10 common mistakes people make with cash-back credit cards and how to avoid them

Signing up for credit cards through partner links earns us a commission. Terms apply to the offers listed on this page. Here’s our full advertising policy: How we make money.

Update: One or more card offers in this post are no longer available. Check our Hot Deals for the latest offers.

No one likes to make mistakes, especially when money and rewards are involved. If you’re not careful and conscious with your cash-back credit card strategy, you could end up losing out on a great welcome offer and get the wrong rewards credit card for you.

Whether you’re a seasoned veteran or a newbie in the miles and points world, learning about these common mistakes people make with cash-back credit cards (and avoiding them) is super helpful.

10 Common Mistakes Folks Make With Cash Back Credit Cards And How to Avoid Them
Protect your hard-earned rewards – don’t make these common mistakes with cash back credit cards. (Photo by pathdoc/Shutterstock)

Common mistakes with cash-back credit cards

Always pay your balance in full

Please pay your balance in full every month. Carrying a balance will likely negate any rewards you’re earning. In fact, you can actually improve your credit score by paying your credit card bills early. If you don’t think you can pay your credit card in full, on time, every time, do not get in this hobby. You will never get ahead in life by constantly paying high rates of interest on travel credit card debt.

People in our hobby use credit cards the same way others use debit cards, in that we only charge what we can actually afford and we pay our bills on time (or early) and in full.

Not meeting the minimum spending requirement

Cash-back credit cards come with valuable bonuses for meeting minimum spending requirements. If you fail to meet the spending, you’ll lose out on hundreds (or even thousands) of dollars in cash back or travel rewards. It’s important to have some kind of plan when you apply.

For instance, in the winter you know you’ll be buying a bunch of holiday gifts, Black Friday sales items, making year-end charitable contributions and maybe you have birthday and anniversary gifts coming up too. And of course you’ll have your usual grocery shopping and other expenses.

If you don’t think you have enough regular spending to unlock a welcome offer, check out our resource full of ideas to help you meet your credit card minimum spend.

Remember, the following will not count toward the minimum spend:

  • Annual fee
  • Cash advances
  • Cash-like instruments (such as money orders)
  • Returned purchases

Another critical detail is that the clock starts ticking on your minimum spending time period when you are approved, not when you receive or activate your new card.

Not finding the right card for you

There’s no reason you can’t find the best cash-back credit card for your particular situation. For most of us, the best card is the one that maximizes everyday purchases, like groceries and gas. Or you might even have need of a business credit card that earns cash back.

If you don’t go out to eat often or spend on entertainment, then the 4% cash back on dining and entertainment purchases using the Capital One Savor Cash Rewards Credit Card isn’t right for you. But if you drive a lot, the Chase Freedom® might be a great fit because it sometimes includes gas stations as part of the rotating quarterly bonus categories. Take a look at your spending habits to find the right card for you.

Not understanding the rules of cash back and making low-value redemptions

Not every cash-back credit card is the same. They all have unique benefits and different ways to redeem your cash back. My Bank of America® Cash Rewards credit card used to limit redemptions to a minimum of $25, but now you can redeem any amount of cash back. There are still some cards out there that limit the cash-back redemption to a certain threshold before your can redeem. But you won’t have that issue with the Capital One Savor card.

Cash-back points are generally valued at face value or one cent per point. So if you’re redeeming 2,500 cash-back points for a $20 gift card to Amazon, that’s a low-value redemption.

Thinking all cash-back cards are the same

Some cash-back credit cards offer unique ways to redeem what you’ve earned. For example, you can pair the Chase Freedom and the Ink Business Cash Credit Card with an annual-fee Chase Ultimate Rewards earning card like the Chase Sapphire Preferred® Card. When you combine your points to your Sapphire Preferred account, those one cent per point values are now 1.25 cents per point when redeemed in the Chase Travel Portal. You’ll also unlock the ability to transfer Ultimate Rewards points to Chase’s travel partners, like Hyatt and United Airlines and potentially get much more value.

Don’t be afraid of applying for small-business credit cards to support your for-profit side hustles

Credit issuers want small business owners to use their business credit cards, so don’t be shy. Our team has directed friends who are real estate agents, franchise restaurant owners, private practice doctors, independent contractors and tutors to both the Ink Business Preferred Credit Card and Ink Business Cash Credit Card.

Team member Jasmin has a side hustle re-selling products and she’s got the Chase Ink cards to earn points on her expenses. Meghan on our team rents out vacation properties and that has qualified for business credit cards. Here’s how to qualify for a small-business credit card and why you should consider applying.

The information for the Chase Freedom and Capital One Savor has been collected independently by Million Mile Secrets. The card details on this page have not been reviewed or provided by the card issuer.

Understand the rules for each card issuer

We’ll be the first to admit, there are quite a few sets of rules to follow when you’re applying for the a cash-back card.

American Express

Welcome offers go up and down, but you can only earn the welcome offer once, per card, per lifetime on a specific personal American Express card or American Express business card. This rule applies to all Amex cards. So it makes the most sense to apply when there are increased limited-time offers because you never know if or when a welcome offer will increase again.

