AskMyFinance

Author: AskMyFinance Editorial Team

  • Best Car Insurance for Bad Credit 2026: Affordable Options

    Advertiser Disclosure: AskMyFinance.com may earn a commission from affiliate partners when you click on links or apply for financial products on this site. Our editorial opinions are our own and not influenced by advertiser relationships.

    Having bad credit can raise your car insurance premium significantly — but some insurers penalize poor credit less than others. Here are the best options if your credit score is below 580.

    How Credit Affects Car Insurance Rates

    In most states, car insurance companies use a credit-based insurance score to help set your premium. Studies show that drivers with lower credit scores file more claims on average. As a result, insurers charge more to offset that risk.

    The impact is significant. Drivers with poor credit pay an average of 61% more than drivers with good credit. That is roughly $700 more per year on a $1,150 average premium.

    States that ban credit scoring: California, Hawaii, Massachusetts, and Michigan do not allow insurers to use credit scores. If you live in one of these states, your credit will not affect your premium.

    Best Car Insurance Companies for Bad Credit

    1. Geico — Lowest Average Rates for Poor Credit

    Geico charges less than most competitors for drivers with poor credit. While rates still go up with bad credit, the baseline is lower than average. Geico’s large scale allows it to spread risk across a wide pool of drivers.

    2. State Farm — Smallest Credit Penalty

    State Farm applies one of the smallest credit-based surcharges in the industry. The difference in premium between a driver with excellent credit and poor credit is smaller at State Farm than at most other major insurers.

    3. Progressive — Best for High-Risk Drivers Overall

    Progressive specializes in nonstandard and high-risk drivers. It accepts drivers with poor credit, recent accidents, and DUIs that other companies reject. Its Snapshot telematics program also lets safe drivers earn discounts that can partially offset the credit penalty.

    4. USAA — Best for Military Families with Bad Credit

    USAA also applies a relatively small credit surcharge and offers some of the lowest base rates available. If you are eligible, it is the best option regardless of credit.

    How to Lower Your Premium with Bad Credit

    • Shop at least three quotes. Credit penalties vary widely by insurer — shopping around can save hundreds per year.
    • Raise your deductible. A higher deductible lowers your premium. Make sure you can cover the deductible in cash if you need to file a claim.
    • Drop comprehensive and collision on older vehicles. If your car is worth less than $4,000–$5,000, these coverages may not be worth the premium.
    • Ask about telematics programs. Programs like Progressive Snapshot or State Farm Drive Safe and Save reward safe driving habits regardless of credit.
    • Work on your credit. As your score improves, ask your insurer to re-run your credit at renewal. The savings can be significant.

    Bottom Line

    Bad credit raises your car insurance premium, but the penalty varies significantly by insurer. Geico and State Farm tend to offer the most competitive rates for drivers with poor credit. Always compare at least three quotes and consider telematics programs to offset the credit surcharge.

    Frequently Asked Questions

    Can insurers use your credit score to set rates?

    In most states, yes. Insurers use a credit-based insurance score (different from your FICO score) to predict claim likelihood. California, Hawaii, and Massachusetts ban this practice.

    How much more does bad credit cost for car insurance?

    Drivers with poor credit pay an average of 61% more for car insurance than drivers with good credit, according to industry data. That can add $500 to $1,500 per year to your premium.

    Will improving my credit lower my insurance rate?

    Yes. As your credit improves, ask your insurer to re-run your credit score for a new rate. Some insurers do this automatically at renewal.

    Related Articles

    Get Personalized Financial Guidance

    Answer a few questions and get personalized recommendations tailored to your situation.

    Get My Recommendation

  • Best Car Insurance for Seniors 2026: Top Companies and Discounts

    Advertiser Disclosure: AskMyFinance.com may earn a commission from affiliate partners when you click on links or apply for financial products on this site. Our editorial opinions are our own and not influenced by advertiser relationships.

    Car insurance for seniors does not have to be expensive. Many insurers offer strong discounts for older drivers, especially those with clean records and low annual mileage. Here are the best car insurance companies for seniors in 2026.

    Best Car Insurance Companies for Seniors

    1. The Hartford (AARP Program) — Best Overall for Seniors

    The Hartford partners with AARP to offer auto insurance designed specifically for drivers 50 and older. Key benefits include:

    • Accident forgiveness — your rate does not increase after your first accident
    • Lifetime renewability — they cannot drop you for old age alone
    • New car replacement for vehicles less than 15 months old
    • RecoverCare benefit for household expenses if you are injured in an accident

    AARP members get exclusive pricing. If you are 50 or older, this is the first quote to get.

    2. USAA — Best for Military Seniors

    USAA consistently earns top customer satisfaction scores and offers very competitive rates for veterans and military families. If you or a spouse served in the military, USAA should be your first call. It is available to active duty, veterans, and their families.

    3. Geico — Best Rates for Seniors with Clean Records

    Geico offers low base rates and a mature driver discount of up to 10% for drivers who complete an approved defensive driving course. Its digital claims process is straightforward for seniors who prefer to handle things online.

    4. Nationwide — Best for Low-Mileage Seniors

    Nationwide’s SmartMiles program is a pay-per-mile option ideal for seniors who drive fewer than 7,500 miles per year. You pay a base rate plus a per-mile charge. If you drive significantly less than the average American (about 14,000 miles per year), this can cut your premium in half.

    5. State Farm — Best for Seniors Who Want a Local Agent

    State Farm has 19,000+ local agents nationwide. For seniors who prefer face-to-face service, State Farm’s agent network is unmatched. Its Drive Safe and Save program also rewards low-mileage driving with discounts of up to 30%.

    Senior Car Insurance Discounts to Ask About

    • Mature driver discount: Most major insurers offer 5–15% off after you complete a defensive driving course (AARP, AAA, and online courses qualify).
    • Low-mileage discount: If you drive under 7,500 miles per year, ask about pay-per-mile or low-mileage discounts.
    • Multi-policy discount: Bundling home and auto with the same insurer typically saves 5–15%.
    • Loyalty discount: Many insurers reward long-term customers who have been with them for multiple years.

    What Coverage Do Seniors Need?

