Best credit cards for cash back of January 2025

In short, how cash back credit cards work is that you automatically earn cash back each time you swipe your card – it’s as simple as that. Most often you’ll earn consistent 1% cash back on all purchases made, but there are several cards that will earn you more than that up to a certain spending threshold, in certain categories, etc.

The basic idea with cash back credit cards is that when you swipe your card, you’ll earn cash back each time you make your purchase. Unfortunately, spending money is just a part of everyday life— from filling up the tank with gas, to buying groceries for dinner, paying bills, purchasing school supplies, etc. You might as well earn yourself some cash back on money you’ll be spending regardless.

Cash back credit cards are not cards you can get cash back with at an ATM or a store register. While this is technically possible with some credit cards, it’s not advised as this action causes interest charges to immediately apply and the fees for using a credit card in this manner can be expensive.

Yes, cash back credit cards can be extremely valuable if used wisely. They offer a straightforward way to earn rewards on everyday purchases, which can be redeemed for cash or applied to your credit card balance.

Cash back credit cards come in a number of typical formats. The one that is right for you will depend upon your spending habits, lifestyle and amount of work you want to put into maximizing your rewards. Let’s look at the types from the simplest, most hands-off to the most involved.

Flat-rate cards – These cash back cards offer a single cash-back amount no matter where you make your purchase. The cash-back percentage usually ranges from 1%-2%, with 1.5% being common among flat-rate cards. These cards require the least amount of planning and thought, though they also lack the ability to strategize and maximize your rewards.

Tiered-rate cards – Tiered-rate cardholders earn varying amounts of cash back depending on where they use their card. The categories don’t change, but the amounts for each purchase can vary. These cards often offer cash back in two or three different tiers and require a bit more planning from cardholders to maximize cash back, but are still fairly simple.

Rotating category cards – Rotating category cash back cards require cardholders to take a hands-on approach to using their cards and maximizing rewards. These cards feature rewards categories that change on a schedule, often quarterly, and usually require the cardholder to “opt in” to the bonus categories each new rewards period. There’s excellent opportunity to rack up rewards here, but you have to pay attention to where you’ll earn top rewards each quarter and remember to activate the categories as they come around.

Cardholder’s choice cards – The most involved of the cash-back rewards cards, these cards offer the high rewards potential of a rotating-category card and more by offering cardholders the opportunity to choose the bonus rewards category or categories. Each reward period, usually monthly or quarterly, the cardholder can choose where they’d like to earn the bonus rewards for that period. That means cardholders who are willing to plan their spending well can stand to earn the most with this type of card.

There are a few other slight variations on the cards above, such as those that automatically offer bonus rewards in your highest spending category of a given billing cycle. In general, though, the types of cash back credit cards include flat-rate, tiered-rate, rotating-category and cardholder-choice.

In a word, no, cash-back rewards are generally not taxable. The Internal Revenue Service tends to view credit card rewards, whether cash back or frequent flyer miles or some other form of points, as a discount rather than income so you generally won’t need to report your cash-back rewards on your tax return. Consider this: The cash-back you earn with your card is really just a refund based on purchases you’re making. In other words, you aren’t getting something for nothing.

There are slightly different things to consider if you redeem points for a tax-deductible purchase for your business. You can only deduct the amount that you actually pay, so you’ll need to subtract whatever amount was covered by the rewards. Obviously, taxes are complicated and every person’s situation differs, so if you have any doubt about how to treat your rewards, whether business or personal, consult a tax professional.

Learn more about credit cards and taxes.

It depends on the card. In our experience, cash back on most popular cards doesn’t expire so long as your account remains open. Before applying for a new card, check its expiration policy. Plus, be aware that closing an account could mean forfeiting any unredeemed cash back or rewards.

Do credit card points expire? Similar to cash, points or miles won’t expire as long as your account is open and in good standing. There may be exceptions, so it’s best to always check your card’s fine print.

Yes, in fact, many of the best business credit cards are cash back credit cards and offer bonus cash back on eligible business purchases.

Generally speaking, no, there is no limit to how much cash back you can earn with a credit card. However, some credit cards might implement caps on how many bonus rewards can be earned in a particular spend category before a lower rate applies. For example, a card may earn 5% back on up to $6,000 spent in a specific category each year and once you hit that spend cap, the rate drops to 1% until the year is over.

To maximize earnings with a cash back credit card, make sure you understand your card’s rewards structure, track your spending, and pay your balance in full to avoid interest charges. Leverage bonus categories, introductory offers, and shopping portals to boost your rewards. Consider redemption options that align with your financial goals and be mindful of potential fees. By strategically using your cash back credit card and making informed decisions, you can significantly increase your financial rewards.