10 Common Mistakes Folks Make With Cash Back Credit Cards And How to Avoid Them
Amex has some of the most strict rules when it comes to earning welcome offers. (Photo by First Class Photography/Shutterstock)

Keep in mind, you can still earn the welcome offer on different card products. For example, you’re eligible for the offer on both The Platinum Card® from American Express and The Business Platinum Card® from American Express because one is a personal card and the other is the small-business version.

Amex has additional rules that may restrict you from earning a welcome offer if you’ve already applied for lots of cards:

Welcome offer not available to applicants who have or have had this Card. We may also consider the number of American Express Cards you have opened and closed as well as other factors in making a decision on your welcome offer eligibility.

Fortunately, Amex will now tell you up front if you’re not eligible for a welcome offer when you’re applying online. There’s no official limit to the number of Amex cards you can have at the same time. But most people report being able to hold at most five Amex credit cards at once. I’ve heard of a few exceptions, but they’re few and far between.

That said, the decision to approve you or not is still ultimately up to the bank.

Chase 5/24 rule

If you’ve opened five or more cards from any bank (not counting Chase business cards and certain other business cards) in the past 24 months, you won’t be approved for most Chase credit cards. This is commonly referred to as the Chase 5/24 rule.

In short, the most powerful Chase Ultimate Rewards points cards meant consumers (not small businesses) are the Chase Sapphire Preferred and the Chase Sapphire Reserve®. Note, if you’ve never had a Chase Sapphire card you can skip this little section.

  1. You can’t get a new Chase Sapphire Preferred or Chase Sapphire Reserve card if you already have a Sapphire card. Pretty simple.
  2. Also, you aren’t eligible for a new a Sapphire card if you’ve earned the intro bonus on any version of the Sapphire card within the past 48 months.

Capital One

Capital One generally limits the number of personal credit cards to two. Small business cards usually don’t count towards your cap of two cards and you should wait six months between applications for all Capital One cards because they generally only approve one card per six months.

Not opening a card just because it has an annual fee

A number of cash-back credit cards come with annual fees and often they’re waived the first year. Sometimes it makes sense to cancel a card when the annual fee comes due, because the cost of the card isn’t worth the rewards you’re earning, but that’s not always the case.

Some cards with annual fees, like the Sapphire Preferred, are worth having because the points they earn are so valuable and they even boost the value of other points earned by no-annual-fee Chase Ultimate Rewards points earning cards. I keep it because Chase Ultimate Rewards points are amazingly flexible.

The $95 annual fee (see rates & fees) on a card like the Blue Cash Preferred® Card from American Express can also make sense, because you earn 6% cash back at U.S. supermarkets (up to $6,000 in purchases per calendar year, then 1% cash back) and 6% cash back on select U.S. streaming services. Depending on your spending habits, you could easily recoup that annual fee and much more. Cash back is received in the form of Reward Dollars that can be redeemed for statement credits.

Most cards with annual fees are worth opening for both the welcome offer and the long term benefits.

Paying foreign transaction fees

You should never have to pay for foreign transaction fees. There are a few no-annual-fee credit cards that don’t have foreign transaction fees, like the Capital One SavorOne Cash Rewards Credit Card. I always hold onto cards with no annual fee and no foreign transaction fees because it saves me money and builds my credit.

Not opening a card just because the welcome offer is “small”

Big welcome offers are great, but don’t choose a card solely based on cash back or points earned as part of the intro offer. For example, the Chase Freedom offers $150 bonus (15,000 Chase Ultimate Rewards points) after you spend $500 on purchases within the first three months of account opening.

$150 might seem small, but the overall value of having the Chase Freedom in your wallet outshines the welcome offer. The card has rotating quarterly categories, like gas stations, grocery stores and mobile wallet or Paypal payments. After you activate the bonus, you can earn 5% cash back on up to $1,500 in spending each quarter combined across all bonus categories.

Also consider perks like rental car insurance, extended warranty protection and trip or baggage delay coverage, when you’re deciding if a card could benefit you. For example, the Chase Freedom Unlimited® card comes with extended warranty protection. With this coverage, you’ll get an additional year of warranty on eligible warranties of three years or less, up to a maximum of $10,000 per claim and a maximum of $50,000 per account. Here’s our review of the Chase Freedom Unlimited for more details.

Bottom line

It’s easy to make mistakes with cash-back credit cards, especially if you’re a beginner. Make the most of your rewards by avoiding common pitfalls like:

Devon O'Rourke is a contributor to Million Mile Secrets, he covers topics on points and miles, credit cards, airlines, hotels, and general travel.

Editorial Note: We're the Million Mile Secrets team. And we're proud of our content, opinions and analysis, and of our reader's comments. These haven’t been reviewed, approved or endorsed by any of the airlines, hotels, or credit card issuers which we often write about. And that’s just how we like it! :)

Join the Discussion!

Inline Feedbacks
View all comments