Get The Best Cash Back Credit Card

Tired of using a two credit card system to maximize his cash back returns, I did an analysis to determine the single best cash back credit card. Here’s what I found:

* Even using one card, a 2% total return should be the minimum you receive back (versus the 1% that many cards tout as “standard”.)
* Which card is best for you personally depends on how much you charge, where you charge, and when you charge.
* To make cash back cards work financially, you have to follow the other rules for good credit card management — no annual fee, pay off card every month, only buy stuff in your budget, etc.
* There are other factors you need to consider other than earning the most money. For instance, convenience.

I looked mainly at three cards in particular. Here’s what’s best depending on your circumstance:

* Chase Freedom — Much of your spending is concentrated in a few of Chase’s 15 bonus (3%) categories (again, assuming you already have one of these cards and can get the 3%.)
* Blue Cash from American Express — You charge a lot each year (at least $15k, but more is better) and most of the charges are in the gas, grocery, and drugstore categories and occur later in the year (once you’ve gotten to the level-two rewards.)
* Schwab Bank Invest First Visa Signature — Most of your spending is not in any of the Chase or Amex Blue bonus categories and/or you want the simplicity of knowing you’re getting a certain percentage back (2%) no matter what you charge or where.

Watch for the bait and switch. For instance, the Chase Freedom card recently lowered its rewards for new accounts. Instead of the once solid 3% cash back on certain transactions, 1% is the new norm. I go into my findings in more depth in the “The Best Cash Back Credit Card” on my blog Free Money Finance.

FREE MONEY FINANCE (Photo: frankieleon)

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  1. boomerang86 says:

    AmEx Blue Cash ROCKS, especially if you charge everywhere AmEx is accepted and pay off your balance in full each month. Last year, my cash back (a statement credit posted automatically, no forms to complete) was nicely north of $650.!

    • courtarro says:

      @boomerang86: I’ll second that. I can’t speak for everyone, but my experience with Amex hasn’t shown them to be playing the games that I constantly read about on Consumerist. In fact, they recently raised my credit limit from $6000 to $10000 without any prompting whatsoever.

      Last year I realized that my trusty “Blue for Students” card wasn’t earning me any rewards, so I called and asked if it was possible to convert it to “Blue Cash” without changing the card number or losing my credit limit. They did it with no hassle whatsoever, and I had my new card shortly.

  2. MattO says:

    i LOVE Blue Cash as well – we get our rewards back in november usually, giving us free christmas shopping for most of the family. And with putting all of our monthly bills on it that allow a credit card as a payment method, we EASILY hit the minimum to get the better cash back

    • Eyebrows McGee (now with double the baby!) says:

      @MattO: We also love our Blue Cash. We put EVERYTHING on the Blue Cash — even our monthly cell bill takes AmEx — and top the $6,000 threshhold for kicking to the higher rewards really very early.

      (We pay it off monthly, of course, and we use the CC as our primary spending management tool. Which for us works, but isn’t the right decision for everyone.)

      Of course you have to look at what local to you takes AmEx — our biggest spending is probably groceries and gas, and all the local places we go take AmEx. About the only place I go that DOESN’T take AmEx (that still takes credit cards) is the cafeteria at the college where I teach. I charge lunch there once a month or so to keep my old Visa active, so it works out.

      One perhaps-unexpected thing to look at is medical bills. All of our doctors belong to a hospital group that takes AmEx, and we have a high-deductible policy. This year with the baby coming, we’ll hit our deductible nice and early and that’ll kick our AmEx into the higher-tier rewards nice and early as well.

  3. EarlNowak says:

    An alternative to the schwab invest first is the fidelity investment rewards american express. It’s also a 2% rewards card, with rewards automatically deposited into a fidelity brokerage account.

  4. nataku8_e30 says:

    My g/f has the Chase freedom card with the 3% reward on certain categories. They get around it by not correctly classifying stores, so purchases at Kroger, CVS, etc… show up as unclassified and only qualify for 1% cashback.

