With travel on hold, credit cards that give you cash back (instead of miles or points) may be a good option. Here are eight of the best no-annual-fee choices.
The credit cards I tend to use most earn airline miles, hotel points, or bank points that can be transferred to travel partners. But with travel on hold, my cash-back cards are getting more of a workout.
The concept of a cash-back credit card is simple: If you make a purchase for $100 and it’s a five percent cash-back category, you’re going to get $5 back on that $100 purchase. As with any credit card, choosing the right cash-back card presents a lot of things to consider. Chief among them are, of course, fees (including annual fees, late fees, and return-payment fees, which you will be charged if you try to pay your bill with an account that has insufficient funds). Don’t worry, though; many come without fees.
The second thing to look for is a card’s cash-back options, which essentially come in two forms: flat rate or rotating category. If you’re just going to have a single card, I would just go for one with the highest flat-rate cash back option, which is right now probably two percent. In this case, a two-percent flat rate means you will get two percent cash back on all purchases, as opposed to only purchases from certain types of vendors; the latter, which is how rotating-category cards offer cash back, requires a little more strategizing. When a cash-back card pays back on rotating categories, the base rate is usually one percent, which isn’t great, but then in one quarter restaurants might earn 5 percent back, and in another quarter gas stations might, and in another quarter wholesale clubs might. The cash back you receive from any card can be spent in different ways, depending on the card you choose. You can apply your cash back to your credit card bill to reduce your statement; or, some companies let you grow your cash-back total by offering gift cards for, say, $80 that only require you to redeem $75 of your cash back.
Here are good no-annual-fee cash-back cards you can apply for right now. REMEMBER: Cards like these are not worth their rewards if you’re in debt. As soon as you’re carrying a balance on your card and paying interest, cash back loses its value.
Best overall cash-back credit card
Citi Double Cash Card
This card offers flat-rate cash-back percentage of two percent. Another plus? It charges no annual fee, which means it not only saves you money, but offers you more flexibility when you no longer want to use that card. For example, you could get the Citi Double Cash card today and start using it, and then maybe a few years from now, when travel is ramping up again, the card no longer makes sense for you to use as your everyday card. As there’s no annual fee, it’s okay to keep the card open. Just let it sit in your desk, using it once a year maybe so that it doesn’t get closed. That way you still can keep all of the credit history that’s helping your credit report without paying an annual fee for a card you’re not using.
It’s important to note the full two percent cash back this card offers is only earned once you pay off the bill. You get one percent back at the time of purchase, and the other one percent when you pay off the card. This is a great incentive to pay off your bill in full, and on time, every month. (Note: according to the Citi website, as long as you pay your minimum monthly balance, you can still earn the full two percent cash back.) Still, PAY YOUR FULL BILL EVERY MONTH. The interest rates are horrible and it’s not good for your credit rating to carry balances.
Best flat-rate cash-back credit card (with a temporary rotating-category bonus)
Chase Freedom Unlimited Card
If you have a high-spending period on the horizon (a wedding or a move or another big event), or are planning to make some big purchases, I recommend the Chase Freedom Unlimited card because it doesn’t charge any interest for the first 15 months. It has no annual fee and the flat-rate cash back percentage is 1.5 percent—not as high as the Citi Double Cash card, but higher than the average one percent, plus it’s all earned at once (not half up front, half when you pay your bill).
While this is a flat-rate cash-back credit card, right now there is a bonus for new cardholders that allows them to earn 5 percent cash-back on grocery-store purchases (excluding Target and Walmart) for the first year, along with an additional $200 cash back. The 5 percent cash-back category, however, is capped at $12,000, so you won’t get cash back on eligible purchases once you spend more than that in your first year. Still, even with the cap, it’s a great offer because $12,000 is one of the highest spending maximums I’ve seen. (Rotating-category cash-back cards typically have spending maximums for getting cash back.)
Best rotating-category cash-back credit card
Chase Freedom Card
Like the Chase Freedom Unlimited card, the Chase Freedom card also has no annual fee, zero interest for the first 15 months, and the same sign-on bonus for new cardmembers ($200 cash back, five percent cash back on up to $12,000 worth of grocery-store purchases in the first year of use). The big difference between the Freedom and the Freedom Unlimited is that the Freedom is a rotating-category cash-back card that incentivizes spending at different merchants on a quarterly basis to earn even more cash back. While it offers a flat (unlimited) one-percent cash back on all purchases year-round, the real draw is the five percent cash back it offers on certain purchases every quarter. For example, in the first quarter of this year, cardholders earned five percent cash back when they used it at gas stations, or to pay for internet, phone, and some streaming services. Note: every quarter has a spending cap: You can only earn the five percent cash back on the first $1,500 you spend on eligible purchases; anything beyond that will just earn the base one percent back. And in order to ensure you get that five percent on eligible purchases, you have to activate them every quarter using the Chase app or website.
