Inflation Continues to Drive Up Prices. A Cash Back Credit Card Can Help Offset the Cost – NextAdvisor

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From gas prices to grocery store staples, inflation continues to take a toll on Americans’ wallets.

And the categories that are contributing most to skyrocketing prices, according to the Bureau of Labor Statistics, are essential expenses in many Americans’ monthly budget: gasoline, shelter, and food. 

When every dollar counts, having the right financial tools can help you make the most of your spending. Experts recommend taking practical measures, such as reining in spending where possible and developing a budget for monthly expenses, to help combat inflation. 

But another way to save even a few cents on the dollar is with the right cash back credit card. These cards offer anywhere from 1% to 5% back on common everyday expenses, and can offer savings on the items you buy most.

Here’s more about how you can save using cash back, and how to pick the right card for you.

How Can a Credit Card Help with Inflation?

The latest Consumer Price Index, which measures changes in the prices of goods and services, showed an increase of 8.5% over the past 12 months — the largest annual increase since December 1981. 

And the situation isn’t likely to reverse anytime soon, experts say.

“[In] the next 12 to 18 months, I expect inflation to continue on its upward trajectory,” says Kennetth Chavis IV, certified financial planner and senior wealth manager at LourdMurray, a California-based wealth management group. “I would assume that we will normalize at some point, but I don’t think that it’s anytime soon.”

While credit card rewards can’t solve the inflation problem for American consumers, they can soften the financial blow. 

For example, say your average grocery check increased by 8% since last year — which is in line with the Consumer Price Index report. If you made those supermarket purchases with the Blue Cash Preferred® Card form American Express, which earn 6% back at U.S. supermarkets (up to $6,000 in purchases each year, then 1%), your credit card would absorb much of the price increase through rewards.

But in general, this strategy is most effective for small, everyday purchases that are within your budget and you can afford to pay off when your balance is due. Failure to pay off credit card debt in full and on time each month can spiral into high-interest debt that sets you back or leaves you in worse financial shape than you might have been in the first place. Plus, it may not be as effective for purchases in more costly spending categories hit hard by inflation. 

For instance, it’s possible to buy a car with a credit card, and earn rewards on the purchase as long as it’s within your credit limit and you can pay off the balance right away to avoid interest. But used vehicles saw a 35.3% annual cost increase in March. Even the best rewards cards can do little to offset such a steep price hike. 

Best Credit Cards for Everyday Spending

If you’re looking for a credit card that will help you offset rising prices, evaluate your spending to see where you already spend most — and where inflation has hit your budget the hardest.

Here are a few of our favorite cash back cards to consider:

Editorial Independence

As with all of our credit card reviews, our analysis is not influenced by any partnerships or advertising relationships.

Good for Supermarket Spending Blue Cash Preferred® Card from American Express

Editor’s Score: (4.3/5)

Editor’s Score: (4.3/5)

rewards rate: 5.0

welcome bonus: 4.5

annual fee: 3.0

other costs fees: 5.0

intro apr: 4.0

other benefits: 4.0

simplicity: 4.0

annual percentage rate: 3.5

Rewards rate:

6% Cash Back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%). 6% Cash Back on select U.S. streaming subscriptions. 3% Cash Back on transit including taxis/rideshare, parking, tolls, trains, buses and more. 3% Cash Back at U.S. gas stations. 1% Cash Back on other purchases.

NextAdvisor’s Take

Pros

  • Great rewards in everyday spending categories
  • 0% introductory interest offer for new purchases
  • Competitive welcome bonus

Cons

  • $0 introductory annual fee for one year, then $95
  • No intro offer for balance transfers
  • U.S. supermarket 6% rewards capped after $6,000 annual spend

The Bottom Line

The Blue Cash Preferred Card from American Express is one of the only cash back cards we think is worth an annual fee, especially for modern families. This card’s excellent rewards on everyday purchases can help you maximize all of your most frequent spending — from dining in to at-home entertainment to the expenses that come with your daily commute.

