What Does 2% Cash Back Mean? Is It Worth It?

By Jackie Lam · October 18, 2023 · 9 minute read

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What Does 2% Cash Back Mean? Is It Worth It?

Who doesn’t like a bit of extra cash in their pocket? And earning money from spending you’re already doing is arguably even better. If you prefer cash-back rewards with your credit cards, a card that features a 2% cash back flat rate — meaning 2% back on all purchases — can be a solid way to reap rewards.

Let’s go over the ins and outs of what 2% cash back actually means, as well as the pros and cons of a 2% cash-back credit card, to help you determine whether it’s worth your while.

What Is Cash Back?

Cash back is a form of reward that cash-back credit cards offer that allows you to earn money back on purchases you make. Other examples of credit card rewards include points or travel miles.

With a flat-rate cash-back card, all of your purchases earn the same amount in cash back. Other credit card issuers might offer higher cash-back rates on certain spending categories, such as on gas or groceries.
Meanwhile, some may feature rotating bonus categories to give your rewards-earning abilities a boost. For example, you might earn 5% cash back in the fall months on purchases made at restaurants and on gas.

You can redeem the cash-back rewards you earn in the form of a check, bank transfer, or gift card, or as a statement credit. Other options might include making a charitable donation or making a purchase through the issuer’s online portal. Depending on the credit card, there might be a spending threshold you need to meet before you can redeem your cash-back rewards.

What Is 2% Cash Back?

If you’re wondering, ‘What does 2% cash back mean exactly?,’ here’s how it works. Earning 2% cash back simply means that for every $100 you spend on your credit card, you’ll get $2 back. So if you were to spend $1,000, that’s $20 back in your pocket — though you’ll then have to redeem that cash back in order to make the rewards usable.

How 2% Cash-Back Credit Cards Work

As mentioned previously, having a 2% cash-back credit card means you’ll earn 2 cents back for every $1 you spend using the card, or $2 for every $100, and so forth.

There might not be a limit to how much you can earn in cash back. However, in other cases, the card may cap the amount of cash-back rewards you can earn for either regular spending or spending in bonus categories.

Pros and Cons of 2% Cash Back

While a 2% cash back card does come with some advantages, there are some drawbacks as well. Let’s take a look at both:

Pros and Cons of a 2% Cash Back Card
Pros Cons
Easy to use Higher APRs compared to non-rewards credit cards
Can rack up rewards quickly Earning caps may apply
Often no annual fee Don’t often offer travel rewards or perks


•   Easy to use: A major benefit of a 2% cash-back credit card is that the rules are simple: You spend money, and get a certain amount back. Plus, redeeming rewards is usually pretty straightforward, and you have a choice of how to do so.

•   Can rack up rewards quickly: If you use your credit card for everyday purchases, you’ll accrue rewards fairly fast. Of course, only put everyday purchases on your card if you can afford to pay them off, and always use your card responsibly, considering what a credit card is and the implications overspending can have for your credit score.

•   Often no annual fee: Many cash-back cards don’t have an annual fee. That means you won’t need to worry about spending enough to offset the fee.


•   Higher APRs compared to non-rewards credit cards: While your annual percentage rate (APR) on a card partly depends on your credit and other financial factors, rewards credit cards like cash-back cards tend to carry higher interest rates. If you keep a balance on your account, you can expect to pay a pretty penny in interest, given how credit cards work.

•   Earning caps may apply: While some credit cards allow you to earn unlimited cash-back rewards, others place a limit on how much you can earn. If you’re looking to max out your rewards potential, a cap could make that harder to do.

•   Don’t often offer travel rewards or perks: If you’re hoping to earn rewards that apply to travel, such as airline trips or hotel stays, a cash-back credit card likely isn’t the form of rewards credit card for you. While some cards may offer travel redemption options, most don’t, and many also charge foreign transaction fees.

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Is a 2% Cash Back-Credit Card Worth It?

Whether a 2% cash-back credit card is worth it really depends on how you’ll use the credit card. This includes what types of purchases you’d like to make, and if you plan on using your card for bills and everyday expenses, such as gas and groceries. If you use the credit card regularly, you’ll be able to earn a greater amount of cash-back rewards.

