A cash back credit card allows you to earn cash back on your purchases. With these cards, you can earn cash back for travel expenses like airfare and hotel stays. The best part about this type of rewards program is that your earnings accumulate over time to create a larger sum than what you would earn from other types of credit cards.
Flat Rate
The first type of cashback card is called a flat-rate card. A flat-rate means you earn a fixed amount of cash back on all purchases, no matter what. This is the most common cashback credit card offer because it’s easy to understand and manage. It also has the highest earning potential: if your spending habits are constant, this offer will get you the most bang for your buck over time.
Tiered Rate
In this type of cash back card offer, the percentage of cashback that you earn on your purchase depends on your spending tier. The card issuer will set the amounts for each tier, which can be different across different cards.
The higher your spending tier, the higher your cash back % will be. The best part is that there’s no cap on how much you can earn from this type of offer.
However, note that since tiered rates don’t change throughout the year as flat rate ones do, it’s essential to know what category you fall under so that you can maximize earnings by making sure all purchases are made during high-reward periods.
Rotating Cash Back
Rotating 3% cash back credit card offers a different cash back rate every quarter. For example, one card might offer 3% cashback on gas purchases, 2% on groceries and 1% on everything else during the first quarter of each year. The second quarter could then see 4% cash back on restaurant purchases, 3% on travel and entertainment expenses and 1% everywhere else. Cards like this are best suited for people who want to maximize their rewards in various spending categories or take advantage of limited-time promotions offered by their favorite retailers. Also, SoFi experts explain, “You will see the points earned from your spend in real-time.”
Bonus Categories
Bonus categories are the best way to earn cash back. If you find a credit card that offers bonus rewards in the category or types of purchases you want, then it’s worth applying for. Bonus categories usually rotate, so if you’re looking for airline miles, apply when airlines are on the list and then cancel your card once those miles expire. Bonus categories can be found on the credit card issuer’s website or in their terms and conditions section.
It’s important to note that cash back credit cards work differently than other types of rewards cards. For example, you don’t have to spend a certain amount within a set time frame to earn your reward, and there are no blackout dates or limits on how much you can earn. Instead, cash back credit cards give you a percentage of every dollar spent on your card as an annual percentage rate (APR).