Additional Card Details

  • 0% introductory APR on purchases for the first 12 months, then 14.24% – 24.24% variable APR
  • Early event ticket access and seating through American Express Experiences
  • Eligible for Amex Pay It, Plan It
  • Travel protections
  • Purchase protections
  • Minimum $25 rewards redemption
Good for Category Variety Citi Custom Cash℠ Card

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Citi Custom Cash℠ CardCiti Custom Cash℠ Card

Editor’s Score: (3.9/5)

Editor’s Score: (3.9/5)

rewards rate: 4.0

welcome bonus: 4.5

annual fee: 5.0

other costs fees: 3.0

intro apr: 5.0

other benefits: 1.0

simplicity: 4.0

annual percentage rate: 3.5

Learn more externa link icon At our partner’s secure site.

Good for Category Variety Citi Custom Cash℠ Card

Editor’s Score: (3.9/5)

Editor’s Score: (3.9/5)

rewards rate: 4.0

welcome bonus: 4.5

annual fee: 5.0

other costs fees: 3.0

intro apr: 5.0

other benefits: 1.0

simplicity: 4.0

annual percentage rate: 3.5

Rewards rate:

Earn 5% cash back on purchases in your top eligible spend category each billing cycle, up to the first $500 spent, 1% cash back thereafter. Earn unlimited 1% cash back on all other purchases.

NextAdvisor’s Take

Pros

  • Solid welcome bonus for a no annual fee card
  • Earn 5% back up to limits with no enrollment required
  • No annual fee
  • Introductory 0% APR for purchases and balance transfers

Cons

  • 5% back capped after $500 spent per billing cycle
  • Just 1% cash back outside of 5% bonus category
  • No major cardholder benefits
  • 3% foreign transaction fee

The Bottom Line

The Citi Custom Cash Card offers 5% back on your top eligible spending category without the need to track quarterly bonus categories. This makes it a great choice for maximizing your everyday spending without much need to strategize. Plus, there’s no annual fee, and a 0% APR for purchases and balance transfers for 15 months.

Additional Card Details

  • ThankYou® Points can be redeemed for cash back, gift cards, travel, and Shop with Points at Amazon.com
  • Can add authorized users at no cost and earn points on purchases they make
  • Card is contactless-chip enabled
Good for Flat Cash Back Wells Fargo Active Cash℠ Card

Editor’s Score: (4.6/5)

Editor’s Score: (4.6/5)

rewards rate: 5.0

welcome bonus: 4.5

annual fee: 5.0

other costs fees: 3.0

intro apr: 5.0

other benefits: 3.5

simplicity: 5.0

ongoing apr: 3.0

Rewards rate:

Earn unlimited 2% cash rewards on purchases.

NextAdvisor’s Take

Pros

  • Unlimited 2% cash rewards on purchases
  • Valuable welcome bonus
  • 0% Introductory APR for 15 months from account opening on purchases and qualifying balance transfers (15.24% – 25.24% variable thereafter)
  • Cellphone and travel protections

Cons

  • High variable APR after introductory offer ends
  • No bonus categories to maximize
  • 3% foreign currency conversion fee

The Bottom Line

The Wells Fargo Active Cash Card comes with an enticing 2% cash rewards on purchases, along with a valuable welcome bonus. You won’t pay an annual fee, and can also benefit from the 0% intro APR for 15 months from account opening on purchases and qualifying balance transfers (followed by a variable APR of 15.24% – 25.24%).

Additional Card Details

  • 0% intro APR for 15 months from account opening on purchases and qualifying balance transfers (followed by a variable APR of 15.24% – 25.24%).
  • Cell phone protection worth up to $600 when you pay your bill with your eligible Wells Fargo card (subject to a $25 deductible)
  • Visa Signature® Concierge service
  • Travel and emergency assistance services
  • Roadside dispatch
Good for Revolving Categories Chase Freedom Flex℠

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Chase Freedom Flex℠Chase Freedom Flex℠

Editor’s Score: (4.7/5)

Editor’s Score: (4.7/5)

rewards rate: 5.0

welcome bonus: 5.0

annual fee: 5.0

other costs fees: 4.0

intro apr: 4.0

other benefits: 5.0

simplicity: 2.0

annual percentage rate: 3.0

Apply Now externa link icon At Chase’s secure site.

