What is Actually a Good Cash Back Rate?

Out of all the different reward types out there for credit cards, cash back is easily the most flexible and useful one. With cash back, you don’t have to wait months or years to accumulate enough points or miles to redeem a big reward. Cashback is simple, you earn as you spend, and you’re not limited to what you can spend on. But with all the different cashback credit card options out there, it can get confusing on what is considered a good cash back rate which makes the card even worth applying for. While some cards have a flat rate on all purchases, other cards utilize a tiered system. Below, we will go over different cashback types and which ones are best for your lifestyle.

Flat Rate

A flat rate is the most straightforward type of cash back. You simply earn a set percentage of cash back regardless of what you purchase. If your spending habits vary between different industries, a card with a flat-rate cash back system can be a great option for you. A good rule of thumb to follow is to look for at least 1.5% flat rate cashback.. An example of a card with a great flat-rate cash back percentage is the Citi Double Cash card. Not only does this card come with an 18 month 0% intro APR for balance transfers, but it also provides 2% cash back on all purchases (1% cashback when you make the purchase and the other 1% when you pay it off).

Tiered Rate

The second most common cash back structure is a tiered rate. Tiered cards earn higher rates in some categories and usually 1% on everything else. These categories depend on the card but a few examples are groceries, gas, and dining. With some cards, you even get to decide which categories will earn higher rewards. Tiered cards are great if you tend to spend a lot on the highest category the card offers. A card that operates on a tiered cash back rate is the Capital One SavorOne Cash Rewards Credit Card. This card pays 3% cash back on dining and entertainment, 2% on groceries, and 1% on all other purchases

Rotating Categories

The last type of cash back is rotating categories. These types of credit cards offer a high cash back rate for specific categories, which typically change every quarter. You also usually have to activate the category every period, which can be an unnecessary hassle. These cards can be either every day or back up cards, depending on the quarter. The Discover It Cash Back Card is a well-known cash back credit card that utilizes rotating categories. With this card, you get 5% cash back on up to $1,500 every quarter, and 1% on everything else. Past categories include gas, groceries, and online retailers. The card also has no annual fees and a cashback match offer.

Conclusion

Remember that cash back doesn’t always mean dollars being deposited into your bank account. For many cards, cash back comes in the form of statement credit, acting as a discount for your next bill. Regardless of what format you prefer, cash back is an investment. The more you spend, the more rewards you get back in return. When choosing a cash back card, be aware of your spending habits so that you can pick the best card for you.