Flat Rate vs. Bonus Categories: Which is Better for Cashback?

Cashback credit cards come in many different forms, providing cardholders with plenty of opportunities to enjoy bonus perks and earn cashback from their purchases.

Yet with so many options, it can be tough to decide on the card that makes sense for your spending habits. After all, you want to make sure you're getting the most from your credit card and reaping all the benefits your issuer has to offer.

To help, we'll break down two major categories of cashback cards: flat rate vs. bonus categories. The best cashback credit cards come in both forms, and there are pros and cons to either depending on your spending habits.

Why choose a flat rate cashback credit card?

A credit card with flat rate cashback helps you earn the same amount of cashback for every dollar you spend. For example, you might get 1.5% cashback on all purchases — whether you make a purchase at a grocery store, gas station, or e-commerce site. So if you spend $100, you know $1.50 is coming back into your pocket.


The biggest benefits of a flat rate rewards card include:

  • Ease of use. It's simple to keep track of your rewards, since you always know what you'll get back. You also don't have to worry about spending more in certain buying categories just so you can max out your rewards.
  • Higher returns for everyday purchases. Many cards with high cashback rates in bonus categories also include cashback rates for all other purchases — but they may be low. For instance, a card with bonus categories might offer 2% cashback for travel purchases but 1% cashback for everything else. Meanwhile, a flat rate rewards card might offer 1.5% cashback on any purchase.


On the other hand, there are drawbacks to credit cards with flat rate rewards, such as:

  • Lower rates in certain categories. If you're looking to maximize your rewards in a certain spending category like restaurants and food deliveries, you won't be able to with a flat rate rewards card.

Why choose a bonus category rewards credit card?


The main advantages of choosing a card with bonus category rewards include:

  • Maximized rewards on certain purchases. If you know you spend a lot on groceries, for example, you might select a card with higher rewards in this spending category.


The biggest downsides of bonus category cards are:

  • Complicated to use. You'll have to keep track of your spending in each category to ensure that you're getting the most from your rewards. You'll also have to keep an eye on changing categories, since they may fluctuate a few times each year.
  • Less cashback on other categories. You'll likely earn less cash for everyday spending than you would with a flat-rate rewards card.

Which is better for cashback?

The answer to this question really depends on your spending habits. If you plan to use your credit card often for everyday purchases, a flat rate rewards card can help you maximize your cashback. However, if you know you'll be using your credit card for many purchases in bonus categories like travel or dining, you might want a card with higher cashback rewards in those areas.

A flat rate rewards card may also be best if you prefer a more low-maintenance option. Remember that, if you choose a card with bonus categories, you'll need to keep a closer eye on your spending habits to ensure you're getting the most from your rewards.

Source: iQuanti, Inc.


Categories: Personal and Family Finances

Tags: cash back, credit cards, financial services, personal finance