A Roadmap to Credit Card Cash Back

Rewards points aren’t for you? Maybe cash back might be the alternative.

Airline miles and Hotel points are not for everyone. Even though there are ways to extract significant value from these programs, it can sometimes be difficult and always requires pre planning.

A lot of people don’t like to get into credit cards because the daunting task of planning with points is not worth the payoff.  Others don’t like to travel, so earning these points are worthless to them.

Well there is one reward program that can be earned across all card issuers and can be used to purchase anything. We call it The Cash program, or U.S Dollars, or you know money….

For  people who don’t want to mess with points then cash back is the alternative for you, and just like in the points game, not all cash back cards are equal.

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So, what card should I get?

Well just like in points there are multiple cards that earn cashback at different rates with different category bonuses. Just like with points, it is best to have a few cash back credit cards to maximize your earning potential.

What we did was compile a list of cards that we felt were some of the best cash back cards. This is by no means a comprehensive list.

We also did not take sign up bonus or any other features into account. We only looked at maximum cash back. 

Let’s start simple.

If you current cash back credit card earns less than 2% cashback then throw it away. Seriously. If your goal is to earn cash back and you get are getting less than 2% on all purchases then the card is worthless.

To maximize cash back it is best to take a multi-pronged approach. 

Step 1: Acquire a base spend card that gives a high percentage cash back at all places.

You only need 1 of these cards. A couple of our favorites are below.

Base Spend Cards

Earn 2% on all purchases

No Annual Fee

Earn 2% everywhere.

No Annual Fee

  • USAA Limitless Cashback Rewards

Earns 2.5% cash back everywhere.

No Annual Fee

Only available to USAA members and not available in all states. Requires USAA checking account with $1,000 a month direct deposit.

Great card if you are eligible to join USAA.

  • Alliant Cash Back Visa Signature Card

2.5% everywhere and 3% the first year. Annual Fee of $59 which is waived the first year.

The annual fee is offset if you spend $11,800 per year on this card over a no annual fee 2% card.

You must be a member of Alliant Credit Union, which anyone can join. It is actually a great Credit Union to join if you are looking for a new bank. They are mostly an online only credit union but they do have some branches in Illinois. They offer competitive savings rates ~1.05% and $20 a month in ATM fee reimbursement.

Step 2: Acquire Cards with rotating categories.

These cards give 5% cash back in a different category every quarter. We recommend picking up both, the Chase Freedom and the Discover IT cards, as the categories are generally different between the two.

Categories are usually fairly broad such as grocery stores, restaurants, or hardware stores. The categories change every quarter are different every year.

Both of these cards have a limit of 5% cash back on the first $1,500 in category spend but keep in mind that both spouses can sign up for the card bring the total to $3,000 in spend.

Rotating Category Cards

5% cash back in up to $1500 in spend in a specific category per quarter

No Annual Fee

5% cash back in up to $1500 in spend in a specific category per quarter

No Annual Fee

Step 3: Fill out the rest of your wallet with selectable category or specific category cards. Chose these based you your spending habits.

Selectable Category Cards

These cards let you select the category that gives the most cash back. We don’t like these as much as the rotating category cards as you either get less cash back in each category or they are really restrictive.

3% on selectable category on first $2,000 spent

Categories (Select 1)

Apparel/Soft Goods, Discount Stores, Sporting Goods, Gas, Wal-mart, Restaurants, Grocery, Department/Electronic stores, Pharmacy, Home Improvement, Travel/Entertainment, Utilities, Office Supply

5% on 2 selectable categories

2% on 1 selectable category

No Annual Fee

Note: You can select new category each quarter. The 5% are typically more restrictive such as fast food while the 2% category would be restaurants. There is a good amount of choices. The current choices can be found here. https://cashplus.usbank.com/merchants/index?return=site%2Fhow_it_works

Specific Category Cards

These cards give a bonus in a specific unchanging category so pick up whatever cards fit into your typical spending patterns.

  • American Express Blue Cash Everyday

3% cash back at Grocery Stores on the first 6,000 in spend per year.

2% at gas stations and select department stores

No Annual Fee

  • American Express Everyday Preferred

6% Cash Back at Grocery Stores up the first $6,000 in spend.

3% a gas stations and select department stores

$95 annual fee (Spending $3,167 on groceries in a year makes offsets the fee vs Everyday version)

If you already have the Chase Freedom and Discover It, we don’t recommend getting the Everyday Preferred. Groceries is a pretty common category so the annual fee isn’t worth it unless you spend a lot at grocery stores.

4% on Gas on the first $7,000

3% on Travel

2% at Costco

No Annual Fee but must be a Costco member

5% Gas

3% Supermarket

No Annual Fee

Must become member of Pen Federal Credit Union, although anyone can join.

There are quite a bit of choices for cash back cards and depending on a families individual spending habits, the ideal strategy will be different. If I didn’t prefer miles and points my ideal strategy would be.

Citi Double Cash

Chase Freedom

Discover It

Amex Everyday

Bottom line do your research and chose what card is best for you. We are in no way financial advisors, just savvy spenders that find credit cards work well for our family.

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