I Make This Cash Back Card Move Every Month. Here's Why You Should, Too

It's no surprise that most Americans with a net worth of less than $1 million prefer using cash back credit cards, as opposed to their flashier and often more complicated cousins, travel rewards cards. Research from The Motley Fool Ascent found that 72% of us non-rich folks have at least one cash back card (as opposed to 59% of those with a net worth over $1 million).

Cash back credit cards are easy to use thanks to their straightforward nature -- you make purchases with the card and you earn a percentage of your spending back. With many cash back cards, you get a base rate of 1% across all non-bonus purchases, and a higher rate in certain categories (perhaps 3% back on dining and restaurant spending, for example). Others offer a flat rate across all purchases, like 1.5% or 2%.

If you're using these cards to earn cash back, it might not pay to then let that cash back sit and accumulate. Here's what I do instead.

The best card I've found for this tactic

I have a few favorite cards that I use every week to pay for various expenses in my life. My grocery store superstar is the Blue Cash Preferred® Card from American Express. This card earns 6% cash back on U.S. supermarkets (up to $6,000 per year) and select U.S. streaming subscriptions (terms apply; see rates and fees).

Grocery spending is a huge part of my budget, and most of the money I earned from this card last year was due to my food shopping habits. Since I buy groceries every week, I have cash rewards waiting to be redeemed every month -- in 2023, that amounted to $400 across the board, or an average of about $33 per month. This is well worth it, and since this card has an annual fee, it's in my best interest to get my money's worth out of that. (The Blue Cash Preferred® Card from American Express has a $0 intro annual fee for the first year, then $95. See rates and fees.)

Earn and burn

I've never been great at waiting for something good, and redeeming cash back absolutely counts as something good. So rather than sit on my accumulating cash back, I always redeem it as a statement credit, every single month. Depending on the card and how much I've spent in a given bonus category (or overall, in the case of a flat-rate card), my earnings might just be a few dollars. But that still reduces the cost of my next bill -- which saves me money.

In addition to paying less on my next credit card bill, redeeming cash back as a statement credit also means I'm preserving the value of that cash. Thanks to inflation, our money is slowly losing value over time. If I sat on my cash back earnings for, say, a year, it's entirely possible that by the time I redeem it, the rate of inflation might be higher -- meaning those dollars won't go as far.

Other redemption options

No shame if the prospect of a lower credit card bill every month doesn't appeal to you! Thankfully, you have other options for redeeming credit card rewards:

• Redeem as actual cash: Yes, you can have your cash rewards sent to your bank account as actual money. And if you were then to invest that cash in a brokerage account or even just add it to your high-yield savings account, that money could grow over time.
• Sit on it for a while: If you're more patient than I am, you could just let your cash pile up. I recommend setting a goal for it, though -- maybe redeem once it reaches a certain threshold, or even hold it back for holiday gift-buying?
• Exchange it for gift cards: Some credit card issuers give you the option of redeeming cash back for gift cards. Just be careful here, as your cash back or points might be worth less than a statement credit in this form.
• Turn it into travel: Some cash back cards offer the option of using your rewards for travel expenses, either directly or by transferring them to a travel card. For example, the Chase Freedom line of credit cards earn cash back as Ultimate Rewards Points. If you also have a card in the Chase Sapphire Line, you can transfer your earned points and book travel with them.

If you're using credit cards with the direct goal of saving money on the expenses you'd be paying anyway, earning and burning your cash rewards can be the way to go. But ultimately, the choice is yours for how to redeem it -- so make the right choice for you and your budget.