    As a senior, your coverage needs depend on a few factors:

    • If you own your vehicle outright, you may not need collision and comprehensive coverage if the car’s value is low.
    • If you drive infrequently, a pay-per-mile policy can reduce costs significantly.
    • Make sure you have adequate liability coverage — minimum state limits are often not enough if you cause a serious accident.
    • MedPay or PIP coverage is valuable if your health insurance has high deductibles.

    Bottom Line

    The best car insurance for seniors depends on your driving habits, military status, and preference for digital vs. local service. Get quotes from at least three companies — The Hartford (AARP), Geico, and State Farm — to find the best rate for your profile.

    Frequently Asked Questions

    Does car insurance go up after age 65?

    Rates start to rise gradually around age 70 for most drivers. The increase depends on your driving record and the insurer. Maintaining a clean record and taking a defensive driving course can offset higher rates.

    What discounts are available for senior drivers?

    The most common are the mature driver discount (after taking a certified course), low-mileage discount, and bundling discount. AARP members can also access special rates through The Hartford.

    Is AARP car insurance worth it?

    The Hartford’s AARP Auto Insurance program offers competitive rates and benefits designed for drivers 50+, including a lifetime renewability guarantee and accident forgiveness. It is worth comparing against standard quotes.

    Related Articles

    Get Personalized Financial Guidance

    Answer a few questions and get personalized recommendations tailored to your situation.

    Get My Recommendation

  • State Farm vs. Geico: Which Car Insurance Is Better? (2026)

    Advertiser Disclosure: AskMyFinance.com may earn a commission from affiliate partners when you click on links or apply for financial products on this site. Our editorial opinions are our own and not influenced by advertiser relationships.

    State Farm and Geico are the two largest car insurance companies in the United States. Both offer solid coverage, but they serve different types of drivers well. This comparison breaks down pricing, coverage, discounts, and service so you can choose the right one.

    Quick Comparison: State Farm vs. Geico

    Feature State Farm Geico
    Average annual premium ~$1,480 ~$1,320
    J.D. Power satisfaction (2025) 847 / 1,000 829 / 1,000
    AM Best rating A++ (Superior) A++ (Superior)
    Local agents Yes — 19,000+ agents Limited
    Mobile app rating 4.8 / 5 4.8 / 5

    Pricing: Who Is Cheaper?

    Geico is usually the cheaper option for drivers with a clean record. Its average full-coverage premium runs about $110 per month, compared to about $123 for State Farm. But pricing depends heavily on your ZIP code, age, driving history, and vehicle.

    State Farm is often more competitive when:

    • You have a teen driver on the policy
    • You have a recent accident or ticket
    • You bundle home and auto

    Coverage Options

    Both companies offer all standard coverage types:

    • Liability (bodily injury and property damage)
    • Collision and comprehensive
    • Uninsured and underinsured motorist
    • Medical payments (MedPay) and personal injury protection (PIP)
    • Rental car reimbursement
    • Roadside assistance

    State Farm also offers rideshare coverage for Uber and Lyft drivers, which Geico offers in fewer states.

    Discounts

    State Farm discounts include:

    • Multi-policy (bundle home + auto)
    • Drive Safe and Save (telematics program)
    • Good student (under 25, 3.0 GPA or higher)
    • Accident-free discount
    • Defensive driving course

    Geico discounts include:

    • Multi-policy and multi-vehicle
    • Good driver (5 years accident-free)
    • Federal employee and military
    • Good student
    • Membership and employee discounts (partner with 500+ groups)

    Customer Service and Claims

    State Farm scores higher in J.D. Power’s overall satisfaction study. Its large network of local agents means you can often meet your agent in person, which many customers prefer when filing a claim.

    Geico is almost entirely digital. It handles claims well through its app and online portal, and has a strong reputation for quick claims processing. If you prefer to handle everything online without talking to an agent, Geico may suit you better.

    Which Should You Choose?

    • Choose Geico if you want the lowest base premium and prefer a digital-first experience.
    • Choose State Farm if you want a local agent, have a teen on your policy, or want the highest customer satisfaction scores.

    Bottom Line

    Both State Farm and Geico are excellent insurers with top financial strength ratings. The best way to choose is to get quotes from both — prices vary significantly by location and driver profile. Spend 10 minutes getting quotes from each before you decide.

    Frequently Asked Questions

    Is State Farm or Geico cheaper?

    Geico is often cheaper for drivers with clean records. State Farm can be more competitive for drivers with accidents or teens on the policy.

    Which company has better customer service?

    State Farm has higher J.D. Power satisfaction scores and a large local agent network. Geico is rated well for its digital tools and claims app.

    Can I get a quote from both on the same day?

    Yes. Both State Farm and Geico offer instant online quotes. Getting both on the same day is the fastest way to compare real prices for your ZIP code.

    Related Articles

    Get Personalized Financial Guidance

    Answer a few questions and get personalized recommendations tailored to your situation.

    Get My Recommendation

  • How to Buy Bitcoin for the First Time in 2026: A Beginner’s Step-by-Step Guide

    Bitcoin is the most widely held cryptocurrency in the world. Buying it for the first time takes about 15 minutes. This guide covers how to buy Bitcoin safely, where to buy it, how to store it, and what to know before you invest a single dollar.

    What Is Bitcoin?

    Bitcoin is a digital currency that exists on a decentralized network called the blockchain. No bank or government controls it. Transactions are recorded permanently on the blockchain, a public ledger maintained by computers around the world.

    Bitcoin was created in 2009 by an anonymous developer (or group) using the name Satoshi Nakamoto. The total supply is capped at 21 million coins — no more will ever be created. That fixed supply is what many investors believe gives Bitcoin its long-term value.

    Bitcoin is highly volatile. The price has dropped 50–80% multiple times in its history, and also risen 1,000%+ from those lows. It is not a savings account. Only invest what you could afford to lose entirely.

