Credit cards often come with a range of perks, and one example of a major benefit is when you own a rewards credit card, such as a cash-back option. A cash-back credit card offers you a percentage of cash back for certain purchases you make with the credit card. You’ll find the range of possible earnings anywhere from 1% to 6% of your purchase, depending on the category of spending the purchase falls within.
A cash-back credit card offers an effortless way to earn a little extra. When you use one of these credit cards responsibly (which means always paying on time and paying your balance in full each month to avoid interest charges as much as possible), you can earn a chunk of change for everyday purchases you’re most likely making anyways. But the other appealing part is you can actually set up a strategy to maximize your cash back and earn even more on a variety of eligible purchases. Let’s walk through the steps and show you how to maximize cash-back rewards.
Strategies to maximize cash back rewards
Implement these strategies, and you could see your cash-back potential grow throughout the year.
1. Analyze your spending habits before choosing a new card
Before applying for any rewards credit card, look at your personal spending habits on a monthly, quarterly, or annual basis. Notate which categories you’re spending in and how much. Taking this time to review helps you choose the right credit card and find the
best rewards program based on facts for the highest earning potential. Once you have your spending categories in place and estimate how much you’re spending in each one, you can match a card offering the most cash back for your high-spend categories.
Common categories of spending often featured in cash-back rewards include:
Groceries
Dining (including takeout and delivery services)
Streaming services
Gas
Travel (hotel, airlines, car rental)
Drugstore purchases
Wholesale club purchases
Purchases with online retailers, such as Amazon
You don’t have to limit a rewards program based on these purchases listed here. If you use your card for rent or mortgage payments, tax payments to the IRS, furniture, or virtually any other reason, you could consider a flat-rate cash-back card, where you earn a flat percentage of your purchase, no matter the category.
Once you zero in on your categories, you can crunch the numbers to see your potential with a card and if the annual fee (if applicable) is worth it. The key to keeping your credit card usage in check is to use a card for purchases you’d make anyways, and you already have the budget to pay the balance in full each month.
2. Look for a robust welcome bonus or bonus offers
On top of the cash-back potential, credit card companies lure you in even more with lucrative welcome offers or sign-up bonus offers. These are generally additional cash awarded for meeting a certain spending level within a limited time after opening a credit card. While some cards may require thousands of dollars in spending within the first three months to receive a welcome bonus, others are more attainable.
For example, for a limited time, the Citi Double Cash® Cardprovided a $200 bonus cash back after spending $1,500 on purchases in the first six months of account opening.
No matter which card you select that includes a bonus offer, taking advantage of this additional “free money” is a fantastic way to maximize your cash-back credit rewards.
3. Pay attention to how you earn
When choosing a credit card with a rewards program, not only should you look at your highest spending categories and a welcome bonus, but don’t forget to look at how you earn these rewards. Some cards offer rewards for a spending category all year long, while others require you to activate monthly cash-back earnings for certain categories. There are also cards with standard bonus categories throughout the year that provide you with a yearly promotional calendar.
If you find this too tedious to keep track of, you may prefer the ease of a flat-rate cash-back program. Or, set reminders on your smartphone if you need to activate a bonus offer throughout the year.
4. Take advantage of bonus categories
Speaking of bonus categories, these are often used by a credit card throughout the year as an extra incentive. You generally need to register for these, but it’s worth the time if it matches your higher spending categories.
Chase Freedom Flex℠ is one example of a card that has offered both rotating and bonus categories each quarter. While the Chase Freedom Flex℠only announces the bonus categories a quarter ahead of time, you can earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. Enjoy new 5% categories each quarter! Plus, earn 5% cash back on travel purchased through Chase Ultimate Rewards®, 3% on dining and drugstores, and 1% on all other purchases.
5. Redeem your cash-back rewards wisely
Credit card companies might not want to advertise how the rewards rate among the various redemption options is not always equal. Typically with cash-back credit cards, you are given multiple options for redeeming. This includes statement credits, direct deposits, or mailing a physical check to you.
However, some credit card companies offer additional redemption options, such as converting your cash reward to gift cards at popular retailers, tickets to concerts or sports events, or even charitable donations. While choosing one of these fun options may be tempting, be sure to read the fine print. These options generally do not give you the value for your cash back, as you’ll find the details in the card’s terms and conditions.
6. Review all fees
As lucrative as the cash-back possibilities may seem, review all the credit card terms before signing up for any card. This includes understanding the annual fee, the interest rate, and interest charges, plus any balance transfer or cash advance fees. Don’t forget to review the late fee charge too.
Some cards do include an annual fee, but you may find your spending habits more than justifies the annual cost. For example, the Chase Sapphire Preferred® Card has a 95 annual fee. Enjoy benefits such as 5x on travel purchased through Chase Travel℠, 3x on dining, select streaming services and online groceries, 2x on all other travel purchases, 1x on all other purchases, $50 Annual Chase Travel Hotel Credit, plus more. Plus, it includes bonus spending categories, which is another reason why the $95 annual fee may be more than worth it.
7. Consider pairing with more than one cash back credit card
One of the best ways to maximize cash-back rewards is to carry more than one cash-back card. For example, assume your biggest spending category purchases from U.S. supermarkets and grocery stores. Because of this, you choose the Blue Cash Preferred® Card from American Express for its 6% at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%). However, your spending at U.S. gas stations is another major category, but the Blue Cash Preferred® Card from American Express offers 3% cash back on gas purchases. (Terms apply.) You could pair this card with the Discover it® Cash Back and earn 5% on gas purchases instead, which is 2% more earnings versus the Blue Cash Preferred® Card from American Express. This could add considerable cash-back rewards, given the current high gas prices.
If you’re concerned you’ll forget which card works best in each spending category, you can add a note to your digital wallet, download an app to help you keep track, or simply tape a piece of paper or masking tape to the card with a reminder. And, of course, you have to keep the impact on your credit score in mind if you take on more than one card, especially considering your credit utilization ratio.
The bottom line
Who doesn’t love extra cash? While you may not get rich off cash-back credit cards, using them strategically to match your personal finance habits, you could pile on serious savings throughout the year. The key is to find the card that matches your spending and take advantage of a welcome bonus and any other bonus opportunities throughout the year. And if you use the redemption options with the highest value and pair it with another rewards card the right way, your cash back will grow before your eyes.
For rates and fees of Blue Cash Preferred® Card from American Express
, please click here. 
