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Banks offer cash back credit cards to entice consumers to spend on their cards and earn a percentage of their spending back in cash. This can be a great option to getting something back for your everyday spending if you’re not interested in travel points and miles. Many popular cashback cards offer up to 5% back on certain rotating spending categories throughout the year. Other cards offer a fixed percentage of cash back for every dollar that you spend.
Banks use a number of different ways to reel you in to using their products, especially their credit cards. They do this in hopes of you carrying a large balance and paying huge sums in interest back to the banks. Of course, we’re smarter than that and never carry a balance on our credit cards. We do however reap all of the rewards offered by those cards.
CHASE FREEDOM
The Chase Freedom card is extremely popular among everyday consumers and travel hackers alike. This card offers rotating 5% categories every quarter where you can earn a substantial amount of cash back. The way these rotating categories work is that each quarter, the bank designates which spending categories will earn 5% cash back for every dollar that you spend. As of this recording, the Chase Freedom is offering 5% cash back at gas stations, internet, cable, phone services and select streaming services on up to $1500 spent.
From January to March, I use my Chase Freedom card at all gas stations and I use it to pay my internet bill, Netflix and Hulu bills. If you’re curious as to which merchants will trigger the 5% bonus, check out this link. As you can see, Netflix and Hulu are part of select streaming services. You also earn 1% cash back on all other categories.
As mentioned, if you max out the $1500 in spending in bonus categories each quarter, you could earn $300 per year. That’s pretty cool since you’re spending on useful categories and earning cash back. What makes the Chase Freedom so valuable to me is the fact that instead of cash back, you can convert that cash back to Ultimate Rewards points if you also own the Chase Sapphire Preferred or the Chase Sapphire Reserve cards. Ultimate Rewards is Chase’s travel rewards currency. Ultimate Rewards points are flexible points that can be transferred to airline and hotel partners. Since I love to use credit card rewards for “free” travel, this is my preferred option. Those $300 in cash back earned per year ends up being 30,000 Ultimate Rewards points.
DISCOVER IT CASH BACK
The Discover It credit back card is a fan favorite among cash back enthusiasts. Much like the Chase Freedom card, it also offers rotating categories every quarter where you can earn 5% on up to $1500 spent. I use the Discover card and my Freedom card interchangeably each quarter to earn 5% on their respectable bonus categories. As of this recording, the bonus categories are grocery stores, Walgreens and CVS pharmacies. You also earn 1% on all other categories for that quarter.
I find this category easy to max out since we do regular grocery shopping, plus our grocery store, Walgreens and CVS sell very useful gift cards. Keep in mind that Walmart Supercenters and Target are excluded from earning 5%.
Although in practice, my purchases from our Neighborhood Walmart (the smaller, grocery store Walmarts) do code as a grocery store and I earn the 5% per dollar spent. But, “your mileage may vary” so please test it out in your area before spending a lot on your card.
CITI DOUBLE CASH CARD
The Citi Double Cash credit card doesn’t have rotating 5% categories like the Chase Freedom and Discover It cards, but what makes this card great is that you earn 2% cash back on every purchase. You earn 1% when spending on the card, and 1% when you pay off your balance. Since we never carry a balance, this makes the card a 2% cash back card. This is great because while the Chase Freedom and Discover It cards only offer 1% on their non-bonus categories, you can use your Citi Double Cash card to earn 2% on those other categories. This really boosts your cash earning potential.
Much like the Chase Freedom card, the Citi Double Cash card allows you the flexibility to convert your cash back into ThankYou points. ThankYou points are Citi’s flexible points that can be transferred to several airline partners. This is where I can really maximize the value of those credit card rewards.
SUMMARY
I own the 3 cards mentioned previously and they serve a useful purpose for me. All 3 of the cards do NOT have an annual fee, which is great so you can keep the card long term to improve your credit score with a longer credit history.
If I had to rank these 3 cards, I would say that the Chase Freedom comes in first place, with the Citi Double Cash coming in second, while the Discover It card comes in third.
CASH BACK CREDIT CARD #1
The reason for this is because with the Chase Freedom I can earn an easy 30,000 Ultimate Rewards points per year just by maximizing the bonus categories every quarter. Because the rewards can be converted to Ultimate Rewards points, I can transfer those points to United Airlines or Hyatt and get extreme value from them. I value Ultimate Rewards points at around $.02 per point. Also, the Chase Freedom card is issued by Visa and is virtually accepted everywhere. However I wouldn’t use this card overseas since it does charge you foreign transaction fees.
CASH BACK CREDIT CARD #2
The Citi Double Cash card earns 2% cash back on everything and also has the option to convert its cash back into a flexible points, but ThankYou points from Citi are slightly less valuable than Chase’s Ultimate Rewards points. ThankYou points have 15 different airline partners, however about half of them are useful to me. Although I could transfer them to Turkish Airlines and book flights from the US mainland to Hawaii for 7,500 points! The Citi Double cash card is issued by MasterCard which is accepted just about everywhere. Like the Chase Freedom card though, it does charge you for foreign transaction fees.
CASH BACK CREDIT CARD #3
The Discover It card also has 5% rotating categories like the Chase Freedom card and offers great customer service. It is an amazing card and highly recommend it, however I’m not able to convert that cash back from the Discover It card to a flexible point where I can get increased value from it. This is why the other 2 cards edged this one out. Another drawback that I have to mention is that Discover is not as widely accepted as Visa and Mastercard. But, this card does NOT charge you for foreign transaction fees if you’re able to find a foreign merchant that accepts Discover.
CONCLUSION
There are a number of cash back credit cards out there, but these three are the ones I find to be the most valuable. While there is nothing wrong with using these cards for their cash back earning potential, I choose to get more value out of rewards cards by transferring them to my favorite airline and hotel partners when possible. Do you currently have any of these cards? What is your preferred use out of them? Let me know in the comments down below! That’s it for me guys. We’ll see you in the next one.