    Step 1: Choose a Cryptocurrency Exchange

    You buy Bitcoin through a cryptocurrency exchange — a platform that handles the transaction between buyer and seller. The largest and most trusted U.S. exchanges are:

    • Coinbase: The most beginner-friendly option. U.S.-based, publicly traded, insured for certain assets. Higher fees than some competitors but the simplest experience. Best for first-time buyers.
    • Kraken: Lower fees than Coinbase, strong security record, more advanced trading options. Good choice once you are comfortable with the basics.
    • Gemini: Founded by the Winklevoss twins. Strong regulatory compliance and security focus. Earn program allows you to earn interest on held crypto.
    • Robinhood: If you already use Robinhood for stocks, you can buy Bitcoin there too. Easy interface but you cannot withdraw Bitcoin to a personal wallet — you hold it on Robinhood’s platform only.

    For most beginners, Coinbase is the safest starting point. Once you understand how it works, you can compare fees and move to alternatives.

    Step 2: Create and Verify Your Account

    Go to the exchange’s website and sign up. You will need:

    • Email address
    • Government-issued ID (driver’s license or passport)
    • Social Security Number (for U.S. users — required for tax reporting)
    • Phone number for two-factor authentication

    Identity verification (called KYC — Know Your Customer) is required by law. It usually takes a few minutes to a few hours. Enable two-factor authentication before you do anything else — this is a basic security measure that prevents unauthorized access to your account.

    Step 3: Connect a Payment Method

    Link a bank account or debit card to fund your purchases. Options vary by exchange:

    • Bank account (ACH transfer): Lowest fees (often 1.5% or less), but funds may take 3–5 days to settle. Some exchanges give you immediate buying power while the transfer completes.
    • Debit card: Instant, but fees are higher (typically 2.5–3.9%).
    • Wire transfer: Fast and lower fees for large amounts ($10,000+), but involves a fee from your bank.

    For most first-time buyers making a small purchase, a bank account ACH link is the best option.

    Step 4: Place Your First Bitcoin Order

    On most exchanges, click “Buy” and select Bitcoin (BTC). Enter the dollar amount you want to spend. You do not need to buy a whole Bitcoin — you can buy any fraction. $50 worth of Bitcoin at today’s prices is a legitimate starting point.

    Review the fee before confirming. Coinbase charges approximately 1.5% for ACH purchases and higher for instant card purchases. On a $100 purchase, that is $1.50 to $3.90 in fees.

    Confirm the transaction. The Bitcoin will appear in your exchange account within seconds of the order filling.

    Step 5: Decide How to Store It

    This is the most important step that most beginners skip. Leaving Bitcoin on an exchange means the exchange holds your private keys — not you. If the exchange is hacked or goes bankrupt, your Bitcoin may be at risk. Several major exchanges have failed in recent years, including FTX in 2022.

    Your options:

    • Leave it on the exchange: Simplest option. Acceptable for small amounts or if you plan to trade frequently. The exchange’s insurance and security practices matter here.
    • Software wallet (hot wallet): A free app like Coinbase Wallet, Exodus, or Trust Wallet where you control your private keys. More secure than an exchange but still internet-connected.
    • Hardware wallet (cold wallet): A physical device (like a Ledger Nano or Trezor) that stores your private keys offline. The most secure option for larger amounts. Costs $50–$150. Recommended for anyone holding $1,000 or more in crypto.

    The rule in crypto: “Not your keys, not your coins.” If you do not control the private key, you do not truly own the Bitcoin.

    Bitcoin Taxes: What You Need to Know

    In the United States, Bitcoin is treated as property for tax purposes, not currency. This means:

    • Every time you sell Bitcoin, you owe capital gains tax on any profit
    • Short-term gains (held less than one year) are taxed as ordinary income
    • Long-term gains (held more than one year) are taxed at 0%, 15%, or 20% depending on your income
    • Even exchanging Bitcoin for another cryptocurrency is a taxable event

    Keep records of every purchase: date, amount in USD, amount of Bitcoin purchased. Most exchanges provide tax documents but the recordkeeping is ultimately your responsibility. Tools like CoinTracker or Koinly connect to your exchanges and generate tax reports automatically.

    How Much Should You Invest in Bitcoin?

    Bitcoin is a speculative asset. Most financial advisors recommend limiting speculative investments to 5–10% of your portfolio — and only after you have an emergency fund and retirement contributions in place.

    Make sure your financial foundation is solid first. See our guide to building an emergency fund and our overview of investing in index funds — these are typically lower-risk first steps before adding Bitcoin to a portfolio. If you want to understand the full picture of investing basics, our guide to how to start investing in stocks is a good starting point.

    Frequently Asked Questions

    Is it safe to buy Bitcoin?

    Buying Bitcoin on a reputable, regulated exchange like Coinbase or Kraken is reasonably safe. The risks are the price volatility of Bitcoin itself, and the security of how you store it. Using two-factor authentication and not leaving large amounts on an exchange addresses most security risks.

    Can I buy less than one Bitcoin?

    Yes. Bitcoin is divisible to eight decimal places. The smallest unit is called a satoshi (0.00000001 BTC). You can buy $10, $50, or $100 worth of Bitcoin regardless of the current price per coin.

    Do I owe taxes when I buy Bitcoin?

    No taxes are owed when you buy. Taxes are triggered when you sell, exchange for another crypto, or use Bitcoin to buy something. The taxable amount is the difference between what you paid and what you received.

    What happens if the exchange I use goes bankrupt?

    If a U.S. exchange goes bankrupt, your assets may be part of the bankruptcy estate, which means you could lose them or wait years for partial recovery. This is why holding large amounts on an exchange long-term is risky. A hardware wallet eliminates this risk because you hold the private keys yourself.

    Get Personalized Financial Guidance

    Answer a few questions and get personalized recommendations tailored to your situation.

    Get My Recommendation

    Affiliate Disclosure: This article contains affiliate links. AskMyFinance may earn a commission when you click links and purchase products. This does not affect our editorial independence or the products we recommend. We only include products we believe provide value to our readers.

    Related Articles

  • How to Write a Will: A Step-by-Step Guide for 2026

    A will is a legal document that says who gets your property when you die and, if you have children, who takes care of them. Without a will, a court makes those decisions under your state’s intestacy laws — and the outcome may not match your wishes. Writing a will is not complicated. Here is how to do it.

