With the right cash back credit card in your wallet, you can save hundreds of dollars each year on the most common expenses and bills. But to get value from the cash back rewards you earn, you have to redeem them.
Cashback cards are easy to redeem compared to many travel and rewards credit cards with valuable but complex rewards programs. Most commonly, you can redeem a cash reward for a check or statement credit to your card balance, but some cards offer other options. To get your money’s worth, you should also make sure you have the best cash back card for your most frequently purchased purchases.
Here’s how to best use cash rewards for your spending and financial goals, and what to consider before opening a new cash back card:
How to Redeem Cash Back Rewards
Before applying for a cash back card, please review the card’s terms and conditions to see all of your options for redeeming rewards. Different cards have unique redemption options, and some cards may be better suited to your financial goals than others.
Common cash back credit card redemptions include:
- Check in mail
- Direct deposit to linked checking or savings account
- Your most recently purchased billing points
- Gift card
- fan shop
- Travel through the travel portal
Some cash back cards refer to cash rewards as “points,” even if you redeem them for cash. Generally, these bonus points are worth one cent each. So, if you have a 3% Dining Card, you can earn 3 points for every $1 you spend at eligible restaurants.
Some cash back credit cards also allow you to use rewards like travel points. For example, you can convert the cash back you earn with your Chase Freedom Flex into flexible Chase Ultimate Rewards points that can be redeemed for travel. If you also have a Chase Sapphire Preferred or Chase Sapphire Reserve, you can combine your rewards and redeem them for a higher price through the Chase Portal, or transfer your points to Chase airline and hotel partners.
When you’re ready to redeem your reward, simply log into your card account online or use the mobile app and choose your redemption method. You can also choose the amount to exchange. Some cards have a minimum redemption amount (usually $25) that you must earn before you can redeem them, which may limit how often you can redeem rewards.
How does the cashback card work?
Cash back cards are best for who you spend the most with, giving you the best redemption value for cash back cards, earning rewards where you spend the most.
Rewards vary by card, but most offer at least a 1% bonus, with some types of purchases ranging from 2% to 5%. Many cash back credit cards also have no annual fee, and some even extend the 0% APR on purchases, balance transfers, or both for a limited time.
If you’re looking for cash back savings, look at your budget for the past few months to see where you’re spending the most—look for categories like restaurants, groceries, gas, monthly subscriptions, and more. You should make sure your bonus rate matches your regular payout.
Once you understand your spending habits, you can choose the type of cashback credit card that will best help you maximize every dollar you spend:
Flat Rate Cash Back Card
Flat-rate cashback cards offer the simplest type of cash rewards: you get a flat rate (usually 1.5% or 2%) on anything you buy, with no category restrictions. These cards are generally best for those who want an easy way to earn rewards on every purchase without having to develop a strategy. Examples of flat-rate cash back credit cards include the Citi Double Cash Card and Wells Fargo Active Cash Card.
Tiered Bonus Category Cash Back Cards
Some cash back credit cards offer a base rewards rate (usually 1%) on all purchases as well as higher rewards (usually between 2% and 4%) in fixed reward categories, such as dining, travel, or drugstore purchases. If you spend a lot of money on certain categories each month and want to maximize the rewards for those purchases, this might be a good option for you. Tiered cash back credit cards include American Express’ Chase Freedom Unlimited, Capital One SavorOne Cash Rewards Credit Card, and Blue Cash Preferred.
Rotating Category Cashback Cards
Cashback cards with rotating tiers offer higher rewards (usually 5%, maximum) in the reward tiers that change every three months. Typically, you need to keep track of categories and open them quarterly. This type of cashback is probably the most valuable if you’re willing to strategize as the category evolves, how to earn more rewards over time. Rotating category cash back rewards cards include the Discover it® Cash Back Card and the Chase Freedom Flex.
How to Get a Cash Back Card
Most rewards credit cards — including cash-back credit cards — are aimed at consumers with good or better credit ratings. This typically includes anyone with a credit score of 670 or higher, although those with a score above 700 are most likely to be approved.
If your credit score needs some work, you may need to spend some time improving it before applying for a competitive cash-back offer. But that doesn’t mean you can’t get cash prizes at the same time. There are also a variety of cash-back credit card options for people with good or bad credit.
For example, you can get Capital One QuicksilverOne Cash Rewards credit with “fair” credit (scores typically between 580 and 669) and get a flat 1.5% cash back on every purchase. The annual fee is $39.
Once you’ve built your balance by paying it in full on time, you can choose to upgrade or apply for other cashback card options that better suit your spending.
How to choose the best cashback card for you
To find the best cashback card with the best redemption value for your purchases, first determine which type of cashback card is most appealing to you. For example, would you rather get 2% cash back on all purchases, or 4% on specific reward categories like food and groceries that you spend the most?
You should also make sure you like the redemption options for the card you are considering. While Chase cards like the Chase Freedom Flex allow you to redeem rewards for cash back, statements, merchandise, travel, and more, some cards limit your redemption to statements only.
Other factors to consider include annual fees and cardholder benefits such as purchase protection, extended warranties or travel insurance. Also, check to see if the card offers 0% APR on purchases, balance transfers, or both. If so, you can save on interest when paying off large purchases or consolidating debt on other cards.
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