Cash Back Rewards Programs

Cash back credit cards let you spend your rewards on anything you want.

Cash back credit cards let you spend your rewards on anything you want.

If you're going to spend money, you might as well get rewarded for it, and cash back credit card programs do just that. While there's no single "best" card for everyone, there are definitely cards that will give you more cash back based on your spending and the rewards rules than others.

Cash Back Basics

Cash back rewards programs give you an incentive to use a specific credit card for your purchases. The credit card company charges the merchant a transaction fee and gives you a portion of that back in the form of cash rewards. Many cards offer a flat cash back rate, typically 1 percent, but some increase your rewards after you've reached a spending threshold for the year. However, watch out for overspending: It's a lot easier to overspend when you think about the cash back you're getting. But remember, it doesn't make sense to spend $100 to get $1, or even $5, back.


Many credit cards offer special bonus cash back offers in certain categories. For example, one card might offer 3 percent cash back on gasoline while another might offer 2 percent on groceries. Other cards offer rotating categories so that every couple of months you get higher cash back rewards for purchasing in different categories. For example, the first quarter of the year you might get 5 percent back on movie tickets and then in the second quarter get 5 percent back on home improvement purchases.


Make sure you read the fine print, especially on the bonus categories: Your cash back might be limited to only a certain amount of purchases. For example, you might think you're in for massive rewards on your gas card because you drive a lot, but the extra cash back only applies to your first $500 in gas purchases per quarter. All else being equal, look for a card that doesn't have limits, or at least has higher limits than what you expect to spend in the categories. Or, if you're married, get separate cards for you and your spouse. Also, watch out for expiration dates on the rewards. No matter how good the cash back, it won't help if you can't redeem it in time.


As great as cash back on purchases sounds, sometimes it's just not worth it depending on the card's other features. For example, if the card gives you 2 percent on groceries, but comes with a $100 annual fee, you'd have to spend $10,000 on groceries just to break even on the annual fee versus having a card with no annual fee that offers 1 percent cash back on everything. Similarly, if you carry a balance and the card charges a high interest rate, you could watch all your extra cash back head right back to the credit card company in interest payments.


About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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