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Credit Cards

How using a cash-back credit card can fight against inflation

Cash-back credit cards provide an easy way to help your budget fight back against rising prices.

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Terms apply to American Express benefits and offers. Visit americanexpress.com to learn more.

The subject of inflation has been making headlines for months, and for good reason — according to a recent report by the U.S. Department of Labor's Bureau of Labor Statistics, the consumer price index has risen 8.6%, which measures the cost of everyday goods like rent, gasoline, food, medical care, energy and other essential items.

Discussions regarding inflation are often met with few solutions for consumers other than to simply cut back on spending. While it's recommended that you work with a budget and do your best to live below your means, there's only so much trimming back you can really do. Thankfully, there's an easy way to help your budget fight back against rising costs: earning a portion of your purchases back with a cash-back credit card.

Below, Select details how these types of credit cards can work against inflation, plus a few factors to consider when choosing one that best suits your financial needs.

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How cash-back credit cards fight against inflation

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. Plus, for a limited time, earn 5% total cash back on hotel, car rentals and attractions booked on the Citi TravelSM portal through 12/31/24.

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 6.5% cash back on travel purchased through Chase Travel, 4.5% cash back on drugstore purchases and dining at restaurants (including takeout and eligible delivery service), and 3% on all other purchases (on up to $20,000 spent in the first year). After your first year or $20,000 spent, enjoy 5% cash back on travel purchased through Chase Travel, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1.5% cash back 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.

Whichever way you go, you can put your cash back to work in a myriad of ways. Whether you want to pay off some debt, invest in your retirement, save up for a new home or prefer to have a bit of a cushion in your monthly budget, every dollar helps during these inflationary times.

Citi Double Cash® Card

  • Rewards

    Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, pay at least the minimum due on time. Plus, for a limited time, earn 5% total cash back on hotel, car rentals and attractions booked on the Citi Travel℠ portal through 12/31/24

  • Welcome bonus

    Earn $200 cash back after you spend $1,500 on purchases in the first 6 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® Points, which can be redeemed for $200 cash back.

  • Annual fee

    $0

  • Intro APR

    0% for the first 18 months on balance transfers; N/A for purchases

  • Regular APR

    19.24% - 29.24% variable

  • Balance transfer fee

    For balance transfers completed within 4 months of account opening, an intro balance transfer fee of 3% of each transfer ($5 minimum) applies; after that, a balance transfer fee of 5% of each transfer ($5 minimum) applies

  • Foreign transaction fee

    3%

  • Credit needed

    Fair/Good/Excellent

  • See rates and fees. Terms apply.

Chase Freedom Unlimited®

On Chase's secure site
  • Rewards

    Enjoy 4.5% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery services, 6.5% cash back on travel purchased through Chase Travel, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more; and 3% cash back on all other purchases (on up to $20,000 spent in the first year). After your first year or $20,000 spent, enjoy 5% cash back on travel purchased through Chase Travel, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1.5% cash back on all other purchases.

  • Welcome bonus

    INTRO OFFER: Earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) - worth up to $300 cash back!

  • Annual fee

    $0

  • Intro APR

    0% for the first 15 months from account opening on purchases and balance transfers

  • Regular APR

    20.49% - 29.24% variable

  • Balance transfer fee

    Intro fee of either $5 or 3% of the amount of each transfer, whichever is greater, on transfers made within 60 days of account opening. After that, either $5 or 5% of the amount of each transfer, whichever is greater.

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

  • Member FDIC. Terms apply.

What to consider when selecting a cash-back card

Cash-back credit cards can sometimes be overlooked, especially when travel rewards credit cards tend to garner most of the attention because of their flashy benefits. Cash-back cards, meanwhile, offer one nuclear perk that everyone can benefit from: saving money on your purchases.

Keep in mind, however, that not all cash-back credit cards are created equal. When choosing a new one, consider the following questions:

Are your purchases spread out across several categories?

