Home > Credit Cards > 7 Ways to Make the Most of Your Cash-Back Credit Card

Comments 0 Comments

[UPDATE: Some offers mentioned below have expired and/or are no longer available on our site. You can view the current offers from our partners in our credit card marketplace. DISCLOSURE: Cards from our partners are mentioned below.]

Cash-back credit cards are a great way to receive an effective discount on all of your purchases, but they are often not as simple as they appear. Many cash-back cards can be a challenge to use because they offer different rates of return for different types of purchases, or have limits on the amount of cash back you can earn in a bonus category (If you’re trying to decide which one would work best for you, check out our guide on the best cash rewards credit cards in America).

If you want to earn the most possible cash back from your rewards card, with the fewest expenses, consider these seven tips.

1. Never carry a balance.

When you carry a balance on a cash-back card you will incur interest charges that will likely exceed the value of any rewards you receive. Unless you can avoid interest charges by paying your statement balances in full each month, you would be better off using a low interest rate card with no rewards program because it will have a lower standard rate than a similar card that offers cash back.

2. Don’t consider cash back when making a purchase.

A cash-back card literally pays you to spend more money, but of course you will always lose out when you make an unnecessary purchase in order to earn additional rewards.

3. Consider a card with an annual fee.

Many cash-back credit cards are offered in versions with and without an annual fee. There are a lot of people who don’t spend enough to justify a cash-back card with an annual fee, and others who refuse to pay an annual fee on principle. Yet for many people, it can be worth paying an annual fee in order to receive significantly more cash back. You should take the time to do the math and decide if a card’s additional rewards are worth paying an annual fee.

4. Watch out for spending limits.

Many cards impose spending limits on bonus categories and only offer the standard amount of cash back once you’ve reached the limit. For example, the American Express Blue Cash Preferred card (read a full review of this card here) offers 6% cash back at U.S. grocery stores, but only on up to $6,000 spent in a calendar year (then 1%). The Chase Freedom (read the review here) offers 5% cash back at select merchants, but only for the first $1,500 spent each quarter. Unfortunately, it can be hard to keep track of how much you’ve spent on qualifying purchases, so you may have to make an occasional call to your card issuer for this information if it isn’t provided online.

5. Keep track of rotating bonus categories.

The Chase Freedom and Discover it are both popular cash-back credit cards that offer 5% returns on up to $1,500 spent each quarter at feature retailers and on select categories of purchases. Those who hold one of these cards need to remember to login once per quarter to “activate” their bonus categories, and keep them in mind throughout the quarter. Fortunately, both of these cards allow you to activate your bonus retroactively throughout the quarter.

6. Think about using multiple cash back credit cards.

Some cards offer up to 2% cash back on all purchases while others can feature as much as 6% cash back on some purchases and only 1% on the rest. One way to enjoy the best of both worlds is to carry one of each type of credit card. You can use a card with a great bonus at qualifying merchants, while using a separate card with a high level of rewards on all other purchases.

7. Make sure you are using a competitive card.

The market for cash-back credit cards is intensely competitive, so you have to re-evaluate which cards you are using from time to time as new and better cards are being constantly introduced. Just a few years ago, it was common for most cards to offer 1%, but now there are cards that offer 1.5% or even 2% cash back on all purchases, often with no annual fee.

While it’s great to have a card that rewards you for spending, you don’t want to go overboard. To see how your spending habits are affecting your score, check out two of your credit scores for free, updated every 14 days, 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.

Image: AntonioGuillem

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team