When 1.5% cash back is better than 2%

Based on your spending patterns, a flat-rate card may become your go-to option in your wallet. It can act as the ideal complement to cards that offer additional rewards in specific categories like groceries, travel or dining.

Before applying for a 1.5% cash back card, it is essential to carefully consider whether it will meet your needs and worth its annual fee. The benefits can be immense and make this an important choice to consider.

1. You don’t need a flat-rate card

Many credit cards offer some form of cash back rewards when purchasing products and services. Typical rewards for all purchases, like 2%, can be earned. Some flat-rate cards like the $0-annual-fee Citi Double Cash Card give 1% cash back when purchasing and an additional 1% when paying it off (this feature was noted by TPG as one of its 10 commandments for credit card use).

Certain cards are tailored to provide maximum rewards by setting limits on how much can be spent in each bonus category – for instance, 5 percent on Lyft rides or dining and drugstore purchases. These cards often boast higher annual rewards values than standard flat-rate cards but may not suit everyone.

Flat-rate cash back cards provide an easy and straightforward way to reap rewards from every purchase made – for instance, Capital One Quicksilver Cash Rewards Credit Card offers a flat 1.5% cash back rate – worth about $15 in rewards per $1,000 spent!

If you’re a low-spender, the breakeven point for a 2% card might take years to reach; therefore, a 1.5% card may offer greater reward as you can spend enough in less time to hit its break-even bonus and reach its breakeven point bonus.

Look for cards offering sign-up bonuses to accelerate the speed of reaching the breakeven point more quickly. Additionally, consider minimum redemption amounts or options such as statement credit, direct bank deposit or paper check as you search.

Other credit cards provide multiple ways of earning cash back, from rotating categories and targeted offers to flat-rate cards with additional benefits such as the Chase Freedom Unlimited’s 1.5 percent cash back on all purchases and additional perks. You can combine one flat-rate card with others that focus on specific categories in order to maximize rewards.

2. You don’t want to pay an annual fee

A 2% cash back card can be an ideal solution for those seeking a straightforward rewards rate or as a catchall card that doesn’t fall into bonus categories on other cards. Furthermore, it makes an excellent addition to one or more rewards cards with higher earning rates in specific spending categories.

Many 2% cash back cards offer signup bonuses that cover their annual fee for several years; however, even with this benefit in place you will likely still need to spend significant sums before becoming financially ahead of a standard 1.5% card with no annual fee.

This is especially relevant to high-spending individuals. Someone who spends $19,800 annually would need to open and use two 2% cards with annual fees for three years before being ahead of a no-fee card earning 1.5%. But there may be other reasons to pay an annual fee on a credit card such as purchase security and roadside dispatch services, so before making your decision it’s essential that all considerations be carefully evaluated prior to deciding whether an annual fee is worthwhile for yourself.

3. You don’t want to pay a high interest rate

A 2% cash back card can be an ideal solution for those who want a straightforward rewards rate on all spending, or as an “all-purpose” card for purchases not covered by other bonuses cards they carry. Some also use these cards as base earning cards with elevated rates going toward specific spending cards they carry separately; and modern tiered credit cards offer higher rates ranging between 3%-5% in some categories and 1% on all spending, to boost overall earnings rates even further.

Even with all this in mind, it’s still wise to remember that paying a high interest rate rarely is in our best interests – so many consumers may be better served with either no-fee cash back cards or low-interest credit cards.

4. You don’t want to pay a foreign transaction fee

2% cash back cards can be useful as general-purpose or for expenses that don’t fit within the parameters of your rewards cards, however if you want to avoid foreign transaction fees then lower rate cards such as 1.5% or even 2.5% could be more suitable since foreign fees limit how much rewards you can earn and can also decrease the value of points or miles redeemable; an example being how a 3% foreign transaction fee could wipe out more than one percent of your earnings with a 2% cash back card during an overseas trip!