How much cash back could you get from credit cards in 2024?
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BLUEPRINT
Updated 11:28 a.m. UTC Nov. 20, 2023
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The best cash-back credit cards offer users the opportunity to put some money back in their pockets on the spending they already plan on doing. But exactly how much money can you expect to earn with a cash-back card?
Before signing up for a new credit card, it’s important to make sure you can earn enough in rewards to make it worthwhile. We estimate that the average spender has the potential to bring in $500 in cash back or more per year with the right card — but it all depends on your spending habits.
What is a cash-back credit card?
Cash-back credit cards are a type of rewards card that offer a percentage of cash back on your purchases, typically between 1% and 6%. There are several common structures for the rewards-earning, including:
- Flat cash-back rate: With these cards, all purchases earn the same amount of cash back. Rates generally range from 1.5% to 2.5%.
- Bonus cash-back categories: Rather than a single cash-back rate, these cards typically offer a base rate of 1% back on general purchases but a higher rate in certain spending categories, such as groceries or dining.
- Rotating bonus categories: These cards, sometimes called 5% cash-back cards based on the most common rate offered, have a rotating selection of categories that you must activate each quarter to earn the elevated cash-back rate. You’re also typically subject to spending caps on how much you can earn at the elevated rate each quarter.
All of these cards offer the potential to bring in plenty of rewards, but the best for you will depend on your spending habits and how much work you are willing to put into tracking categories.
Cash-back cards aren’t just for consumers, either. Small business owners can use a cash-back business card to manage cash flow and earn a little bit in rewards to offset their expenditures.
Wells Fargo Active Cash® Card
Examples of how much you could earn
So how much cash back can you expect to earn in a year using your credit card? It depends on your particular budget and the rewards structure on the card you choose.
For instance, some of the best flat-rate credit cards offer 2% cash back on all purchases, so if you spend $25,087 in a year (our average spending estimate based on publicly available government data) on the card, you’d earn $501.74 in cash back annually.
Alternatively, choosing a bonus category card with a higher rate in a category you spend more in — like gas or groceries — could potentially tip your earnings higher. A common strategy is to use two or more cash-back cards, one that earns an elevated rate in a category where you spend heavily and one that earns a flat 2% rate for all your other purchases.
Check out estimated earnings for some of the most popular cash-back cards on the market:
You can do the math with your own budget by multiplying the amount you spend in each category by its rewards rate (considering any spending caps) and adding the totals.
One important caveat — these earning estimates assume you are paying off your full card balance every month. That’s because credit card APRs are generally extremely high and if you don’t pay off the balance monthly, the amount you’ll owe in interest charges will likely outweigh the cash back you earn.
Want to avoid paying interest? Here’s how a credit card grace period works.
What to consider when choosing a cash-back card
Picking the cash-back card that is best for you depends on a number of factors, with one big consideration being how much you can earn. In addition to doing the math on the rewards rate to see if it fits your spending patterns, consider if you are willing to track spending categories, pay an annual fee or juggle multiple cards with different earning rates. All of these factors can impact your choice.
If you don’t want to have to worry about activating bonus categories, for example, a rotating cash-back card probably doesn’t make sense for you. Similarly, if you plan to open more than one cash-back card, you might choose one with a good rate on grocery spending and another with a good rate on restaurant dining to maximize your earnings.
Which is better: Cash back or points?
The distinction between cash back and points isn’t always clear cut. For example, Chase Ultimate Rewards® points can be redeemed for cash back at a value of 1 cent per point — but if you hold a premium Chase Ultimate Rewards travel card, you can get more value by using points to book travel through the issuer’s portal, or you can transfer points to travel partners.
Cards may be marketed as cash-back cards but may actually earn rewards in the form of points. For example, Citi markets the Citi Custom Cash® Card as earning cash back, but the fine print spells out that you’re earning Citi ThankYou® Points which you can redeem for a penny each.
The important thing to consider is what redemption options a card presents you with and what value you’ll get for various redemptions. If you’re earning points or miles, anything that nets you a value of less than 1 cent per point or mile should be considered a subpar option.
When earning plain cash back, the value of your rewards should be straightforward. But there can still be details to bear in mind, such as if a minimum redemption amount is required or if you’re restricted to redeeming cash back into a bank account with the issuer rather than being able to get a check or a deposit to a bank account at the financial institution of your choosing.
To put it briefly, cash back is likely better if you don’t travel frequently and you want rewards with clear-cut value. But if you travel somewhat regularly and are willing to put work into searching for award travel, you can often get outsized value in exchange for your credit card rewards.
Those seeking flexibility should beware airline and hotel co-branded cards. While these cards can provide value to people who are loyal to a specific airline or hotel chain, offering perks such as free checked bags and elite status, options for redeeming your rewards can be more restrictive than what you’d get using a cash-back card or a flexible travel card.
Want to turn your rewards into nearly free travel? Check out our list of best travel rewards credit cards.
Cash-back credit cards can definitely be worth it, allowing you to bring in hundreds of dollars in rewards per year. One important caveat, however, is that you should be paying off your balance in full each month. With the average credit card interest rate over 21% according to the most recent Federal Reserve data available at the time of this writing, interest charges can easily nullify your cash-back earnings.
The best cash-back credit card is subjective based on your spending habits and preferences. For example, if a high flat-earning rate is your goal, consider the Wells Fargo Active Cash Card. But, if you want to earn a higher rate on purchases at U.S. supermarkets, the Blue Cash Preferred Card from American Express (terms apply, rates & fees) — which has a $0 intro annual fee for the first year, then $95 annual fee — is a better choice.
Cash-back credit cards make it easy to put a few extra bucks in your bank account on the spending you already do. And, compared to rewards cards that earn points or miles, the value of the rewards in your account can be easier to understand with a cash-back card.
The danger comes if you use the rewards rate as an excuse to spend more than is allotted in your budget. Overspending and carrying a balance can easily wipe out what you earn in cash back, and you don’t want to get trapped in a cycle of increasing credit card debt.
This depends on your spending habits and your preferences. People who just want cold, hard cash in their bank account and who don’t travel frequently will likely prefer a cash-back card. But those who travel frequently might opt for a card earning points that can be used to book travel through an issuer’s portal or transferred to an airline or hotel loyalty program.
Depending on your credit card, you might have to earn a minimum amount of cash back before you are eligible to redeem. If that’s the case, you won’t be able to redeem your cash back until you accrue the minimum amount, often around $25.
Other cards may stipulate that your cash back expires if not redeemed within a certain period of time from earning it. In that case, you’d want to make sure to redeem your cash back before it expires. The best cards have rewards that don’t expire as long as your account is open and in good standing, but you should check the fine print on your card agreement to be sure.
Aside from these considerations, you can redeem your cash back as often as you like — choosing smaller, monthly redemptions as soon as your rewards appear in your account or one large redemption at the end of the year for a bigger influx of cash.
For rates and fees for the Blue Cash Everyday® Card from American Express please visit this page.
For rates and fees for the Blue Cash Preferred® Card from American Express please visit this page.
*The information for the Alliant Cashback Visa® Signature Credit Card, Capital One Quicksilver Cash Rewards Credit Card, Chase Freedom Flex℠ and Discover it® Cash Back has been collected independently by Blueprint. The card details on this page have not been reviewed or provided by the card issuer.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
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