    • johnva says:

      @nataku83: I think this depends on how the merchants categorize themselves (and hence, what kind of fees they are paying to the credit card companies). I don’t shop at those particular stores, but I haven’t had the same problem with my Freedom.

    • JakeChance84 says:

      @nataku83: I have this card as well and they def. find ways around giving you the 3% for some things. For example restaurants don’t qualify for the 3% at all, but some fast food places do. It’s merchant code/category based but they’re not upfront about what categories and codes are eligible and don’t let you see the merchant’s codes you’ve purchased from.

  5. johnva says:

    I still have a 5% cash back card from Chase for gas, groceries, and drugstores. I’ve been thinking they were going to downgrade it for awhile, but they just renewed it at the same terms (!). I don’t use it anywhere except for the places that give me the 5%, so I tend not to hit the rewards earning cap (as that would require me to spend $12,000 a year on those categories, something that I don’t come close to doing). I think that that might explain why they haven’t canceled on me.

    I then use a Chase Freedom for everything else, getting me 1% on everything and 3% on certain other categories that aren’t covered by my 5% card. I could probably do better with one of the 2% cards for things that don’t fall in the Freedom “categories”, but to me it’s not really worth the inconvenience of having to juggle 3 cards instead of just 2.

    This strategy makes me like $500/year in cash back, with no interest or fees paid ever. I don’t understand why more people don’t do this.

  6. jackbishop says:

    I spend fairly little per year — my average monthly CC bill is in the neighborhood of $600, which would take a while to hit the big returns limit on an Amex Blue. I use mostly a Chase Freedom, and I’ve always been a bit flummoxed by exactly what earns triple rewards and what doesn’t (they don’t flag it in any detectable way on the statements, which kinda leads me to believe I may be being shortchanged). However, even the 1% is actually 1.25% if you manage it right — $200 in rewards points is redeemable for a $250 check, which isn’t too bad.

    Is there a better rewards card for a modest spender than the Chase Freedom? I can see how the AmEx Blue is good if you actually move large sums of money, but every time I’ve read through the actual details of the rewards program, it’s seemed like a worse deal than what I already have.

    • ryohazuki222 says:

      @jackbishop: I’m in the same boat. Been using the citi dividend for a while. It’s not the “best” right now, since they lowered their rewards a while back, but I haven’t found the small difference of the Chase card to be worth it. Not into the tons of fine print either. But a lead to a different card would be welcome.

  7. xdreamwalker says:

    What a lot of consumers don’t realize is that the merchant pays for most of those rewards in higher rates charged to them by Visa/MasterCard.
    Good deal for consumers, bad deal for business owners.

    • johnva says:

      @xdreamwalker: I realize it, and don’t care, because it benefits me personally and it’s not my fault that the credit card companies are jackals. Moreover, they can just raise prices to cover it. Since it mostly is going to affect everyone who competes with each other relatively equally, I don’t see how having to do that is such a competitive disadvantage (unless you’re competing with one of the businesses that is big enough to negotiate lower rates with the credit card companies, in which case, yeah, that’s unfair – and should probably be addressed in antitrust laws). The effective consequence ends up being that it is a subsidy of credit card rewards users from people who pay cash or use debit cards or non-rewards credit cards.

    • Traveshamockery says:

      @xdreamwalker:

      Good deal for consumers, bad deal for business owners.

      Really, it affects both in some negative ways. Business owners have to raise prices or eat the lost profit, and consumers lose because of the higher prices.

      Here, though, I don’t care, because individually I can benefit more than I am negatively affected. I will make about $600 in cashback rewards this year with AMEX, plus about $200 from Citi, and I don’t believe I paid $800 more for my goods and services as a privilege.

      There are downsides to accepting cash for a business as well, costs that disappear with credit cards. One example is stolen or miscounted cash – not a problem with credit cards. The effort of going to a bank, or having to pay for a cash pickup by armored car is a measurable cost that increases a business’ cost of doing business, and therefore raises prices.

      There’s good and bad to each arrangement.

