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Hot take: It’s all about cash-back cards now

The Points Guy logo The Points Guy 10/17/2021 Stella Shon
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Award travel strategies are ever-changing, and what worked in 2019 may not necessarily work for you now. With the pandemic upending travel completely, more people put their travel credit cards to rest in their sock drawers and switched over to cash back cards.

But with travel picking up to pre-pandemic levels, it begs the question: should you use your cash-back cards or your travel credit cards?

I’d argue that it’s all about cash-back cards now — here are the six reasons why you may want to reevaluate your strategy, now more than ever.

In This Post

Issuers have improved cash-back card options

Over the years, issuers have upped the ante, raising the value of cash-back cards. There are more options than ever before, increased sign-up bonuses and generous benefits that even start to compete with that travel credit card in your wallet.

In September 2020, Chase added new bonus categories to the ever-popular Chase Freedom Unlimited, historically known for earning a terrific 1.5% rate on all purchases, no matter the category. Now, the Freedom Unlimited earns 5% back on Lyft purchases (through March 2022) and travel booked through Ultimate Rewards and 3% back on dining and drugstores — all while continuing that great 1.5% non-bonus category rate.

a close up of a logo: (Photo by John Gribben for The Points Guy) © Provided by The Points Guy (Photo by John Gribben for The Points Guy)

Coupled with that announcement, Chase unveiled the Chase Freedom Flex, a cash-back card with rotating quarterly bonus categories. You’ll earn 5% back on the first $1,500 spent each quarter (activation required) — and this quarter’s categories are particularly lucrative: Walmart and PayPal. Not only that, you’ll get 5% back on Lyft purchases (through March 2022) and travel booked through Ultimate Rewards, 3% back on dining and drugstores, and 1% on all other purchases.

Both cards offer temporary partner benefits, such as with DoorDash and Lyft. If activated by the end of 2021, cardholders will enjoy three free months of DoorDash DashPass, getting you free delivery on orders over $12 and reduced service fees. Until March 2022, you’ll earn 5% on eligible Lyft rides.

Another example of a new cash-back card would be the Citi Custom Cash℠ Card. Similar to the Freedom Flex, the Custom Cash offers rotating bonus categories each month. Cardholders will automatically earn 5% back on the first $500 spent on their top eligible spend category from 10 different category options each month (then 1%), making this a truly customizable card that changes as you spend.

(Photo by John Gribben for The Points Guy) © The Points Guy (Photo by John Gribben for The Points Guy)

Business cash-back card options are just as prolific, too. The U.S. Bank Business Triple Cash Rewards World Elite™ Mastercard® is an underrated option that was just refreshed this year and serves as a terrific card for small-business owners who want to minimize their costs but maximize their cash-back earnings on business expenses. There’s a 3% rewards rate on eligible purchases at gas stations, office supply stores, cell phone service providers, and restaurants and 1% on all other eligible purchases. Plus, cardholders receive an up to $100 annual software credit.

The card also offers a solid sign-up bonus of $500 cash back after spending $4,500 in the first 150 days of account opening. For a card with no annual fee, the U.S. Bank Business Triple Cash should be top of mind for new businesses or independent employees just starting.

You want no or much lower annual fees

(Photo by Isabelle Raphael for The Points Guy) © The Points Guy (Photo by Isabelle Raphael for The Points Guy)

If annual fees that are $450+ no longer appeal to you — and Amex has even raised the annual fee of The Platinum Card® from American Express to $695 this year (see rates and fees) — maybe it’s time to trim down those costs altogether.

Many cash-back cards do not charge annual fees, and you’d be hard-pressed to find one whose annual fee is over $100. That’s way more manageable for any budget, and you won’t ever have to worry about whether you’re maximizing the card to justify paying its annual fee. As long as you pay your bills on time and in full, you’ll avoid any sort of fee altogether and be able to focus on earning more cash back for the purchases that matter to you.

You spend less on travel and more on everyday spend

Travel credit cards tend to offer the highest earning rates on, well, you guessed it — travel.

If your travel budget has decreased significantly and you spend more closer to home, you should get a card that rewards you accordingly. Perhaps you’ve switched your game plan altogether and have your sights set for other large purchases — whether that’s a massive home improvement project or are buying a new car — and travel isn’t top of mind for the foreseeable future.

Here are a few types of cash-back cards to choose from:

  • Flat-rate earning card: These cards offer the same cash-back rate, no matter the purchase, offering the utmost simplicity. The Citi® Double Cash Card is a great example that offers up to 2% on all eligible purchases — you’ll earn 1% when you buy and 1% when you pay your bill.
  • Tiered-earning card: These cards tend to offer higher earning rates, but for certain bonus categories. The Capital One SavorOne Cash Rewards Credit Card offers 3% on dining, entertainment, popular streaming services, and grocery stores (excluding superstores like Walmart® and Target®) and 1% on all other purchases.
  • Rotating category card: These cards offer different bonus categories that rotate monthly or quarterly. As mentioned above, the Chase Freedom Flex provides 5% on rotating categories each quarter you activate, on the first $1,500 spent.