I think rotating category cards like this are best suited for people who really monitor their spending habits and are interested in gaming the credit-card system. If you do opt for a card like this, I recommend setting calendar notifications quarterly to keep up with which categories are the moneymakers. Another way to maximize rewards is by using a two-card system, pairing a flat-rate cash-back card with one that has rotating categories. For example, the Chase Freedom Unlimited card could be your default card and the Chase Freedom could be a secondary one you would only use on the categories that earn you more cash back.
Best cash-back credit card with cash-back matching
Discover It Cash-Back Card
The Discover It Cash Back card is a rotating-category card that is comparable to the Chase Freedom. Like the Freedom, it has no annual fee and charges zero interest for the first 14 months. The base cash-back rate is also one percent, with no annual spending cap. And each quarter you can earn up to five percent cash back on purchases within select categories up to $1,500. (As with the Chase Freedom card, you have to activate these categories via Discover’s app or website to get the cash back.) Through September, those select categories are restaurants and PayPal; from October through December, they’ll include purchases at Amazon, Walmart, and Target.
What separates this card from the others is that Discover will match your cash-back rewards at the end of your first year of use with no cap on how much it will match. While this may sound enticing, don’t let this influence you to spend more in order to earn more. Another perk that comes with this card: You can use your cash back to pay for Amazon purchases when checking out at the retailer, which is a pretty seamless way to redeem cash back.
Best customizable rotating-category cash-back credit card
Bank of America Cash-Back Rewards Credit Card
With the rotating-category cash-back credit cards mentioned thus far, the categories that have higher cash-back rates are chosen by the card companies. But the Bank of America Cash Back Rewards card lets cardholders choose their higher-earning categories from among several on offer, including gas, online shopping, dining, travel, drug stores, and home improvement/furnishings. The cash back offered is three percent—a bit lower than other cards’—but the ability to choose what you earn that on can help you game the system because you can change that category at any time. For example, if you typically spend more on online shopping but one month you are planning to spend more on gas for travel, you can switch it to maximize your cash-reward earnings. This card also has no annual fee, zero interest for the first 12 months, and currently offers a sign-on bonus of $200 cash back to new cardholders who spend $1,000 in the first three months.
While you can change reward categories any time, you can only change them once a month, and you can only choose one category to earn the three percent back at a time. But these limitations don’t seem so bad when you consider that this card also offers a rate of 2 percent cash back on purchases at grocery stores and wholesale clubs (just remember those three- and two-percent earnings are capped at $2,500 a quarter). And it offers one-percent cash back on all other purchases year-round, with no spending limit.
Best cash back credit card for people with not-so-great credit
Bank of America Cash Rewards Secured Credit Card
If you have poor credit, you should consider applying for a secured credit card. A secured credit card requires the cardholder to pay a refundable security deposit to the credit-card company, which holds the deposit as collateral. The amount of your deposit is one of the factors that will determine your maximum credit line. Bank of America’s Cash Rewards Secured Card has a minimum deposit of $300 and a maximum of as much as $4,900, and requires applicants to provide a checking or savings account (which is where the deposit will be pulled from). But there is no annual fee, so if you can front the security deposit, this card is good for people with bad credit because it doesn’t charge fees and still offers decent rewards. (This card more or less offers the same cash-back benefits as the Bank of America Cash Back Rewards card described above: one percent unlimited cash back, two percent back on groceries, and three percent back on a category the cardholder can choose. (There is a $2,500 quarterly cap on the three- and two- percent categories.)
Best retailer-affiliated cash-back credit card
Amazon Prime Rewards Visa Signature Card
Generally, I am not a fan of store cards because you really only gain value at that one store. That’s why I make an exception for the Amazon Prime Rewards Visa Signature card: you can buy anything on Amazon, so the card has flexibility built into it. While there’s technically no fee, you do have to be an Amazon Prime member to be eligible (and that membership costs $119 a year). Like the Blue Cash Preferred card (below), this card is a cross between flat-rate and rotating-category: You can earn five percent cash back on purchases at Amazon and Whole Foods; two percent cash back at restaurants, gas stations, and drug stores; and one percent on everything else. There are no spending limits in any of these categories, though the categories that earn you five percent can drop down to three percent if you close your Amazon account. You can apply your cash-back rewards directly to Amazon purchases, but they are also redeemable as regular cash back (to, say, pay off your bill).
Best cash-back credit card for a pandemic
American Express Blue Cash Preferred Card
This card is the best one for the present moment because it combines the ease of flat-rate cards with the high cash-back rates of rotating-category cards—and some of the highest-earning categories include things that people are buying a lot of during the pandemic. The American Express Blue Cash Preferred card earns six percent cash back at grocery stores and on some streaming services, plus three percent cash back on gas and transit purchases. (The six percent cash back on grocery-store purchases is capped at $6,000 per year; after that, those purchases earn one percent, as do all other purchases outside of the aforementioned categories.)
The Blue Cash Preferred card has an annual fee of $95, though it offers a sign-on bonus of $250 cash back for new cardholders who spend $1,000 in the first three months. So be sure to run the numbers: if the annual fee will be more than the cash-back you’ll earn over time, you may want to pass.
Twist’s Take: With travel on hold, credit cards that give you cash back (instead of miles or points) may be a good option.