      • johnva says:

        @Billy Gillispie Halftime Interview: Well, consumers don’t necessarily lose because of higher prices IF they have a rewards card that pays them back. Consumers who don’t use these cards do lose, however, you’re right.

        And as I said above, I’m not sure it’s necessarily bad for businesses, either. The only way it’s really bad is if the business CAN’T raise their prices to pass along the costs for some reason. And I’m skeptical that that is the case here because I would assume that the percentage of customers using rewards cards is similar for most businesses that compete with each other. As long as all businesses are impacted by it relatively equally, then each one loses little from having this cost.

        And as you point out, I don’t believe that businesses would accept credit cards if they didn’t think they were gaining by doing so.

  8. keith4298 says:

    The nice thing about Chase Freedom is that if you wait until you have $200, it can be redeemed for a $250 check, changing your 1% into 1.25%

  9. Jordan Leventhal says:

    The Discover Open Road card is 5% back on all gas purchases. I use my Chase Freedom for everything besides gas, which goes on the Discover Open Road.

    But if you want to get really good (and live near a Giant Eagle), you can go to Giant Eagle and buy gift cards on your Chase Freedom. So I get 3% off when I buy gift cards to places I know I already go (i.e. book stores, eBay), and then get 20 cents off a gallon of gas in FuelPerks.

    When I buy airline tickets, after finding my flights, I’m sure to use that method to get a major rebate.

  10. Myron says:

    Amex Blue cash all the way.

  11. coren says:

    Tired of using a two credit card system to maximize his cash back returns, I did an analysis to determine the single best cash back credit card.

    Ya got a littler person disagreement there.

    This is extremely helpful – thanks!

    • Traveshamockery says:

      @coren: Those who live in glass houses shouldn’t throw stones, and those who critique grammar should watch their own spelling.

  12. KyleOrton says:

    I have a blue cash, but greatly prefer the Chase BP Visa. My local grocery store doesn’t take Amex so it became a hassle. And the BP gets 5% at BP (plenty convenient), 2% dining and lodging and 1% on the rest.

    No need to calculate when I spend enough for the good percentage on the Blue Cash and no one ever doesn’t take a Visa.

    And I get cash back every month instead of waiting until the end of the year.

  13. Joseph Beck says:

    I use the Chase BP Visa which gives a 5% rebate on gas puchases at BP. Yesterday I received a notice that the previously unlimited rebate is now going to be limited to $25 per month.

  14. David Brodbeck says:

    I used to work for a company that didn’t issue company credit cards; they made us use ours and then reimbursed us. This was a huge pain in the tail when it came to keeping track of my personal finances, but I did make out like a bandit on cash back rewards from AmEx.

  15. Gamethyme says:

    3% back is still 97% spent.

    I’d rather just use my Visa-branded Debit card. It’s tied to my checking account, but I can transfer from savings to checking before I make the purchase. That way, I’m earning (rather than paying) interest on my money.

    Yes, it means I have to wait until I have money before making a big purchase, but that wait gives me time to think and rethink and make sure that I really want what it is I’m buying.

    • David Brodbeck says:

      @Gamethyme: I’ve thought about doing something like that, but the 0.6% interest doesn’t seem worth the hassle.

    • johnva says:

      @Gamethyme: I don’t pay interest on my credit cards, and I get $500 in free money a year, as I said above. Your point about earning interest also doesn’t make a lot of sense, because you earn MORE interest by using a credit card and paying it off every month than you would by using a savings account. The reason is that your money gets to sit in your savings account until you pay your bill at the end of the grace period instead of it leaving right when you make a purchase. In any case, this difference is pretty negligible right now with how low savings interest rates are, unless you’re pumping $50,000/month through your cards for a small business or something.

      As for your point about “thinking through your purchase”, that’s a good point IF your mentality with credit cards is that they let you spend more on impulse or spend money you don’t have. If that’s the case, credit cards aren’t for you. But I’m not like that at all. I NEVER do a big purchase without thinking it through carefully and researching, etc. Credit cards are just the way I manage my cash, not a way to get things I can’t afford.