    Why You Need a Will

    Most people think wills are for the elderly or wealthy. They are not. If you have a bank account, a car, any personal property, or children, you need a will. Without one:

    • Your assets go through probate court, which can take months or years and costs money in legal fees
    • The state distributes your assets according to a default formula — spouse, then children, then parents, then siblings — which may not match what you want
    • If you have minor children, a court (not you) decides who raises them
    • Unmarried partners receive nothing unless specifically named

    A will takes 1–2 hours to complete. Online tools make it faster. The cost ranges from $0 (if you write it yourself) to $30–$100 using an online service, to $300–$1,000 if you use an attorney for a complex estate.

    What a Will Can and Cannot Do

    A will can:

    • Name who receives your property (your “beneficiaries”)
    • Name a guardian for your minor children
    • Name an executor — the person responsible for carrying out your wishes
    • Specify your funeral and burial preferences
    • Leave specific items to specific people

    A will cannot:

    • Override beneficiary designations on retirement accounts (401k, IRA), life insurance, or bank accounts with designated beneficiaries — those pass directly regardless of what your will says
    • Avoid probate — property in your will still goes through the probate process
    • Manage assets held in a living trust

    This is why beneficiary designations on your financial accounts are just as important as your will. Review them annually and after any major life change.

    How to Write a Will: Step by Step

    Step 1: Take Inventory of Your Assets

    List everything you own that has value:

    • Real estate
    • Bank and investment accounts
    • Vehicles
    • Retirement accounts (401k, IRA)
    • Life insurance policies
    • Personal property (jewelry, artwork, electronics, furniture)
    • Digital assets (cryptocurrency, PayPal, domain names)

    Note which assets already have beneficiary designations — those pass outside of your will.

    Step 2: Decide Who Gets What

    Name your beneficiaries and what each receives. Be specific. “My car to my sister Jane Smith” is clearer than “my car to my sister.” Include contingent beneficiaries — the people who receive an asset if the primary beneficiary dies before you do.

    Step 3: Choose a Guardian for Minor Children

    If you have children under 18, name a guardian who will raise them if both parents are gone. Talk to the person first — do not surprise them. Also name a backup guardian in case your first choice cannot serve.

    Step 4: Name an Executor

    Your executor (also called a personal representative) handles your estate after you die — paying final debts, filing taxes, distributing assets, and closing accounts. Choose someone organized and trustworthy. It is often a spouse, adult child, or close friend. Name a backup executor as well.

    Step 5: Write the Will Document

    You have three options:

    • Handwritten (holographic) will: Entirely written by hand, signed, and dated. Valid in about 25 states. Simple and free, but higher risk of errors and challenges.
    • Online will service: Services like Trust & Will ($199 for a complete estate plan) or LegalZoom ($89–$149 for a basic will) walk you through a Q&A and produce a legally valid document. Best for most people with straightforward estates.
    • Estate planning attorney: Best for complex situations — blended families, business ownership, significant assets, special needs dependents, or if you want a trust alongside your will. Expect $300–$1,000 for a simple will, $1,500–$3,000 for a full estate plan with trust.

    Step 6: Sign with Witnesses

    Most states require your will to be signed in front of two witnesses who are not beneficiaries. Some states also require a notary. Witnesses confirm that you signed willingly and were of sound mind.

    A self-proving affidavit — a notarized statement from witnesses — makes the probate process faster because the court does not need to track down witnesses later. Most online services include this.

    Step 7: Store It Safely and Tell Someone

    Store the original signed will somewhere safe but accessible — a fireproof safe, a safe deposit box, or with your attorney. Tell your executor exactly where it is. A will that cannot be found is almost as bad as no will at all.

    Make copies for your records. Do not alter or mark up the original — any handwritten changes to a typed will can invalidate the entire document or just the changed portion, depending on your state.

    When to Update Your Will

    Review and update your will after any major life change:

    • Marriage or divorce
    • Birth or adoption of a child
    • Death of a named beneficiary, executor, or guardian
    • Major change in assets (bought a home, received an inheritance)
    • Moving to a different state

    As a general rule, review your will every three to five years even without major changes.

    A will is one piece of an estate plan. Pair it with updated beneficiary designations on your retirement accounts and insurance, a durable power of attorney, and a healthcare directive. For protecting your family’s financial security while you are alive, see our guide to term life vs whole life insurance and disability insurance.

    Frequently Asked Questions

    Is a will legally required?

    No. A will is not required by law. But dying without one (called dying intestate) means the state distributes your assets by formula and a court decides who raises your children. Most people would prefer to make those decisions themselves.

    Does a will avoid probate?

    No. Property left through a will goes through probate court. To avoid probate, you need to hold assets in a living trust, name beneficiaries directly on accounts, or use joint ownership. A revocable living trust is the main tool people use to avoid probate, though it costs more to set up than a will alone.

    Can I write my own will without a lawyer?

    Yes, in most states. A handwritten (holographic) will or an online will service is valid for straightforward estates. If you have a blended family, significant assets, business interests, or want to create a trust, an estate planning attorney is worth the cost.

    What happens to my will if I get divorced?

    In most states, divorce automatically revokes any gifts or appointments to your former spouse in your will. But the rest of the will remains valid. It is still best practice to write a new will after a divorce so that everything reflects your current wishes clearly.

    Get Personalized Financial Guidance

    Answer a few questions and get personalized recommendations tailored to your situation.

    Get My Recommendation

    Affiliate Disclosure: This article contains affiliate links. AskMyFinance may earn a commission when you click links and purchase products. This does not affect our editorial independence or the products we recommend. We only include products we believe provide value to our readers.

    Related Articles

  • Zero-Based Budgeting: What It Is and How to Build One Step by Step

    Zero-based budgeting assigns every dollar you earn to a specific purpose before the month begins. Income minus all assignments equals zero — not because you spent it all, but because every dollar has a job. It is the most thorough budgeting method available and produces the clearest picture of where your money is actually going.

    What Is Zero-Based Budgeting?

    In a zero-based budget, you start with your expected monthly income and subtract expenses, savings, and debt payments until you reach exactly zero. Every dollar is allocated before you spend it.

