The good news is that when you’re ready to choose a new credit card, you’ll have a wide range of options. This is especially true in the cash-back credit card world, where a range of different benefit levels can make it easy to feel overwhelmed.
Key Points
Choosing a cash-back credit card isn’t easy, as there are numerous options to consider.
The good news is that you can start to narrow down your options depending on the type of card you want.
If you prefer a flat rate reward or rotating categories, you have a smaller selection of options to choose from.
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Instead of feeling overwhelmed trying to make a decision, you can instead start looking at some different factors that might help you narrow things down. This is precisely the suggestion one Quora poster recommends, as there are several factors to consider when making a final card choice.
What Do You Spend Money On?
Arguably, the most important thing to consider when evaluating different cash-back credit cards is determining how you spend your money. Are you someone who spends upwards of $1,000 a month on groceries? There is a cash-back card for you.
The same applies to someone who tracks their monthly gas expenses for commuting to and from work, which means they can also benefit from a cash-back card. The best thing you can do is look at your spending habits over the last 12 months and decide on what benefits you think would be best for you.
Let’s say you spend $700 monthly on groceries, $300 on dining, and $200 on gas every month, so you want to focus on cards that have big cash-back bonuses in these categories. Alternatively, consider a flat-rate cash back card, such as the Wells Fargo Active Cash card, which offers a 2% flat rate on every purchase.
Consider your Financial Goals
One of the key factors in deciding which cash-back credit card to choose is considering your financial goals. Are you looking to get money for a specific purchase? Then you might want to consider a card that offers a strong bonus for spending within the first 90 days.
You might also want to consider a card with a 0% APR for 15-18 months, which can help balance transfers from other cards that you can work toward paying off. Another consideration might be if you want to put your cash back earnings directly toward your investments or savings.
This is an option for Fidelity Rewards cash-back cardholders, who can earn 2% cash back on all purchases and then deposit all their rewards into a Fidelity investment account.
Evaluate Different Reward Types
Many people overlook the importance of selecting the correct type of cash-back credit card. You have the flat-rate card, which lets you earn between 1.5% and 2% cash back on every purchase. As it’s a flat rate, you’ll always earn the same amount on every purchase, which some people find appealing due to the stability this card type offers, making it a popular option.
Alternatively, you can choose a rotating category card, such as the Discover it or Chase Freedom Flex, which offers quarterly categories where you can earn 5% cash-back bonuses. One quarter might be drug and grocery store purchases, while another quarter is 5% cash back on all Amazon or gas station purchases.
Lastly, you have the tiered card option, which is gaining popularity and often allows you to earn varying cash-back amounts. For example, the Blue Cash Everyday card from American Express offers you 3% cash-back on all grocery store purchases, 3% on all US online purchases, and 3% cash back at gas stations, while earning 1% on all other purchases.
How Would You Like to Redeem Your Rewards?
Just as the Fidelity card lets you put cash-back earnings toward an investment account, other cash-back card types let you do the same thing. The Chase Freedom Unlimited card offers you statement credits, travel points, or gift cards, all of which you can redeem with your cash-back rewards. As not every card offers more than just a statement credit or cash-back in the form of a check, if you want something like a gift card, you have to narrow down the list of card options.
Are There Annual Fees?
While not nearly as common with cash-back cards as in the travel card world, annual fees are still something to consider. If you are not interested in paying a fee to use a credit card, you should skip these options. The Blue Cash Preferred Card from American Express, which offers 6% cash-back on grocery purchases and streaming subscriptions, has a $95 annual fee. You have to ask yourself if you will earn enough cash-back rewards to offset the annual fee every year.
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