations and 1% cash back on all other purchases. (Full Disclosure: Citibank advertises on Credit.com, but that results in no preferential editorial treatment.) 

How Revolving Credit Card Rewards Work

Both the Chase Freedom (reviewed here) and the Discover it card (reviewed here) offer 5% cash back on up to $1,500 select categories of purchases that change each quarter. For instance, in the fourth quarter of 2015 (October through December), the Chase Freedom’s bonus applies to all online purchases from Amazon, Zappos, Audible.com and Diapers.com, while the Discover card’s bonus cash back applies to purchases from Amazon as well as department stores and clothing stores. (You can compare the Chase Freedom and Discover it cards here.) All other purchases return 1% cash back, including those made at featured retailers after cardholders reach the limit of $1,500 of eligible spending each quarter. Both Chase and Discover require cardholders to “activate” their bonus categories every quarter. Thankfully, the bonus cash back can be earned retroactively to the beginning of the quarter, so long as cardholders register before the end of the enrollment period.

Which Card Is Right for You?

Some people want to treat their credit cards like the radiator in their car—they just want it to work. For these credit card users, a “straight” cash-back rewards card is ideal, as they can be assured of receiving the same amount of cash back on their purchases, quarter after quarter, year after year, with little to do on their part. These cardholders don’t want to worry about which merchants may or may not qualify for the bonus cash or if they’ve reached their quarterly maximum. And certainly, these hands-off credit card users wouldn’t want to remember to log onto their card issuer’s site several times a year to register for bonus categories.

At the same time, there are plenty of people who are much more engaged with their credit cards and willing to perform minor tasks to maximize their rewards. So if you’re the type of credit card user who thinks nothing of choosing a card for a purchase, it’s just a small step from there to use a card that offers rotating categories for bonus rewards. And if you’re already in the habit of logging onto your card issuer’s website, it’s easy to activate bonus categories four times a year.

If you don’t mind the tasks required by cards that offer rotating bonus categories, are the extra rewards worth it? Depending on your spending habits and the bonus categories featured in a given quarter, you may come out ahead with a “straight” cash-back card vs. one with rotating categories. But if you’re tempted to go shopping just to earn additional rewards, then you will always fall behind. This is true for users of “straight” rewards card users and those who use cards with rotating categories.

Ultimately, the most engaged rewards card users might even wish to have both a “straight” rewards card that offers more than 1% cash back as well as a card with rotating bonus categories. By knowing which type of credit card user you are, the right type of rewards card will become clear.

Finally, rewards credit cards often require a good or excellent credit score to qualify. If you don’t know where your credit stands, you can check two of your credit scores for free (no credit card required) on Credit.com.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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