However, you’ll also want to balance that spending with sticking to important credit card rules, like not spending more than you can afford to pay off. Because rewards credit cards tend to have higher interest rates, it’s important to avoid carrying a balance so you don’t cancel out the cash back you earn.

A cash-back rewards card might not be worth it if you prefer to use your credit card rewards for travel. In that case, a travel rewards credit card typically will offer more lucrative ways to earn points or miles to use on trips.

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Guide to Using a 2% Cash-Back Credit Card

If you get a 2% cash-back card, here are some tips to keep in mind to use it effectively:

•   Read the redemption rules. Familiarize yourself with credit card requirements, and see if there are any limits on how much cash back you can earn. Similarly, check if you need to hit a minimum amount in cash-back earnings before you can redeem those rewards.

•   Be intentional with your purchases. Devise a plan for how you intend to use your cash-back credit card. Perhaps you would prefer to use it on big-ticket items, or maybe on seasonal purchases, such as during the holidays or back-to-school season. This will help you make the most of your card.

•   Choose how you’ll receive your rewards. You’ll also want to decide whether you plan on receiving the cash-back in the form of an ACH transfer to your account, as statement credit, or as a check dropped in the mail. You also might be able to use your rewards by making online purchases through the credit card’s shopping portal, or by purchasing gift cards or donating to charity.

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Maximizing 2% Cash-Back Earnings

If you have a cash-back credit card, it’s worth your while to take the time to determine how to maximize your earnings. Here are several ways to do so.

Use Your Card For Everyday Purchases and Bills

Consider using your cash-back card on major spending categories to earn the most on rewards. For example, if you spend $4,500 a year on food for you and your family and put all of your groceries and dining expenses on your card, you’ll get $90 in cash-back on just that spending alone.

You might also consider putting your recurring bills and subscription services on your credit cards. This will allow you to scoop up points in areas you already spend.

Just make sure you aren’t spending beyond your means. Keep an eye on your expenditures, and commit to paying off your balance in full each month.

Put Big-Ticket Buys on Your Card

If you’ve been saving up for a sleek new laptop or coveted designer shoes, consider putting that cost on your 2% cash-back card. That way, you can get the item and earn a bit of cash back on the purchase.

Your card may even come with added perks, such as purchase protection or an extended manufacturer’s warranty.

Look for a Card With No Annual Fee

A card without an annual fee means you won’t need to spend as much to make the cash-back rewards worthwhile. Case in point: If you get a card with a $40 annual fee, you’ll need to put $2,000 in purchases to break even at a 2% cash-back rewards rate.

Pay Off Your Balance in Full Each Month

As cash-back credit cards tend to have higher APRs, make it a point to pay off your card in full. This will help you avoid racking up interest charges, which can cut into the cash-back rewards you earn.

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Strategize When You’d Like to Redeem Your Cash Back

To maximize your 2% cash-back rewards card, it helps to be intentional with how you choose to redeem your cash-back rewards as well as when you do so. For instance, if you tend to dig a debt hole during the holidays, use your rewards to pay for gifts and other related expenses. Or, you can put the rewards you’ve accumulated toward a statement credit, or redeem it for a gift card for your loved one.

The Takeaway

Whether a 2% cash-back credit card is right for you may depend on a few considerations, such as how often you plan to use the card, whether you may purchase higher-priced items with it, and if you plan to pay off the balance in full each month. It’s also important to understand all of the rules that apply to the credit card. Some cards have limits on how much you can earn in cash back or have annual fees that could cut into the value of your rewards.

A 2% cash-back credit card that’s used regularly, however, can provide you with a steady stream of extra cash that could benefit your budget, and you can also be strategic about how you redeem the rewards depending on your needs at a given time.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.


Is 2% cash back good for credit cards?

A 2% flat-rate, cash-back credit card can be a strong choice as a go-to credit card if you intend to use your card for everyday spending. Earning rewards at a flat rate and in this manner is simple and straightforward, as you don’t have to worry about keeping track of rotating categories or figuring out point conversion values.

Is 2% cash back better than points?

A 2% cash back credit card is a no-hassle, straightforward way to earn rewards. While you might earn more points on a travel card, redemption values and ways to redeem points on a travel rewards card can be more complicated. A flat-rate cash-back card can be a good choice to use as a foundation. Then, you can also open a travel card if it makes sense for your needs.

Photo credit: iStock/LaylaBird

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


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