The Best Credit Cards That Really Do Give You Cash Back

Posted on November 19, 2009 by The LearnVest Staff

jpegTo help guide you, we painstakingly researched the best cash-back cards that have no annual fees. They’re listed in the order of the ones we liked best, for the reasons below.

Meet your new credit cards:

Capital One No Hassle Cash Rewards

You get 2% back on gas and grocery store purchases, and 1% back on the rest. We like that you get extra for groceries and gas—things you buy regularly.

Chase Freedom

Chase gives you $50 back from your first purchase and 3% cash back on purchases from its rotating categories including gas, home furnishings, and department stores. You get 1% on all purchases not in those special categories.

Blue Cash From American Express

If you spend more than $6,500 in a year (many of the nation’s largest landlords let you pay rent on your card!), then you receive 5% back on purchases at major supermarkets, gas stations, and drug stores. You get 1.5% back on all other purchases outside of these categories. Before you hit the $6,500 mark, however, you get 1% back on those special purchases and 0.5% on the rest.

Discover More Card

Although it is famous for providing cash back, it’s not our favorite because it only does so in rotating categories. For example, this past January through March, it provided 5% for purchases on airlines, hotels, car rentals, and cruises. On purchases not in these categories, you receive 1% after you spend $3,000 for the year; until that point, you are stuck at 0.25% cash back.

Our favorite part? Regarding taxes—you are getting cash, after all—these rebates are considered a reduction in purchase price, rather than being considered income. (Although there is no official word, the IRS issued a private-letter ruling to that effect in 2002.)

DISCLAIMER: If you get these cash-back cards, you MUST pay off your bill in full every month because they are laced with higher interest rates, shorter grace periods, and high late fees.

That’s the LearnVest way to make your money work for you—because, remember, it doesn’t pay to be broke.

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  • Bonnie

    Why do you prefer the Capital One card to the Chase Freedom? Doesn’t Chase Freedom give you a higher percentage cash back?

  • Allison

    Hey Bonnie,

    You’re right, and Chase is still a pretty good option. The reason we didn’t like it as much was that you’re subject to rotating categories for the higher percentage benefits. We’re all pretty busy, and the truth is that we probably won’t do a great job about keeping track of which individual product categories are special and when. Some months those categories might be for things we buy all the time, but other months the extra cash back might be for, like, plane tickets–on a month we’re not going anywhere. Capital One, on the other hand, is consistent. That way, we always use our card at the grocery store and the gas pump, no complications.

    Hope that helps!

    Allison

  • Allison

    There are certain things that I try and always pay for with cash, gas in particular. The less monthly bills I can accumulate, the better. But for something like 2% back, would it be worth my while to then use the credit card?

  • Allison

    Hey Allison (my name is Allison too!),

    Probably. It’ll really depend on your individual situation, but as long as you’re responsible about paying off your credit cards on time: yes. If, however, putting gas on your cash-back credit card means that you’re going to have trouble paying it off every month, then a resounding no. You’d lose all your “found” money by a long shot if you had to start dealing with interest payments and all that.

    –Allison Kade, LV

  • http://www.square3ventures.com Lina G.

    I was devastated to hear from Chase that my favorite card of ALL-TIME, the Chase Rewards card that gave me 5% cashback at grocery stores, gas stations, and drug stores ALL the time, is being phased out due to a “lack of consumer interest.” Give me a break. Thanks for posting some other cards for grocery stores, etc, to help me in my search.

    I use it in conjunction with my Citi Forward (http://www.citiforward.com/) for all my other purchases because this one gets 5% at restaurants, entertainment sites, and, best of all, AMAZON.com! Plus, you get $100 worth of points for signing-up, along with 100 points each month just for paying on time.

    Between these two cards, they cover almost 100% of my purchases.

  • The LearnVest Staff

    Hi Lina,

    Glad that it helps, and thanks for the great advice! Sounds like you’re really optimizing your rewards–something we’re totally into. :-)

  • Ashley

    What about the credit cards with travel rewards? Is it better to get a card with 2% cash back or rewards if you travel a lot?

  • The LearnVest Staff

    Hey Ashley,

    We’re actually planning to do an article on travel rewards in the near future! According to our math, it’s still probably best to go with the cash back cards, not least because they offer you a lot more flexibility as far as how you use your points. If, say, you need 25,000 miles to earn a flight that would normally cost about $500, then each 100 miles would be worth about $2. If your card is giving you one mile per dollar, then you’d be getting about 2% back on your purchases, which isn’t bad… but you could probably achieve similar returns on cash-back cards, and then use them on airfare OR anything else. (And, that’s if the awards flight even cost $500, since it might cost less!) Hope that helps!

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  • jacksmith

    This is a great blog, American banks provided credit cards that customers have take cash back by them at lowest interest rates. These are real & best credit cards.
    jacksmith
    thanks
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    http://www.financehelpdirect.com

  • Lavanya

    My comment is actually in response to today’s personal finance basics bootcamp “How a Learnvester Spends” (1/13/2011) – in this, you recommend that we make all our purchases on credit cards, but I notice when I log in to Credit Karma to check my credit, that when my credit card utilization goes DOWN, my credit score goes UP. So shouldn’t using my credit card for all my expenses lower my credit score since my utilization would be high every month? Maybe I’m not understanding how this process works correctly – I’d appreciate your feedback! Thanks Learnvest :)

  • Anonymous

    Hi Lavanya– Credit Karma was actually awesome enough to write a whole post to answer your question! Check it out here: http://www.learnvest.com/money-tuneup/credit-and-loans/how-much-should-i-use-my-credit-card-to-have-a-good-credit-score/

  • Lavanya Madhusudan

    Thanks Libby! I just found the article today and was happily surprised to see that Credit Karma actually took the time to answer my question – definitely awesome :)

  • Lavanya Madhusudan

    Thanks Libby! I just found the article today and was happily surprised to see that Credit Karma actually took the time to answer my question – definitely awesome :)