    The name is often misunderstood. Zero-based budgeting does not mean you have zero money left. It means zero dollars are unaccounted for. If you earn $4,000, your budget should assign all $4,000 — some to bills, some to groceries, some to savings, some to fun money. The last dollar should be assigned somewhere.

    How to Build a Zero-Based Budget

    Step 1: Calculate Your Monthly Income

    Use your actual take-home pay — after taxes, health insurance, and any automatic 401(k) contributions. If your income varies, use the lowest paycheck from the last three months as your starting point. It is easier to find extra money during a good month than to cover a shortfall during a bad one.

    Step 2: List All Fixed Expenses

    Fixed expenses are the same every month. Write them down first because they are non-negotiable:

    • Rent or mortgage payment
    • Car payment
    • Insurance premiums (auto, renters, life)
    • Minimum credit card and loan payments
    • Subscriptions with fixed monthly fees

    Step 3: Estimate Variable Expenses

    Variable expenses change month to month but are predictable enough to budget for:

    • Groceries
    • Gas and transportation
    • Utilities (use an average of the last three months)
    • Dining out
    • Entertainment and personal spending

    Step 4: Assign Savings and Debt Goals

    Treat savings like a bill. Before you assign fun money, allocate to:

    • Emergency fund (until you reach 3–6 months of expenses)
    • Retirement contributions (if not automatically deducted)
    • Specific savings goals (down payment, vacation, new car)
    • Extra debt payments beyond minimums

    Step 5: Assign Every Remaining Dollar

    After fixed expenses, variable expenses, and savings are covered, any remaining dollars should be assigned. This might mean increasing a dining budget, putting extra toward debt, or building a sinking fund for irregular expenses like car maintenance or holiday gifts.

    The goal is for income minus all assignments to equal exactly zero.

    Example Zero-Based Budget: $4,500 Monthly Take-Home

    Category Monthly Amount
    Rent $1,200
    Car payment $350
    Car insurance $130
    Renter’s insurance $20
    Utilities $120
    Groceries $400
    Gas $150
    Phone $65
    Subscriptions $60
    Dining out $200
    Entertainment $100
    Personal spending $150
    Emergency fund $300
    Roth IRA $500
    Extra debt payment $200
    Sinking fund (car/gifts) $155
    Total $4,500

    Every dollar is assigned. Income minus assignments equals zero.

    What Is a Sinking Fund?

    A sinking fund is money set aside each month for irregular but predictable expenses. Instead of being caught off guard when your car needs new tires or the holidays arrive, you save a little each month so the money is ready when needed.

    Common sinking fund categories: car maintenance, home repairs, gifts, annual subscriptions, medical/dental, pet expenses, travel. Saving $100/month toward irregular expenses can prevent several small financial emergencies per year.

    Zero-Based Budgeting vs 50/30/20

    The 50/30/20 rule sets broad spending limits by category. Zero-based budgeting assigns every dollar to a specific purpose. They are not mutually exclusive — you can use 50/30/20 to set your overall targets and zero-based budgeting to assign every dollar within those targets.

    Zero-based budgeting requires more work. You build a new budget every month. For people who want maximum control over their money, that monthly exercise is valuable. For people who find budgeting a chore, the 50/30/20 framework may be a better long-term fit.

    Best Tools for Zero-Based Budgeting

    • YNAB (You Need A Budget): The most popular app built specifically for zero-based budgeting. Assigns every dollar, tracks spending in real time, $14.99/month or $99/year.
    • EveryDollar: Created by Dave Ramsey’s team. Free version available with manual entry; premium version connects to bank accounts.
    • Spreadsheet: A simple Google Sheet or Excel spreadsheet works well and costs nothing. See our guide to the best budgeting apps for more options.

    Frequently Asked Questions

    Does zero-based budgeting mean I cannot have fun money?

    No. Fun money is a budget category just like rent or groceries. In a zero-based budget you assign a specific amount to entertainment or dining out, then spend up to that amount without guilt. The difference from no budget: you decided the amount in advance instead of spending whatever was left.

    What do I do if I spend more than I budgeted in a category?

    Adjust. Move money from another category to cover the overage. This is called rolling with the punches in YNAB’s terminology. Zero-based budgeting does not mean being rigid — it means staying aware of where your money is going and making conscious choices.

    How long does it take to build a zero-based budget?

    The first month takes 1–2 hours to set up. After the initial setup, monthly budget reviews take 15–30 minutes. Once you have a month of actual spending data, the estimates become much more accurate.

    Is zero-based budgeting the same as the envelope method?

    Similar. The cash envelope method uses physical cash divided into envelopes by category — when the envelope is empty, spending in that category stops. Zero-based budgeting applies the same logic digitally. YNAB and EveryDollar are digital envelope systems at their core.

    Get Personalized Financial Guidance

    Answer a few questions and get personalized recommendations tailored to your situation.

    Get My Recommendation

    Affiliate Disclosure: This article contains affiliate links. AskMyFinance may earn a commission when you click links and purchase products. This does not affect our editorial independence or the products we recommend. We only include products we believe provide value to our readers.

    Related Articles

  • The 50/30/20 Budget Rule: How It Works and Whether You Should Use It

    The 50/30/20 rule is one of the most widely taught budgeting frameworks in personal finance. It divides your after-tax income into three buckets: 50% for needs, 30% for wants, and 20% for savings and debt repayment. It is simple enough to start today but flexible enough to adapt to most income levels.

    How the 50/30/20 Rule Works

    Start with your monthly take-home pay — the amount deposited into your bank account after taxes, health insurance, and retirement contributions are taken out. Then divide it:

    • 50% — Needs: Rent or mortgage, utilities, groceries, insurance, minimum debt payments, transportation to work. These are expenses you cannot easily eliminate.
    • 30% — Wants: Dining out, subscriptions, travel, entertainment, shopping for non-essentials. These are choices, not requirements.
    • 20% — Savings and debt: Emergency fund contributions, retirement savings (beyond employer contributions), extra debt payments, investments.

    Example: 50/30/20 on a $5,000 Monthly Take-Home

    Category Percentage Monthly Amount
    Needs 50% $2,500
    Wants 30% $1,500
    Savings + Debt 20% $1,000

    The $1,000 in savings might go: $400 to an emergency fund, $400 to a Roth IRA, $200 toward extra debt payments.