Good for Revolving Categories Chase Freedom Flex℠

Editor’s Score: (4.7/5)

Editor’s Score: (4.7/5)

rewards rate: 5.0

welcome bonus: 5.0

annual fee: 5.0

other costs fees: 4.0

intro apr: 4.0

other benefits: 5.0

simplicity: 2.0

annual percentage rate: 3.0

Rewards rate:

5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. Enjoy new 5% categories each quarter! 5% cash back on travel purchased through Chase Ultimate Rewards®, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service. Unlimited 1% cash back on all other purchases.

NextAdvisor’s Take

Pros

  • Extensive tiered rewards structure
  • Rotating bonus rewards categories every quarter
  • Valuable welcome bonus offer
  • 0% introductory APR for purchases and balance transfers
  • No annual fee

Cons

  • High ongoing APR after intro period
  • Rotating quarterly bonus categories capped after $1,500 in spending
  • Keeping track of rewards categories may be more complex than some other cash back cards

The Bottom Line

The Chase Freedom Flex card offers cash back rewards in rotating rewards categories that will let you save where you spend the most. Plus, you’ll earn rewards in ongoing bonus categories year-round.

Additional Card Details

  • 0% introductory APR for 15 months from account opening on purchases and balance transfers (15.24% – 23.99% variable APR thereafter) ; intro balance transfer fee of $5 or 3% of the amount of each transfer, whichever is greater in the first 60 days
  • 5% cash back on qualifying Lyft rides through March 2025
  • 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate
  • Cell phone protection
  • Free credit score and monitoring
  • Access to Chase Offers savings

Inflation and Credit Card Debt

Prices of goods and services aren’t all that’s increasing in today’s economic environment — if you’re planning to use a credit card to offset prices, you should also be aware of rising interest rates.

One of the ways the Federal Reserve is acting to combat inflation is by increasing its target federal funds rate. This, in turn, can lead to higher credit card interest rates.

“[The Fed has] already done that to a small degree, and they anticipate increasing rates by 1% to 1.5%… over the next 12 to 15 months,” Chavis says. “And this will lead to interest rates across the board increasing.”

The key to using a cash back card to your advantage is to follow your normal spending patterns, and earn cash back on purchases you’d make anyway and which are already within your budget.

And if you already carry credit card debt, higher interest rates mean your debt will soon become more expensive. You’ll likely save more by paying off any existing debts before you seek to maximize rewards. 

More Ways to Save as Prices Rise

Using a cash back card isn’t the only solution you can use to circumvent rising costs and protect your wallet against inflation.

Start by tracking your budget. This will help you determine what common purchases are increasing and where you may be able to cut expenses.

For example, Chavis suggests looking at “subscriptions, which you either don’t need or that you’re not getting the value for.” If you’re not ready to cancel a subscription outright, consider downgrading to a more basic, cheaper subscription level. 

To decrease your food budget, you might want to limit dining out or completing your grocery list before you go to the store, to avoid overspending and impulse purchases. 

Looking for weekly deals and buying in bulk when items are on sale can help you maximize discounts too, says Danielle Miura, certified financial planner and founder of Spark Financials, a fee-only financial advising firm in California. “We have a freezer in our garage,” she says. “Whenever there’s a really good sale … like meat on sale — we get multiple and then we store it in our freezer.”

And don’t discount the power of price comparisons. If gas is a big expense for you, for example, Miura suggests using GasBuddy, an app that locates the cheapest gas station near you. 

For more ways to save on rising prices of everyday goods, read our guide to preparing for and managing inflation.

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