As you can see, these earning rates are all catered toward the everyday spender rather than the lavish traveler, so you may find these cards to be more lucrative in the long run.

You want to refinance your debt

Suppose you’ve been dabbling in credit card debt. In that case, many cash-back cards fortunately come with a 0% introductory APR financing offer that could potentially help you reallocate your debt and reduce interest fees for the time being — all while earning additional cash-back rewards.

For example, the Chase Freedom Unlimited offers a 0% introductory APR period for the first 15 months from account opening on purchases (then a variable APR of 14.99% to 23.74% applies).

You can still have both

Just because you add a cash-back card to your wallet doesn’t mean that you have to say goodbye to your travel credit cards forever. You can certainly have both and have them play well into your diversification strategy of earning both cash back and points and miles.

Take for example, the popular travel card, the Chase Sapphire Preferred Card. Carrying it along with the no-annual-fee cash-back card options, the Chase Freedom Unlimited or the Chase Freedom Flex plays well into your strategy since you can transfer those points to the Sapphire Preferred to turn them into fully transferable points.

Or, you can redeem your points for cash back if you’d wish. And, you’ll want to keep that travel rewards card for no foreign transaction fees when you do travel internationally.

That’s because the line between cash back cards and travel credit cards has blurred over the years, as more often than not, you can redeem your points and miles for cash back. Although it’s not the most lucrative option, it’s better than never redeeming your points.

Our top picks for cash back cards

While you can see our full roundup of best cash-back cards here, we’ll list below some of our top picks (including some that were mentioned above!):

Card Annual fee Welcome offer Earning rate
Blue Cash Preferred® Card from American Express $0 introductory annual fee for the first year; then $95 (see rates & fees) Earn a $300 statement credit after you spend $3,000 in purchases on your new card within the first six months of card membership. Earn 6% cash back on purchases at U.S. supermarkets (on up to $6,000 in purchases per calendar year, then 1%) and on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations and on transit and 1% cash back on other eligible purchases. Cash back is received in the form of Reward Dollars that can be redeemed for statement credits. Terms apply.
Chase Freedom Unlimited $0 Earn $200 cash back after you spend $500 on your new card within the first three months of account opening. Earn 5% cash back on Lyft purchases (through March 2022) and travel purchased through Chase Ultimate Rewards, 3% on dining and drugstores, 1.5% on all other eligible purchases.
Bank of America® Customized Cash Rewards credit card $0 Earn $200 online cash rewards bonus after making at least $1,000 in purchases in the first 90 days of your account opening. Earn 3% cash back in the category of your choice: gas, online shopping, dining, travel, drug stores, or home improvement/furnishings and 2% cash back at grocery stores and wholesale clubs on the first $2,500 in combined choice category/grocery store/wholesale club purchases each quarter, then earn 1%.
Citi Custom Cash $0 Earn $200 cash back after spending $750 on purchases in the first three months of account opening. Earn 5% cash back on your top eligible spend category up to $500 spent each billing cycle and 1% unlimited cash back on all other purchases.
Capital One SavorOne Cash Rewards Credit Card $0 Earn a one-time $200 cash bonus once you spend $500 on purchases within the first three months from account opening. Earn unlimited 3% cash back on dining, entertainment, popular streaming services, and grocery stores, plus 1% on all other purchases.

Bottom line

While cash is always subject to inflation, points and miles are also subject to devaluation. But, I’d argue that cash is much more flexible and simpler to conceptualize and keep track of than travel rewards.

Plus, we’ve entered a new era where there are more credit card options than ever. But, travel credit cards may not be the best fit for everyone — especially if your travel has weaned off since the pandemic. Maybe it’s time to think about downgrading your favorite travel card, adding a cash-back card to your wallet, and shifting around your strategy.

For rates and fees of the Amex Platinum card, click here.

For rates and fees of the Amex Blue Cash Preferred, click here.

Featured photo by Maskot for Getty Images.

SPONSORED: With states reopening, enjoying a meal from a restaurant no longer just means curbside pickup.

And when you do spend on dining, you should use a credit card that will maximize your rewards and potentially even score special discounts. Thanks to temporary card bonuses and changes due to coronavirus, you may even be able to score a meal at your favorite restaurant for free. 

These are the best credit cards for dining out, taking out, and ordering in to maximize every meal purchase.

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Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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