  16. SpaceBat_GitEmSteveDave says:

    I use my Wawa and Shoprite credit cards a lot. I earn money towards gift cards for those stores, which I then sell for cash.

  17. Customer_Service_Slave says:

    I have a Chase Freedom card that I love. 3% back on gas, car repairs, supermarkets, and fast food, 1% on everything else. I find no need to ever use cash anymore. It’s a waste when you get all these points for the same price. However, if you are at a restaurant, I recommend tipping with cash out of courtesy to your server.

    I did much research on credit cards before I ended up picking the Freedom. There are better cards out there. Mainly from Discover, which gives you 5% back on gas, however Discover is not accepted everywhere, and in order to get a Discover, you must have “Excellent Credit”.

    Be weary about bonus programs like Citi for example. They offer 4-5 “points” for these same transactions, but these points do not directly translate to the same amount of rewards as you would think. A $50 cash redemption costs 8000 Citi thank you points. I calculated it out, and the 3% chase gives puts you out ahead.

  18. Customer_Service_Slave says:

    P.S. The American Express Blue, which I have too, but you only get the highest percentage of bonus points after you’ve spent a certain amount. I believe the threshhold is something like $6,000. If you do not spend that much, it’s not worth it.

  19. floraposte says:

    For me, it’s not just the raw cashback categories, it’s the cashback from rewards shopping. I juggle Discover, which has generally higher cashback rates from its contracted merchants, with Chase, which has more merchants and a higher base rate of cashback, so my cashback percentage comes out much higher per year than the stated base rate for either (I should really figure out what it is sometime).

    Dunno how long it’ll last, but I’ll take the extra money while it’s good.

    • floraposte says:

      @floraposte: Oh, and seconded what Keith said above about getting more rewards for your buck at redemption time. You can also get additional value with gift cards, but I’m not a reliable enough brick and mortar shopper to make that worth my while.

    • johnva says:

      @floraposte: Yeah, those programs definitely can increase your rewards even further as long as you use them only for things that you were already planning to buy.

      Another similar trick I use is that I have one of my cards signed up for a totally “passive” rewards shopping program for local restaurants that earns me frequent flyer miles. It has restaurants I already went to anyway, gives quite a few miles for going to them, and I don’t have to do anything except pay with a certain credit card and it automatically gives me the miles. The main reason I do this is because it prevents my frequent flyer miles from expiring due to inactivity, as each time it credits more it bumps the expiration into the future.

      • floraposte says:

        @johnva: Yeah, from the sound of it you and I shop fairly similarly. I rarely buy even small purchases online on complete impulse, and I’ve usually got stuff bookmarked for a while while I wait for a sale or the right moment for me in the financial cycle.

        I’ll also note, in case it’s useful to anybody else, that when I’m online shopping I’ve found it really helpful to keep a private log of what I’m ordering, with which card, with the order number, the total, and the date. Since I do my clothes shopping online, there are a lot of returns, and this gives me a place to note return info as well–date sent, method/tracking number, amount that I should be credited, date when it is credited, etc. This way I’m less likely to overestimate an anticipated credit and I’ also aware of what’s not been credited yet, and in general it gives me a local reminder of “unclosed” transactions.

  20. ZukeZuke says:

    I use my AMEX Platinum at Costco since it’s the only credit card brand they accept. 99% of the places I shop accept AMEX too. The rewards 1.5% is ok once you pass the spending floor ($5,000?), but now they’re promoting an ‘upgrade’ to the AMEX True Rewards card which has no floor before you start earning the maximum cashback %’s. My cashback was $270 last year, so we’ll see how much better the True Rewards card is. :)

    I’ve been very happy with the AMEX service for 10 years and the annual rebate is a nice plus that I purposely don’t budget for, so it’s a nice surprise.

  21. ZukeZuke says:

    p.s. I’m pretty impressed with these $500-600 cashbacks people are talking about. I spend (and pay off) around $1,000-1,200/mth on credit cards, so I’ll have to look into these!

