avvy cardholders should work to maximize their perks and rewards throughout the year. If you’re using one of the best cash back credit cards, it’s important to understand how to get the most out of your cash back rewards. Keep reading to level up your cash-back savvy and optimize your rewards strategy.
1. Evaluate your spending habits and find a card that suits you
Before you switch up your credit card spending strategy or consider applying for a new credit card, it’s important to analyze your cash flow. Use a budgeting app or a pen and paper to figure out how much you spend each month and on what. Whether you’re feeding your soul with home cooking or convenient takeout, racking up travel miles in your car or with your favorite airline, make sure you understand where your money is actually going so you can choose a card that will reward you for spending you’re already doing.
Understanding how much you spend will help you anticipate what your rewards yield will be each year (often higher the first year if your card has a welcome offer) and therefore whether an annual fee is worth it. If you don’t actually spend enough money on a credit card each year to offset the card’s annual fee, that card is probably not the best for you.
Once you’ve identified how you’re using your credit card, you can identify which type of card will best suit your lifestyle and existing spending.
Common spending categories
The best type of card for everyday spending is generally a flat rate cash back card, as you’ll earn the same rewards rate no matter what you buy. While 2 percent cash back makes a lot of sense, a card with a slightly lower flat rate may offer additional perks that make it a better fit for your spending.
If you spend a lot on dining out or takeout, there are a number of cash back cards with generous rewards on dining and entertainment purchases. If your biggest spending is on groceries to cook at home, you may be best served by one of the best cards for groceries, and a card focused on gas rewards makes more sense if you have a long commute or road-trip a lot.