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.
2. Choose a card with a solid sign-up offer
If you’re in the market for a new cash back card, do your homework to make sure you’re getting a great cash back card welcome offer with a minimum spending requirement you’ll easily be able to meet.
There are plenty of cash back cards with great welcome bonuses, including:
- Chase Freedom Flex℠: $200 cash bonus when you spend $500 on your card within three months of account opening
- Capital One Savor Cash Rewards Credit Card: $300 bonus after spending $3,000 within three months
- Bank of America® Customized Cash Rewards credit card: $200 online cash rewards bonus when you spend $1,000 in the first 90 days of account opening
3. Diversify your spending strategy
There are a few steps you can take to make sure you’re getting the most out of each of your credit cards.
To start, you shouldn’t play favorites with your cash back cards. It’s smart to not focus all your cash back earning on a single credit card. While it’s great that you’re earning 6 percent cash back on U.S. supermarket purchases (on up to $6,000 per year, then 1 percent) with the Blue Cash Preferred® Card from American Express, you don’t need to settle for just 1 percent cash back on most other purchases. Keep a second card in your wallet, like a 2 percent flat-rate cash back card you can use for your spending that doesn’t qualify for a higher-earning bonus category.
Do some research on all your cards and identify what each is best for. Add a small label to your card as a reminder of what to use it for, give each card a helpful nickname in your digital wallet or slip a hand-written legend into your wallet so you’re prepared to use the right card at the right moment.
If your cash back card has rotating bonus categories, keep an eye on your issuer’s cash back calendar and activate bonus categories each quarter. This way you’ll be eligible for the bonus cash back rate. Otherwise, you’ll only earn the base rate, usually 1 percent on all your spending.