    How to Calculate Your Numbers

    1. Find your monthly take-home pay. If your income varies, use an average of the last three months.
    2. Multiply by 0.5 (50%) to get your needs limit.
    3. Multiply by 0.3 (30%) to get your wants budget.
    4. Multiply by 0.2 (20%) to get your savings and debt target.
    5. Compare these targets to your actual spending from last month’s bank or credit card statements.

    Is 50% Enough for Needs in High-Cost Cities?

    In many cities, rent alone can consume 40–50% of take-home pay. The 50/30/20 rule was designed for average income and average cost of living. If your housing costs are high, you may need to run a 65/15/20 split — more toward needs, less toward wants — and still protect the 20% savings target.

    The 20% savings target is the most important number in the formula. If you need to cut somewhere, cut from wants (30%) before cutting from savings (20%).

    What Counts as a Need vs a Want?

    This is where most people get tripped up. A few guidelines:

    • Needs: Basic rent (not a luxury apartment upgrade), utilities, groceries at a reasonable level, car insurance, minimum credit card payments, work-related transportation
    • Wants: Streaming services, gym membership, dining out, clothing beyond basics, upgraded phone plan features, vacations
    • Gray areas: A car payment might be a need if you live in a car-dependent area with no transit. A phone is a need; the newest iPhone is a want. Internet is a need at most plans; a premium fiber plan is partially a want.

    The goal is not to categorize perfectly — it is to be honest with yourself about what is truly essential versus what you are choosing for comfort or convenience.

    Adjusting 50/30/20 for Your Situation

    The 50/30/20 split is a starting point, not a rigid requirement. Common adjustments:

    • High-income earner: 50/30/20 may not be aggressive enough. Consider 50/20/30 or even 40/10/50 once needs are covered.
    • Paying off high-interest debt: Temporarily shift wants money to debt. A 50/10/40 split accelerates payoff.
    • Entry-level salary in a high-cost city: 65/15/20 keeps the savings target intact while acknowledging higher housing costs.
    • Saving for a down payment: Temporarily shift to 50/10/40 to build the down payment faster.

    50/30/20 vs Other Budgeting Methods

    The 50/30/20 rule is a macro-level framework. It does not tell you whether to cut your coffee habit or your gym membership — it just tells you the total you can spend on wants. If you need more precision, zero-based budgeting allocates every dollar to a specific purpose. If you want even less structure, the pay-yourself-first method automates savings and lets you spend the rest freely.

    For most people starting out, 50/30/20 is the right first step. It is forgiving enough to work with real life and specific enough to actually tell you something useful. For tracking tools to help you stay on target, see our guide to the best budgeting apps of 2026.

    If your savings rate is already good but debt is costing you, see how the debt avalanche method can accelerate payoff. And if you are saving toward a home, our guide on how to save for a down payment gives a concrete plan.

    Frequently Asked Questions

    Where did the 50/30/20 rule come from?

    The 50/30/20 rule was popularized by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi in the 2005 book All Your Worth: The Ultimate Lifetime Money Plan. It has since become one of the most widely taught personal finance frameworks.

    Does the 20% savings target include my 401(k) contributions?

    It depends on the version you follow. Some practitioners count only after-tax savings in the 20%. Others include pre-tax retirement contributions taken out of your paycheck before it becomes take-home pay. The most conservative approach: treat 401(k) contributions as a bonus on top of the 20% target, not a substitute for it.

    What if I cannot hit the 20% savings target right now?

    Start where you are. If you can only save 5% right now, save 5%. Increase by 1–2% each time you get a raise. The most important thing is that saving is a habit and happens automatically — not that you hit a specific percentage immediately.

    Should minimum debt payments go in the needs or savings category?

    Minimum payments go in needs — they are required. Extra debt payments beyond the minimum go in the savings/debt category (20%). This distinction matters because if money gets tight, you can temporarily cut extra debt payments but not minimums.

    Get Personalized Financial Guidance

    Answer a few questions and get personalized recommendations tailored to your situation.

    Get My Recommendation

    Affiliate Disclosure: This article contains affiliate links. AskMyFinance may earn a commission when you click links and purchase products. This does not affect our editorial independence or the products we recommend. We only include products we believe provide value to our readers.

    Related Articles

  • Chase Sapphire Preferred vs Reserve 2026: Which Card Is Right for You?

    The Chase Sapphire Preferred and Chase Sapphire Reserve are the two most popular travel credit cards in the U.S. Both earn Chase Ultimate Rewards points, both have strong travel protections, and both let you transfer points to airlines and hotels. The choice between them comes down to whether the Reserve’s extra benefits are worth the higher annual fee.

    Chase Sapphire Preferred vs Reserve: Side-by-Side Comparison

    Feature Sapphire Preferred Sapphire Reserve
    Annual fee $95 $550
    Annual travel credit None $300 (automatic)
    Effective annual cost $95 $250 (after $300 credit)
    Sign-up bonus 60,000 points ($750 in travel) 60,000 points ($900 in travel)
    Dining rewards 3x points 3x points
    Travel rewards 2x points 3x + 10x on Chase Travel
    Point value in Chase Travel 1.25 cents each 1.5 cents each
    Priority Pass lounge access No Yes (unlimited visits)
    Global Entry / TSA PreCheck credit $50 (once every 4 years) $100 (once every 4 years)
    Trip delay reimbursement $500 after 12+ hours $500 after 6+ hours
    Primary rental car insurance Yes Yes

    Where the Reserve Wins

    The $300 Travel Credit

    The Reserve’s $300 annual travel credit applies automatically to the first $300 in travel purchases each year — flights, hotels, Uber, Lyft, parking, tolls. You do not need to register or apply for it. If you spend at least $300 per year on any travel, this credit reduces your effective annual fee from $550 to $250.

    Airport Lounge Access

    The Reserve includes Priority Pass Select membership with unlimited free visits for you and two guests. A Priority Pass membership alone costs $429 per year. If you travel through major airports frequently, this benefit alone can justify the card’s cost.

