Can cashback credit cards fill in the gaps that inflation is causing?


One expert shares their go-to, ace-in-the-hole secret

According to a new report released by the Electronic Payments Coalition, consumers, including lower-income consumers, are increasingly using reward credit cards to help make ends meet.

“For many, these credit card rewards served as a lifeline during the record inflation of the last few years,” EPC Executive Chairman Richard Hunt said.

In a ConsumerAffairs survey of cashback cards, our editors determined that while airline miles and hotel points are great if you travel regularly, nothing beats the flexibility of cash. With the best cashback credit cards, you'll earn extra money to use however you wish.

But it’s not an even playing field. There are twists and turns that consumers have to maneuver through to make sure the cashback card they sign up for makes sense for the things they buy. ConsumerAffairs polled a group of credit card experts to find out how you can play that game and come away with the most cash back to you. Here’s what we found.

Do you typically carry a balance on your credit card?

Dave Grossman, CEO and founder at Your Best Credit Cards, thinks that you’d be foolish to get a cashback card if you don’t typically pay it off every month.

“Generally, a rewards credit card of any kind is going to have higher APRs than non-rewards cards since they have to pay for the rewards. So don't pay 20% in interest to earn 2%,” he told ConsumerAffairs.

“But for anyone who can control their spending, such as not carrying a balance, a cashback card, or any rewards card, is going to be a better move, especially since you'll have considerably more consumer protection on a credit card vs. a debit card.”

What are you going to use it for?

Consider choosing a cash-back credit card that rewards that category with a high cash-back percentage before you apply for one. For example, if you spend the most money on groceries, then you should consider a cashback card that rewards that category with a high cashback percentage, advises Josh Bandura, co-founder of Frugal Flyer.

Andrea Woroch, a money-saving expert, echoes Bandura’s sentiment and shared some data as to why being picky is so important. Pointing to a study done by Gigapoints, a credit card matching tool, she said that the average credit card user misses out on $1,000 worth of cashback each year because they're using the wrong type of rewards card based on their spending history.

“Therefore, it's a good idea to analyze your own spending habits to figure out where you shop the most, which types of purchases and expenses do you spend the most on and then find a card that gives you a higher cashback rate for those categories/stores, etc.,” she advises.

Flat rate or variable rate cashback card?

As you check out what everyone offers, you’ll see some pretty enticing rates if you buy certain things or at certain places. For example, Amazon has a 5% cashback deal when you buy from Amazon (or Whole Foods), but it drops to 2% at gas stations and restaurants and then fades to 1% for everything else.

Woroch adds that if this credit card is only to be your one and only, flat rate is the way to go. “Because it takes the guesswork out of tracking categories or quarterly bonuses and gives you a higher cashback rate for all expenses including even those monthly utilities you pay with your card or medical bills,” she asserted. 

There’s more where these ideas come from. ConsumerAffairs also found CashBackMonitor – a website that tracks what cashback offers all the major retailers are offering and the hoops you have to jump through to get those. And some are definitely worth looking into, such as:

  • Walmart: 3%

  • Home Depot: 7%

  • Best Buy: 4%

  • Macy's: 9%

Again, you’ll have to do some work to make the site work in your favor. Floney explains how CashBackMonitor works in this video:

A complete guide to who’s offering what

ConsumerAffairs recently completed a complete guide to cashback cards and our researchers found even more interesting ways to get money back on what you spend. For example, there’s one credit card that gives you up to 5.25% in a purchase category of your choice.

To find who’s offering what and how their plans work for certain buying categories, you can find our guide here.

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