If the answer is yes, it's up to you to decide if having multiple credit cards for each type of purchase is worth the headache. You can earn more cash back than a flat-rate card with this strategy. For example, if you're using the best credit card for dining on restaurant purchases, and the best credit card for groceries on grocery purchases, and the best credit card for gas at gas stations, then you'll be maximizing every spending category and earning a little more back on every transaction.

If you don't want the hassle, it may be best to go with a flat-rate cash-back card.

Can you earn the card's welcome bonus responsibly?

A welcome bonus is a great way to kick off your cash-back earnings and is typically part of an offer where you'd need to spend a specified amount of money during the first few months of card membership. The Blue Cash Preferred® Card from American Express, for example, lets you earn a $250 statement credit after you spend $3,000 within the first six months of card membership.

While it's traditionally known as a travel card, the Chase Sapphire Preferred® Card is currently offering an 75,000-point welcome bonus after spending $4,000 within the first three months of account opening. That bonus can be redeemed for cash back or towards over $900 in travel through Chase Travel℠.

While earning a tax-free $300 or $800 is an enticing prospect, it's never a good idea to spend more money than you normally would just to earn a bonus. If you're looking to add a credit card because of its welcome bonus, plan ahead so you can meet the minimum-spending requirement responsibly.

Chase Sapphire Preferred® Card

On Chase's secure site
  • Rewards

    Enjoy benefits such as 5x on travel purchased through Chase Travel℠, 3x on dining, select streaming services and online groceries, 2x on all other travel purchases, 1x on all other purchases, and $50 annual Chase Travel Hotel Credit, plus more.

  • Welcome bonus

    Earn 75,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's over $900 when you redeem through Chase Travel℠.

  • Annual fee

    $95

  • Intro APR

    None

  • Regular APR

    21.49% - 28.49% variable on purchases and balance transfers

  • Balance transfer fee

    Either $5 or 5% of the amount of each transfer, whichever is greater

  • Foreign transaction fee

    None

  • Credit needed

    Excellent/Good

  • Terms apply.

 

Are you open to paying an annual fee?

Just because a cash-back credit card has an annual fee doesn't mean you should look away, although many of them don't. The Blue Cash Preferred® Card from American Express, for instance, carries a $0 intro annual fee for the first year, then $95 (see rates and fees), between its many perks, robust spending categories and lucrative $250 welcome offer, the fee might be worth it depending on what you're looking for.

Just make sure the features and benefits of the cash-back card you select outweigh the annual fee.

Blue Cash Preferred® Card from American Express

On the American Express secure site
  • Rewards

    6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%), 6% cash back on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations, 3% cash back on transit (including taxis/rideshare, parking, tolls, trains, buses and more) and 1% cash back on other purchases. Cash Back is received in the form of Reward Dollars that can be redeemed as a statement credit or at Amazon.com checkout.

  • Welcome bonus

    Earn a $250 statement credit after you spend $3,000 in purchases on your new card within the first 6 months. 

  • Annual fee

    $0 intro annual fee for the first year, then $95.

  • Intro APR

    0% for 12 months on purchases from the date of account opening

  • Regular APR

    19.24% - 29.99% variable. Variable APRs will not exceed 29.99%.

  • Balance transfer fee

    Either $5 or 3% of the amount of each transfer, whichever is greater.

  • Foreign transaction fee

    2.7%

  • Credit needed

    Excellent/Good

See rates and fees, terms apply.

 

Bottom line

Cash-back credit cards provide a great value to consumers, as long as they're used responsibly. And as Americans' wallets continue to get squeezed by the rising costs of inflation, saving a little on each of your purchases by using the right rewards credit card can make a big difference.

Before you start using a new cash-back credit card, also consider making larger moves like trimming your expenses, renegotiating your rent or asking for a raise to help fight the increased cost of living. By taking care of these types of financial wins, you'll be in a better position to maximize your savings on your everyday purchases.

Catch up on Select's in-depth coverage of personal financetech and toolswellness and more, and follow us on FacebookInstagram and Twitter to stay up to date.

For rates and fees of the Blue Cash Preferred® Card, click here.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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