    Higher Point Value

    Reserve points are worth 1.5 cents each in Chase Travel, compared to 1.25 cents for the Preferred. On the 60,000-point sign-up bonus, that difference is worth $150 more in redemption value. On ongoing spending, the Reserve earns more on travel (3x vs 2x) and benefits more from the higher per-point value.

    Where the Preferred Wins

    Lower Net Cost for Occasional Travelers

    If you travel fewer than 4–6 times per year, the Reserve’s lounge access is less valuable. The Preferred’s $95 annual fee is more than covered by the value of a single sign-up bonus. For travelers who take 1–2 trips per year and do not care about airport lounges, the Preferred is the better deal.

    Better Welcome Bonus Value for New Cardholders

    Both cards offer the same 60,000-point sign-up bonus, but the Preferred’s minimum spend requirement ($4,000 in 3 months) applies to both. With the Preferred, you get $750 in Chase Travel value for $95/year. That is hard to beat as a first travel card.

    The Math: When Does the Reserve Pay Off?

    The Reserve effectively costs $250/year after the $300 travel credit. The Preferred costs $95/year. The cost difference is $155/year.

    The Reserve’s advantages over the Preferred in ongoing rewards:

    • Extra 1x on travel ($10,000 in travel = 10,000 more points = $150 more in value)
    • Higher point value (1.5 vs 1.25 cents) means existing points are worth 20% more
    • Lounge access: roughly $100–$200 in value per frequent traveler depending on use

    If you spend $10,000+ per year on travel and dining, and use lounges regularly, the Reserve math works. For most people who travel occasionally, the Preferred is the better starting point.

    Can You Downgrade from Reserve to Preferred?

    Yes. Chase allows product changes between Sapphire cards. If you get the Reserve and find the cost is not worth it after a year or two, you can call Chase and request a product change to the Sapphire Preferred without closing the account or losing your points. Your credit history on the account stays intact.

    Note: you can only hold one Sapphire card at a time. You cannot have both the Preferred and Reserve simultaneously.

    Which Should You Get?

    Get the Sapphire Preferred if:

    • This is your first travel credit card
    • You travel 1–4 times per year
    • You do not care about airport lounges
    • You want to keep your effective annual fee below $100

    Get the Sapphire Reserve if:

    • You travel 6+ times per year and value lounge access
    • You regularly spend $10,000+ on travel and dining annually
    • You want the best trip protection and the highest per-point value
    • You already have the Preferred and want to upgrade

    For a broader look at all travel options beyond Chase, see our full guide to the best travel credit cards of 2026. If you would rather skip the complexity and earn simple cash back, see the best cash back credit cards.

    Frequently Asked Questions

    Is the Chase Sapphire Reserve worth $550 per year?

    For frequent travelers, yes — after the $300 travel credit the effective cost is $250, and lounge access alone can be worth more than that. For occasional travelers, the Preferred at $95 is the better value.

    What credit score do I need for the Chase Sapphire Preferred?

    Chase generally approves applicants with scores of 700 or higher for Sapphire products. The Reserve may require 720+. Neither is guaranteed — Chase also looks at income, existing Chase accounts, and recent application history.

    Can I transfer Chase Sapphire points to airlines?

    Yes. Both Sapphire cards transfer points at 1:1 to United Airlines, Southwest, Air France/KLM, British Airways, and more. Hotel partners include World of Hyatt, Marriott Bonvoy, and IHG One Rewards. Transfers are instant to most partners.

    What is the Chase 5/24 rule?

    Chase generally will not approve a new credit card application if you have opened 5 or more credit cards from any issuer in the past 24 months. If you are above 5/24, you will likely be declined for a Sapphire card regardless of your credit score.

    Get Personalized Financial Guidance

    Answer a few questions and get personalized recommendations tailored to your situation.

    Get My Recommendation

    Affiliate Disclosure: This article contains affiliate links. AskMyFinance may earn a commission when you click links and purchase products. This does not affect our editorial independence or the products we recommend. We only include products we believe provide value to our readers.

    Related Articles

  • Best Travel Credit Cards 2026: Top Picks for Every Type of Traveler

    Travel credit cards turn flights, hotel stays, and everyday purchases into free trips. The best ones offer sign-up bonuses worth $500 to $1,000 in travel, plus ongoing earnings that add up fast. This guide covers the top travel cards of 2026 and which one belongs in your wallet.

    Best Travel Credit Cards of 2026

    1. Chase Sapphire Preferred — Best for Most Travelers

    The Chase Sapphire Preferred is the most recommended travel card for people who are new to points or want a single card that does everything well. It earns 3x points on dining and 2x on all travel, and points are worth 25% more when redeemed through Chase Travel. The sign-up bonus — typically 60,000 points after spending $4,000 in three months — is worth $750 in travel.

    • Earning rate: 3x dining, 3x streaming, 2x travel, 1x everything else
    • Annual fee: $95
    • Sign-up bonus: 60,000 points (worth $750 in Chase Travel)
    • Best for: First travel card, versatile points, strong transfer partners

    2. Chase Sapphire Reserve — Best Premium Travel Card

    The Chase Sapphire Reserve costs $550 per year but gives back $300 in annual travel credits automatically — effectively making the out-of-pocket cost $250 for travelers who use the credit. It earns 3x on dining and 10x on Chase Travel purchases. Priority Pass lounge access is included, and points are worth 50% more in Chase Travel.

    • Earning rate: 10x Chase Travel, 3x dining/travel, 1x everything else
    • Annual fee: $550 ($250 effective with $300 travel credit)
    • Sign-up bonus: 60,000 points (worth $900 in Chase Travel)
    • Best for: Frequent travelers who want airport lounge access and maximum point value

    3. Capital One Venture Rewards — Best for Simple Travel Rewards

    The Capital One Venture Rewards card earns 2x miles on every purchase — no categories to track. Miles can be redeemed against any travel purchase at 1 cent each, or transferred to 15+ airline and hotel partners. The $95 annual fee is offset by a Global Entry/TSA PreCheck credit ($100 every four years) and a solid sign-up bonus.

