Some cash back credit cards offer higher cash back amounts on certain spending categories, while others, known as flat-rate cash back credit cards, offer a flat rate on all purchases, regardless of what you purchase with them. Flat-rate cash back cards may be more appealing to those who want simple, consistent rewards without tracking spending categories.
Let’s explore how flat-rate cash back cards work, compare them to other rewards cards and learn how to choose one that works for you.
How does a flat-rate cash back credit card work?
Flat-rate credit cards typically earn the same cash back rate on all qualifying purchases. You may earn cash back on your purchases, but some cards may also allow you to earn rewards when you pay your monthly credit card bill.
Depending on the issuer's terms and conditions, you may typically redeem cash back for statement credits, account deposits or gift cards. You generally need to wait for your qualified purchase to fully process to view your cash back rewards, so you might have to wait a few days to redeem rewards.
Flat-rate vs. tiered or rotating cash back cards
While flat-rate cards offer the same cash back reward for every qualified purchase, other cards may have different benefits that change depending on the type of purchase. The main types of credit cards whose benefits work in different ways are tiered credit rewards credit cards and rotating rewards credit cards.
Tiered credit cards typically offer different rewards rates for different spending categories, such as groceries, gas or hotels. Rotating cards offer rewards rates on spending categories that change quarterly, and the spending category you use that period may require manual activation.
These other types of cards may offer higher benefits for some types of purchases, whereas flat-rate credit cards provide a level of predictability on your purchases that the others don’t. Also, tiered credit cards or rotating category cards may have a cap on the amount of rewards or cash back you can receive on the higher earn categories.
Pros of flat-rate cash back cards
Some of the benefits of a flat-rate cash back card include:
- Consistent earnings: Your card won’t earn less cash back on specific categories. It always earns cash back at the same consistent rate on qualified purchases.
- No need to track categories: With one rate for qualifying purchases, you have the freedom to earn with your card without needing to think about how you’re using it.
The challenge of flat-rate cash back cards
The main challenge of a flat-rate cash back card is that tiered and rotating cards may offer higher rates on cash back for specific spending categories, so if you know you spend more on some categories, you may benefit from more specialized rewards credit cards. Just be aware of any earn caps on the higher earn categories.
Choosing a flat-rate cash back credit card
Here is what you may want to look for when choosing a flat-rate cash back credit card:
- Annual fees: Some flat-rate cards don’t charge an annual fee, but others do, so make sure you understand the terms and conditions of your card before you apply.
- Redemption options and restrictions: Different issuers may offer different ways to redeem your rewards. For example, if you have a travel card with the same provider, you may be able to convert your cash back into travel miles or points.
- Purchase protection: Ask about whether your credit card has purchase protection, which may be able to cover some of your purchases in case of damage or theft. Coverage amounts and the length of time your purchase is covered may vary.
- Low introductory APR: Some issuers may offer a lower APR when you first get your flat-rate card, so look out for any potential promotions.
Flat-rate cash back credit cards and your financial wellbeing
Flat-rate cards offer certain benefits, like predictable rewards, but they may not be right for everyone. If you find that you’re spending more on certain types of purchases, you may want to consider tiered or rotating credit cards. If you’re unsure of which route to take, speak with a financial expert today to help you make a decision that’s right for you.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
