When used responsibly, cash back credit cards can be an effective way to manage your money and earn rewards. Unlike travel rewards credit cards, cash back cards offer something simple that every consumer can understand.
What is a cash back credit card?
A cash back credit card gives you cash back on all eligible purchases. This type of reward is highly appealing to consumers since you're essentially being given cash for using your credit card. Of course, this perk is only valuable if you're paying off your entire balance on time each month. Any interest charges you incur would outweigh the cash back you earn.
While the concept of cash back is straightforward, every cash back credit card comes with different earn rates and perks. While these features do give consumers more choices, they can also cause more confusion than necessary.
How do cash back credit cards work?
Whenever you charge purchases onto a cash back credit card, you're given back a percentage in cash (like a rebate). For instance, the Synchrony Premier World Mastercard® gives 2% cash back on every purchase charged onto the card.*
While that number may seem relatively low, when you're getting that percentage on all of your purchases, you'll be able to quickly build a lot of cash back in your account.
Cash back is usually given for most purchases, but there are a few instances where you won't earn cash back.
- Cash advances
- Balance transfers
- Cash-like transactions such as cryptocurrency and foreign currency
- Lottery tickets
- Casinos and gambling websites
Also note that your account must be in good standing for you to redeem your cash back.1
How much cash back can you earn?
It depends on the credit card, as each one offers different earning rates and structures. For example, some cards offer a flat rate of 2% cash back on everything charged to the card, while others may give you 4% on gas and grocery purchases and only 0.5% on all other purchases. This can be beneficial to people who are looking to maximize their cash back, but it can also be frustrating to others since they need to understand the rules to ensure they're getting the most out of their cards. Either way, you'll be rewarded for your spending with different earn rates.
There may also be a limit on how much cash back you. If you're looking for something simple, the Synchrony Premier World Mastercard® has no cut-off on how much cash back you can earn and you'll get 2% cash back on all purchases made to the card, regardless of the spend category.
Bonus categories
Some credit card cards offer bonus cash back on purchases made in select categories.2For example, you might earn a higher cash back rate on groceries, gas and pharmacy purchases. All other purchases would earn you the base earn rate. These types of cards can be valuable for people that typically do most of their spending in specific categories.
Base earn rate
The base earn rate is how much cash back you'll earn on any purchase that doesn't fall into a bonus category. Generally speaking, the base earn rate is quite low.
Flat rate
Anyone that truly wants simplicity will want to look into flat rate cash back cards. With these cards, you earn the same cash back percentage on all of your purchases.2 For example, the Synchrony Premier World Mastercard® gives you 2% cash back on all purchases, and there's no annual fee.
<h3> Rotating categories
When it comes to cash back cards, rotating categories are the most complicated. While rotating categories are similar to bonus categories, in the sense that you can earn extra cash back, rotating categories typically change every quarter.2 For example, for one quarter, you might get bonus cash back for groceries and gas purchases. Come the next quarter, it would be different categories.
<h3> Choose your own categories
While most cards will have pre-determined bonus cash back categories, there are a few out there that let you choose your own.2 All other purchases would earn the base earn rate. This is a great option for people that find cards with pre-determined bonus categories that don't line up with their spending.
How to redeem cash back
Every cash back credit card has different rules for cashing out your rewards. Generally speaking, cash back is paid out in one of the following scenarios:
- Monthly
- Annually
- When you hit a certain threshold
As for how your cash back is paid out, it depends on your credit card.1 You could be paid in a statement credit, or you could have it deposited directly into your bank account. Some cards will even mail you a check.
The key is to read the terms and conditions of your credit card, so you know what you're entitled to. You always want to know when your cash back will be paid out since that's money you can use to pay off your statement or other expenses.
READ MORE: The Hidden Benefits of Your Credit Card
Tips to increase cash rewards
Earning cash back is simple, but there are a few ways to increase your cash rewards without much work.
Maximize your bonus categories
Bonus categories will usually pay the most cash back, so you should maximize those whenever you can. In an ideal world, you'll get a cash back card that gives you bonus cash back on the categories where you spend the most. For example, if you shop a lot at grocery stores and pharmacies, look for a card that gives you extra cash back in those categories
Get more than one card
Since bonus category cards only give you extra cash back in select categories, look for another card that gives you extra cash back in other categories. By doing this, you're increasing the number of bonus categories you have access to.
Time your spending
With rotating cash back cards, your bonus categories can change every quarter. If you know you have a major electronics purchase coming up, it's worth waiting until there's a bonus category that's rotated in for electronics. Alternatively, many cash back cards come with a welcome bonus for new card members. With these cards, you'd get a cash bonus when you spend a minimum amount. If you were to get a new cash back card before a big purchase, you could take advantage of the bonus.
Go with a flat rate cash back card
All of these bonus categories can be very confusing for a casual user. Instead of focusing on enhanced earn rates, you may be better off going for a no annual fee card that offers a flat rate of cash back. A credit card like the Synchrony Premier World Mastercard® gives you 2% cash back on all purchases—so you'll never miss an earning opportunity.
READ MORE: Are You Getting the Most Out of Your Credit Card?
The bottom line: Choose what's best for you
With cash back cards, there's no need to worry about points, expiration dates or complicated rewards charts. The cash you earn has real value, and you'll know exactly when you'll be rewarded. If you want to maximize your return, look for a cash back card that offers good rewards and lines up with your spending. Learn more about the benefits of the Synchrony Premier Mastercard today.
For more money-savvy tips, check out Synchrony Bank's Money Matters Blog.
LEARN MORE: Ready for a Credit Card? First Learn These Basics
Barry Choi is an award-winning personal finance and travel expert. He appears regularly on a variety of shows in Canada and the U.S., where he talks about all things money and travel. His work has appeared in major publications, including Go Banking Rates, MSN, The Globe and Mail, The Toronto Star, and The Financial Post. Barry is an expert in personal finance, but he's passionate about credit cards, budget travel, debt management, and loyalty programs.
* 2% CASHBACK: Valid on net purchases (less credits, returns and adjustments) of goods and services made with your Synchrony Mastercard. Cash back earned will be applied as a statement credit within 2 billing periods after an eligible purchase is made. See Reward Terms for details. NO ANNUAL FEE: For new accounts the Variable Purchase APR will be 16.24%, 22.24% or 29.24%. The APRs are accurate as of October 1, 2022 and will vary with the market based on the Prime Rate (as defined in your credit card agreement). Minimum interest charge is $2.00.
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