Best Credit Cards - Cash Back Rewards

With cash back rewards credit cards, you make money every time you use them. The concept at the heart is simple: buy things and earn money in return. The various reward structures and rules, however, can complicate things a little bit.

With these popular credit cards, you can earn rewards with not only purchases but also with balance transfers, interest payments and cash advances, depending on the rewards terms of your card. But determining whether a cash back rewards card is right for you will depend--as is true with all credit cards--on a careful reading of the terms and conditions.

Cash back credit card features

The specifics of cash back rewards programs--what's offered and how they work--vary from card to card and can be complex. The key characteristics to look at and compare are:

• Structure The rewards structures of these cards can differ greatly. Some offer a flat percentage of cash back, such as 2 percent on all purchases. Others offer higher percentages on purchases in certain categories, such as groceries, drugstore items and gasoline, or for purchases from selected merchants. Some even feature bonuses for the first purchase or bonuses for earning a spending a certain amount in a year.
• Rate Cash back rates typically range from 1 to 5 percent, but some are as high as 10 percent. Obviously, the higher the rate, the more cash you get back. If, for example, you earn 2 percent on all purchases and you charge $10,000 to the card in one year, you'd accrue $200 in cash back. Credit card companies can modify those rates at any time, however.
• Tiering Some cash back credit cards are tiered. With these cards, your cash back rate increases when you reach certain spending amounts. For instance, you may earn 0.5% on all purchases up to $6,500 and then 1.5% for subsequent purchases. A card may have two or more tiers.

Potential reward limitations

Most of these rewards cards have rules concerning usage and redemption. Here are a few to be aware of:

• Caps Some of these cards have a limit on the cash back you can get: a monthly cap, an annual cap, or both. Annual caps are frequently between $300 and $600. Many of the best cash back credit cards don't have caps.
• Redemption minimums Sometimes you have to charge a certain amount on the card before your reward takes effect or before you can redeem your reward. With some cards, you may redeem your reward each time you meet the minimum; with others, redemption is done monthly or annually.
• Expiration dates Expiration dates on the rewards themselves are not uncommon. On cards with a rewards expiration date, if you don't retrieve your cash back by that time, you lose it. You also could forfeit your rewards in other ways, such as defaulting on the account.

Cash back rewards cards often have higher interest rates than cards without rewards, so it's best to pay any balance in its entirety monthly. Otherwise, interest will eat away at your cash rewards and you won't reap any true benefits.