Cash-back credit cards operate with the simple premise of rewarding you with a certain amount of money returned to your pocket based on how much you spend on purchases. This happens in one of two ways, either via a flat-rate or through category-based spending.
If you were to choose a flat-rate cash-back credit card such as the Citi® Double Cash Card, you’d earn a specified flat-rate back on all your purchases. In this case, the card gives you 2% cash back, which breaks down to 1% back on all eligible purchases plus an additional 1% after you pay your credit card bill.
If you decide you want to maximize your spending across multiple categories, consider a cash-back card such as the Chase Freedom Unlimited®, which earns 5% cash back on travel-related spending booked through the Chase Ultimate Rewards® travel portal, 3% cash back when you spend at drugstores or restaurants — including dining via takeout or certain delivery services — and 1.5% on all other purchases.
So, how much could you earn with each type of cash-back credit card? Select calculated the amount of cash the average American consumer could earn back in credit card rewards based on their annual spending. We worked with the location intelligence firm Esri, which provided us with a sample annual spending budget of $22,126. With a flat-rate 2% cash-back card, you could end up with about $444 in cash back in a year, while using a card that operates on category-based spending would make this figure vary based on how much you actually spent.
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