  22. bostonguy says:

    I’m afraid to mention what card I use, for fear of others jumping on the bandwagon and ruining it, but here’s what I get:

    2% on everything (cash, redeemed as a transfer to my ING account)

    After hitting a $5000 floor for each year, an additional 4% back, for a total of 6% all year, one you spend $5000!

    I normally spend at least $2000/month on the card (paid off every few days), so it’s all profit. The first month I had the card, I got back $150 (didn’t hit the floor, but got signup bonus points). 2nd month, $175. This month, $200.

    It’s gonna be a great year!

    • David Brodbeck says:

      @bostonguy: Oh, come on. You can’t post numbers like that and then not tell us the card.

    • johnva says:

      @bostonguy: It actually probably HELPS it to stick around for you to post it, because that will get more people to sign up who aren’t just relentless “deal chasers”. The more “average” people sign up for it, the more profitable it probably is for the company.

  23. CrunchBite says:

    I get to charge work expenses on my personal card and currently have the Amex Blue Cash, but recently I’ve been thinking of switching to the Schwab card and there’s a couple reasons for that. First unless you buy a ton of groceries and gas, you’ll just make out better. I’m going to be getting 500+ back from my Amex this year, but the same charges on the Schwab Visa card would be 600+. Second the Schwab card is a Visa, and lots of places don’t take Amex because their fees are astronomical, especially in Europe. I had to put 1000 dollars of charges on another card last trip to Germany because many places didn’t take Amex.

  24. diesel54 says:

    I’ve got the Blue Rewards card but my spending limit is too low (because you don’t want to use over 50% of your limit). I got it after I graduated from college 9 months ago. I make a good living but I’m afraid if I call them and ask for a boost they’ll cancel my card like they’ve been randomly doing.

  25. xQuizx says:

    I’ve got one of the original Chase Rewards which gives me 5% cashback on Gas/Grocery/Drugstore visits. I normally get $200 back on that a year. I eat out a lot so I use the AmEx Rewards for the 3% cashback. For travel I use my Southwest Visa for the points. It’s around 2.5% return on that based on the cost of the SW flight and annual fee. Plus I can get partner points when I book certain rental cars and hotels. Every other purchase just falls back to the AmeX card which is at 1% or 2%.

  26. fs2k2isfun says:

    Cashback cards are a bad deal if you pay your balance off every month. I love my Starwood Preferred Guest American Express, 1 point/$, 20,000 points can be converted to 25,000 frequent flyer miles.

    Recently stayed at the Westin Tokyo for 12000 points per night, or $12000 spending on the card. I could have had $120 cash back, or the $400 a night hotel room.

    You tell me which is the better deal.

  27. pmw says:

    Two sites that compare cashback for your individual spending patterns:
    * Credit Card Tune-Up
    * Credit Card Comparator

  28. kexline says:

    @ Jordan Leventhal: The problem with the Discover Open Road card is that the 5% level is limited to $100/month. I usually spend more like $40/month in gas, but $100 goes fast on a trip and I’m always annoyed if I whoosh past the limit without remembering to change cards.

  29. artki says:

    Discover is doing the “shrink ray” thing on their cash back bonus.

    (I’ve had a Discover card for decades)

    At first, you could claim your cash-back bonus once a year.

    A few years ago, they changed that so that you could only claim the bonus once it exceeded $20.

    A few months ago, they changed that so that you could only claim the bonus once it exceeded $50.

    • floraposte says:

      @artki: The shrink-ray hit the rate as well, which is more of a concern for me. But with the rewards shopping, I can still get enough cash back to make it worth my while. The interval limitations aren’t really an issue for me, as I find it more psychologically satisfying to wait till the bonus is in triple digits anyway.

