Updated: April 3, 2020

When you use rewards credit cards wisely, you’ll get tremendous perks from the card issuer, including cash back on every purchase you make. Why would the issuer want to give you money? It’s simple. Credit card issuers are competing for your business. As a result, credit card offers are getting more and more competitive, and rewards now vary from points and miles to cash back. So how do you know which rewards option is right for you? We’re explaining what cash back is and how it works to help you decide if it’s right for you. Read on to learn more, including information about some of our favorite cash back credit cards.

Not all cash back is created equal

When it comes to cash back reward cards, some are going to suit your purposes (and lifestyle) better than others. Many cards offer unlimited 1% cash back on purchases as a default option, but that’s not very lucrative. The best cash back cards let you earn more than that when you make purchases on items in purchase categories, like gas or restaurants, or from cobranded retailers.

Cards that earn on category purchases tend to work in one of three ways. They might earn a set amount of cash back on select purchases, like 6% cash back on dining out, for instance, as a fixed feature of the card. This means every time you use the card to dine out, you earn 6% cash back. Sometimes, the high percentage cash back reward is limited and will revert to a lower reward once you reach the threshold, so it’s important to read the terms. For example, you might only earn 6% cash back on dining out purchases up to $6,000/year spent, then it drops to 1%.

Another way that cash back reward cards work is by having revolving reward categories that you, the cardholder, need to activate each quarter. For example, you’ll earn 5% cash back on rotating categories up to the quarterly maximum, then it’s 1% back. Rotating categories usually align with spending habits and seasons, so they often give you the option to earn higher cash back rates on seasonal purchases, like holiday shopping from October through December.

The third way a cash back credit card works is by earning a higher cash back rate (higher than 1%) on all purchases. For example, you might earn 1.5% cash back on all purchases with no spending limit with a flat-rate card like this.

In addition to letting you earn extra cash back on select or all purchases (depending on the card), many cash back credit cards also offer intro bonuses that come in the form of matching cash back or a set dollar amount once you meet their initial spending requirements. For example, if you spend $500 on purchases in the first 3 months, you’ll earn a $150 bonus.

Finding the right card is key

There are literally hundreds of cash back credit cards on the market, so it’s important to make the right choice for yourself, your preferences and your personality. Are you a little bit OCD? Then you might not have a problem activating quarterly reward categories and remembering to use the right card every time you make a purchase. If you’re someone who doesn’t want to be bothered, though, the best reward card is probably one that earns a flat-rate on all purchases. That way you won’t mess up when making a number of everyday purchases on one of those hectic Sunday shopping sprees.

Another thing to keep in mind is how the card issues the rewards you earn. Sometimes it’s a statement credit. Other times, you can have the cash back reward direct deposited into your bank account, but you have to wait until it reaches a certain threshold. Lots of cash back reward cards also let you redeem things like gift cards and Amazon purchases. For the best results, read the terms carefully.

Best for rotating categories: Discover it® Cash Back

Discover it Cash Back earns 5% cash back on purchases within rotating categories every quarter you activate (up to the quarterly maximum, currently $1,500, then it’s 1% back) and 1% on all other purchases. It’s got a unique intro bonus, too. Discover will match all of the cash back rewards you earn in the first year you are a cardholder. This means if you earn $250 cash back in your first year as a cardholder, Discover will match that $250 cash back and give you a total of $500 back!  Other perks of Discover it Cash Back include no annual fee, free identity theft protection (note that this feature requires activation) and a free FICO score on your monthly statement. Discover requires cardholders to have average to excellent credit (or a credit score of 670 or higher) for approval.

Information regarding the Discover it Cash Back was prepared by NextAdvisor.com staff. Opinions expressed therein are solely those of the writer and have not been reviewed or approved by any advertiser. The information, including card rates and fees, presented on this page is accurate as of the date of the post.

Best credit card for all purchases: Capital One® Quicksilver® Cash Rewards Credit Card

Capital One Quicksilver is a great cash back card for people who don’t want to be bothered chasing reward categories. That’s because it earns unlimited 1.5% cash rewards on all purchases. It’s also got a $150 intro bonus that you can earn when you spend $500 on purchases within the first 3 month from account opening. On top of that, Capital One Quicksilver offers a 15-month 0% intro APR on purchases and balance transfers, then it reverts to 15.49% – 25.49% variable — note that there’s a 3% balance transfer fee. The card has no annual fee, and it requires good to excellent credit to qualify (usually considered a credit score of 700 or higher).

Information regarding the Capital One Quicksilver Cash Rewards Credit Card was prepared by NextAdvisor.com staff. Opinions expressed therein are solely those of the writer and have not been reviewed or approved by any advertiser. The information, including card rates and fees, presented on this page is accurate as of the date of the post.

Best for gas and groceries: Blue Cash Preferred® Card from American Express

The Blue Cash Preferred Card from American Express (a NextAdvisor advertiser) is a great option for people whose staple purchases are food and gas. It earns 6% cash back at U.S. supermarkets (on up to $6,000/year in purchases, then it’s 1% back), uncapped 6% cash back on select U.S. streaming subscriptions, 3% at U.S. gas stations and 1% cash back on all purchases. As noted, you are limited to $6,000 worth of U.S. supermarket purchases/year, but if you hit that max, you’ll earn $360 on supermarket purchases alone. The Blue Cash Preferred Card also offers a $250 statement credit that you’ll earn after spending $1,000 on purchases in the first 3 months. As if all these rewards aren’t enough, the card offers a 12-month 0% intro APR on purchases and balance transfers (then it’s 12.99%-23.99% Variable) — balance transfers come with a balance transfer fee of 3% or $5, whichever is greater. We should note that this card comes with a $95 annual fee, but it may be worth paying since you get an opportunity to earn a boatload of cash back. Finally, this card requires good to excellent credit to qualify (usually considered a credit score of 700 or higher).

Best for dining out: Capital One® SavorOne® Cash Rewards Credit Card

Capital One SavorOne is our favorite card for people whose single biggest expense is feeding themselves or their family. This card earns an unlimited 3% cash back on dining and entertainment, 2% cash back at grocery stores and 1% cash back on all other purchases. Capital One categorizes entertainment as purchases at tourist attractions, amusement parks, movie theaters, zoos, commercial sports operations, live theater and more. On top of those stellar unlimited cash back rewards, you’ll earn a $150 cash back bonus when you spend $500 on purchases within the first 3 months from account opening. We should note that the card has no annual fee and no foreign transaction fees. Capital One SavorOne is available to those with good to excellent credit (usually considered a credit score of 700 or higher).

Information regarding the Capital One SavorOne Cash Rewards Credit Card was prepared by NextAdvisor.com staff. Opinions expressed therein are solely those of the writer and have not been reviewed or approved by any advertiser. The information, including card rates and fees, presented on this page is accurate as of the date of the post.

The final word

Hopefully, you now have a better answer to the question, “what is cash back?” The best cash back credit cards, ultimately, are the ones that give you the biggest rewards on things you purchase everyday.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.