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Do Cashback Credit Cards Have Spending Limits?

Do Cashback Credit Cards Have Spending Limits?
Do Cashback Credit Cards Have Spending Limits?

Do Cashback Credit Cards Have Spending Limits?

Cashback credit cards can help you earn money back on your everyday purchases. The cash rewards you accumulate can add up over time to provide you with a nice stream of statement credits, checks, or bank deposits.

But do cashback cards limit how much you can earn based on your spending amount? In this comprehensive guide, we’ll look at how cashback credit cards work, types of spending limits, and strategies to maximize your rewards earnings long-term.

How Cashback Credit Card Rewards Work

Cashback credit cards provide you with a percentage of money back on the total purchases you make during each billing cycle. For example:

  • A card with 1% cashback would earn $1 for every $100 spent
  • A card with 5% cashback would earn $5 for every $100 spent

So the more transactions and higher payment amounts you put on a cashback card, the greater your rewards.

Cashback percentages are usually tiered based on the type of purchase:

  • 1% – 3% on common purchases
  • 3% – 6% on bonus categories like groceries, dining, etc.
  • 10% or more on special promotions or new cardholder offers

As long as you pay your bill on time each month, you never “lose” the rewards you accumulate. They stay in your account for future redemption when you meet the minimum redemption requirements.

Now let’s look at the types of limits that may be placed on your earnings.

Do Cashback Cards Limit Total Rewards Earned?

Most cashback cards do NOT limit the total dollar amount of rewards you can earn. You could spend $100,000 on a 1.5% cashback card and earn $1,500 back with no cap.

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However, some cards do limit you in other ways:

1. Quarterly/Annual Bonus Category Caps

Cards with rotating bonus categories often limit how much you can earn at the highest rates. For example:

  • 5% back on the first $1,500 spent at grocery stores each quarter
  • 5% back on the first $2,000 spent on gas each year

Once you hit the spending cap, you still earn rewards but usually at a lower 1% rate. These types of caps encourage you to maximize key categories each quarter.

2. Monthly Cap on Custom Bonus Categories

The Chase Freedom Flex and Citi Custom Cash cards let you choose a top spending category to earn 5% cashback each billing cycle.

However, this 5% rate only applies to the first $1,500 – $2,000 spent in that category each month. Again, this encourages focusing your spending but limits maximum earnings.

Outside of category caps, there are generally no restrictions on total cashback earned. As long as you’re actively using your card, rewards can add up over time with no predefined limit.

Do Cashback Cards Limit Earning Rates?

While most cashback cards do not impose an absolute dollar limit, some do limit the maximum rate you can earn across all purchases.

For example, the popular Citi® Double Cash Card caps cashback at 2% on all purchases (1% when you buy and 1% when you pay). Even if you spend $50,000 in a month, you’ll still only earn 2% back.

Most cashback credit cards range from 1% to 5% back depending on the category. The Blue Cash Preferred® Card from American Express offers 6% back at U.S. supermarkets on the first $6,000 per year in purchases. After that cap is reached, the rate drops to 1%.

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Review your card’s terms and conditions to understand if any category or overall earning caps apply. If your spending exceeds caps frequently, a different card may provide higher rewards.

Do Cashback Cards Have a Credit Limit?

Yes, all credit cards are issued with a preset credit limit when you open the account. This limit is based on factors like:

  • Your income
  • Credit score
  • Existing debt and credit utilization
  • Your relationship with the card issuer

Typical credit limits for new cashback cards range from $500 up to $20,000+ for those with excellent credit. You can only make purchases up to your approved credit limit.

However, making large purchases right up to your limit is not recommended because it can increase your credit utilization rate.

Try to keep individual card balances below 10% of the total credit limit. You can always request an increase if you need a higher limit to earn more rewards.

Strategies to Maximize Cashback Rewards

While cashback cards generally don’t impose low limits on earnings, you still have to use effective strategies to maximize your rewards. Consider these tips:

  • Apply for cards with high category bonuses – Earn 5% or more on your top spending types like groceries or dining out. Over time, the extra 2-4% on big purchases adds up quickly.
  • Take advantage of new cardholder bonuses – Many cards offer $200+ for spending a certain amount within the first 3-6 months after getting approved.
  • Use your card for as many purchases as possible – The more transactions, the more rewards. Cashback adds up through small daily purchases, not just big-ticket items.
  • Pay attention to bonus category caps – Maximize spending in 5% categories before any quarterly or annual limits are reached.
  • Ask for a credit limit increase after 6 months – A higher limit lets you earn rewards on bigger transaction amounts while keeping your utilization low.
  • Spread applications across issuers – Having cashback cards from multiple banks avoids overlap in pending applications that may limit approval odds.
  • Build your credit – Having excellent credit scores above 740 improves your chances of getting approved for premium rewards cards with the best bonuses.
See also  Can You Earn Cashback on Bill Payments?

The Bottom Line

While cashback credit cards generally don’t impose low fixed limits on total rewards earned, you may encounter earning rate caps or category spending limits. The key is choosing cards that align with your lifestyle and offer rewards for your largest purchase categories.

With responsible use of multiple cards, paying balances in full each month, and redeeming rewards dutifully, your cashback earnings can add up dramatically over time. Cashback provides reliable value toward everyday purchases as long as you use effective earning strategies tailored to each card.

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