The Golden Rules of a Cash-Back Credit Card

[Update: Some offers mentioned below have expired. You can view the current offers from our partners here — Chase Freedom.]

There is such a thing as free money. It’s a cash-back credit card.

But to really reap the rewards of such a credit card, you have to do things a certain way. Some of these concepts are straightforward, while others are a little trickier to follow, but in general, if you want to make the most of a cash-back credit card, these are the rules you need to know.

1. Make Sure You Have Good Credit

To get a credit card with any kind of rewards, you generally need to have a good credit score. It’s smart to check your credit score (which you can do for free on Credit.com) before you apply for a credit card so you can see if your credit meets the card’s qualification standards. It doesn’t guarantee you’ll get it, but applying for credit cards designed for people with credit like yours increases the likelihood of approval.

2. Know Which Purchases Earn the Highest Rewards

Many cash-back credit cards award different amounts of cash back for different spending categories. For example, Chase Freedom has rotating purchase categories for which you can get 5% cash back each quarter, so you’ll want to strategize using that card on transactions in the highest-earning category. (You can read a review of the Chase Freedom credit card here.)

3. Out-Earn Your Annual Fee

It’s also common for cash-back credit cards to carry an annual fee, though issuers often waive the fee for a customer’s first year with the card. If you’re not earning more cash back than you’re paying in an annual fee, then the card becomes counterproductive. You’re basically paying to use the card, while there are plenty of other credit cards out there you could use without having to pay an annual fee.

4. Avoid Carrying a Balance

Because rewards and cash-back credit cards tend to have high interest rates, carrying a balance on one will almost certainly outweigh any rewards you earn by using it. This can be more difficult to avoid than you think, because cash-back credit cards incentivize spending and can easily lead you to overspend. You need to be careful to not get so caught up earning cash back that you end up in debt.

5. Pay Attention to Earnings Limits

There are several cards that allow you to earn unlimited cash back and have no time limit for redeeming it, but that’s not always the case. You don’t want to miss out on a free reward because you glossed over the details of your credit card agreement.

At publishing time, the Chase Freedom is offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment.

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