  30. zeitgeist09 says:

    I have the Chase Freedom PLUS as my joint card for all expenses at home. Note this is the PLUS not the regular one – yes, I pay $30/year for it, but then there is no cap to rewards each month and you get paid for 6 top categories instead of 3 (or whatever the norm is). We put all of our utilities straight on the card and then use for all vet/gas/grocery stuff. We make heavy use of the extra merchant rewards too, since we buy mostly online for anything other than groceriers anyways. To day, we’ve had the card about 9 months, and are currently $2 away from redeeming our third $250 check. Ie, $750 rewards in about 9 months, nice! (Note – this is with us waiting until we have $200 to redeem as $250). Thought heavily about the AMEX, but our joint card formerly was an AMEX, and there were too many places we wanted to use it that didn’t take the card.

  31. shadax says:

    Right now I have an Emigrant Direct Mastercard to go with my savings account. Provided I keep a minimum balance in the savings (which I do with no trouble), they deposit 1.4% of my purchases into my savings every 6 months. What do you think?

  32. MsAnthropy says:

    I have the Blue Cash, and I love it. I’ll continue to love it right up until the point when AmEx turns around and does an AmEx on me.

    Definitely the cashback card to have IF you spend enough on it to reach the higher-rebate tier early in the year. Mine gets paid in full religiously, and the cashback kitty keeps growing and growing. I think this year the total return will work out at around 2.5% or thereabouts.

    I also have a Discover More. It’s good for the quarterly cashback categories (even if the cashback is capped at a ridiculously low level) and earning 5-15% cashback on online shopping through their ShopDiscover site. I don’t use the site often, but always check to see if something I’m planning to buy anyway is available through one of the retailers on the site (remembering to factor in any shipping costs, of course) – on the occasions I use it, it’s been a very nice little earner indeed!

    Oh, and my husband has a Chase Freedom Plus. 90% of our spending goes on the Blue Cash, but the Chase card is a nice backup for places that don’t accept AmEx.

  33. SteelersAreGo says:

    I just can’t get behind this FMF guy. Anyone who advocates serious financial advice should not be wrapping themselves in anonymity.

  34. provolone says:

    Amex blue is great, but it’s also good to keep a discover card and take advantage of the 5 percent cash back specials that they do every month or season.

    The Chase freedom card cash back program is nice, but I have always felt like Amex and dDiscover were companies that served their customers better. Always watch out for scams when dealing with Chase.

  35. Bradford Loewy says:

    I have the 5% cash back card from Chase for gas, groceries, and drugstores. 1% for everything else. Every 10,000 points ($2000 in groceries) I send in for a $100 check.

    I have two Discover Open Road cards for the 5% back on all gas purchases up to $100. I get rewards that increase the $ amount, like getting a $25 gift certificate at Gap for $20 in rewards, so it’s really more than 5% back. If I hit $100 on both cards (was happening at $4 a gallon), I switch to the Chase card.

    I have a third Discover card that I use for Discover’s 5% promotion in various categories that shift several times a year (usually up to $400 in charges).

    I use my Amex Blue whenever I want additional consumer protection above and beyond standard Visa/MC terms.

    Thanks to all the suckers paying with cash and debit cards for subsidizing my rewards!!

  36. Anonymous says:

    The Chase Freedom is IRRELEVANT since it is gimped down to 1%, so if you have it already… great! But that is not helpful to the rest of us.

    The Amex could be problematic at places that are Mastercard/Visa only, which is my issue with getting one.

    I like the Schwab one, except I am concerned about 1 thing. I open a brokerage there, and though it will have no minimum or monthly fees, doesn’t it have a minimum number of trades?

    Will I get penalized at end of year for not making any??

    • pmw says:

      @MavisDingo: You say “The Chase Freedom is IRRELEVANT since it is gimped down to 1%, so if you have it already… great! But that is not helpful to the rest of us.”

      This is not the first time I’ve heard this, but as far as I know it’s not true: both old and new members get the same rewards: 3% cashback in top 3 categories, 1% cashback everywhere else. I even spoke to their customer service (both acting as a new customer and acting as a concerned existing customer) and they confirm that everyone has the same rewards, and they’re as good as ever. What’s the deal?