    • Earning rate: 5x on hotels and car rentals through Capital One Travel, 2x on everything else
    • Annual fee: $95
    • Sign-up bonus: 75,000 miles after $4,000 spend in 3 months (worth $750 in travel)
    • Best for: Simple earners who want flexibility without worrying about categories

    4. American Express Gold Card — Best for Foodies Who Travel

    The Amex Gold earns 4x points at restaurants worldwide, 4x at U.S. supermarkets (up to $25,000/year), and 3x on flights. It also includes up to $120 per year in dining credits and $120 in Uber Cash. The $250 annual fee sounds steep, but the combined credits bring the effective cost down to around $10 per year for people who use them.

    • Earning rate: 4x restaurants worldwide, 4x U.S. supermarkets, 3x flights, 1x all else
    • Annual fee: $250
    • Sign-up bonus: 60,000 Membership Rewards points after $6,000 spend in 6 months
    • Best for: People who spend heavily on dining and groceries and also travel

    5. Capital One Venture X — Best Premium Card for Value

    The Capital One Venture X charges $395 per year but provides $300 in Capital One Travel credits, 10,000 bonus miles on each anniversary (worth $100), and Priority Pass lounge access. For travelers who book through Capital One Travel, the effective annual fee is negative. It is the best value among premium travel cards.

    • Earning rate: 10x hotels/rental cars (Capital One Travel), 5x flights (Capital One Travel), 2x everything else
    • Annual fee: $395
    • Sign-up bonus: 75,000 miles after $4,000 spend in 3 months
    • Best for: Travelers who want premium benefits at a lower effective cost than Amex Platinum

    How to Get the Most Out of a Travel Card

    • Hit the sign-up bonus: Most of the first-year value comes from the welcome offer. Make sure you can hit the minimum spend requirement organically — do not overspend just to earn the bonus.
    • Use transfer partners: Points transferred to airline and hotel partners often yield 50–100% more value than redeeming through the card’s travel portal. Chase transfers to United, Hyatt, and Southwest, among others.
    • Stack credits: Cards like the Amex Gold and Venture X have built-in credits that effectively reduce the annual fee. Use them or you are leaving money on the table.
    • Pay in full every month: Travel cards carry high APRs (20–29%). Carrying a balance turns rewards into net losses.

    If you are not sure whether to get the Preferred or Reserve, see our detailed comparison in our Chase Sapphire Preferred vs Reserve guide. For simpler rewards without travel redemption complexity, see the best cash back credit cards. And if you are still building your credit score, check out the guide to building credit from scratch first.

    Frequently Asked Questions

    What credit score do I need for a travel credit card?

    Most premium travel cards require a good to excellent credit score — generally 700 or above. The Chase Sapphire Preferred and Capital One Venture typically approve applicants with scores of 700 or higher. Amex products sometimes approve scores in the 680–700 range.

    Are travel credit card annual fees worth it?

    For cards with $95 annual fees, yes — if you travel even once a year. The sign-up bonus alone typically covers two to three years of fees. For premium cards with $400+ fees, the value depends on whether you use the included credits and benefits.

    What is the best travel card with no annual fee?

    The Chase Freedom Unlimited earns 5% on Chase Travel purchases and 3% on dining with no annual fee. The Bilt Mastercard earns points on rent payments with no annual fee. Neither matches the earning power of $95 fee cards, but both are solid options for fee-averse travelers.

    Can I transfer travel points between cards?

    Points can be transferred within the same ecosystem. Chase Ultimate Rewards points from a Sapphire Preferred can be combined with points from a Freedom Unlimited. But Chase points cannot transfer to Amex’s Membership Rewards system and vice versa.

    Get Personalized Financial Guidance

    Answer a few questions and get personalized recommendations tailored to your situation.

    Get My Recommendation

    Affiliate Disclosure: This article contains affiliate links. AskMyFinance may earn a commission when you click links and purchase products. This does not affect our editorial independence or the products we recommend. We only include products we believe provide value to our readers.

    Related Articles

  • Best Cash Back Credit Cards 2026: Top Picks for Every Spending Pattern

    A cash back credit card turns everyday purchases into money back in your pocket. The best cards return 2% or more on everything you buy — no annual fee, no points system to decode, just a simple percentage back on every dollar you spend. Here are the top picks for 2026.

    Best Cash Back Credit Cards of 2026

    1. Wells Fargo Active Cash Card — Best Flat-Rate Cash Back

    The Wells Fargo Active Cash Card earns 2% cash back on all purchases with no category restrictions and no annual fee. That is the highest flat-rate cash back available from a major issuer without an annual fee. There is also a $200 welcome bonus after spending $500 in the first three months.

    • Cash back rate: 2% on everything
    • Annual fee: $0
    • Welcome bonus: $200 after $500 spend in 3 months
    • Best for: Simplicity — one card, one rate, maximum return on all spending

    2. Citi Double Cash Card — Best No-Fee Alternative

    The Citi Double Cash earns 1% when you buy and 1% when you pay, for a total of 2% on every purchase. No annual fee, no category restrictions. The mechanics are slightly different from the Wells Fargo Active Cash but the end result is the same — 2% back on everything. Citi also allows redemption as cash, statement credits, or ThankYou points.

    • Cash back rate: 2% (1% on purchase + 1% on payment)
    • Annual fee: $0
    • Welcome bonus: Occasionally $200 (check current offer)
    • Best for: Flexibility — cash back can convert to travel points if needed

    3. Chase Freedom Unlimited — Best for Bonus Categories

    The Chase Freedom Unlimited earns 5% on travel booked through Chase, 3% at restaurants and drugstores, and 1.5% on everything else. The base rate of 1.5% is lower than a flat 2% card, but the bonus categories make it win for people who spend heavily on dining and travel. No annual fee.

    • Cash back rate: 5% travel (Chase portal), 3% dining/drugstores, 1.5% all else
    • Annual fee: $0
    • Welcome bonus: $200 after $500 spend in 3 months
    • Best for: Diners and light travelers who want a no-fee card

    4. Discover it Cash Back — Best for Rotating Categories

    The Discover it Cash Back earns 5% cash back in rotating quarterly categories (historically: gas, groceries, restaurants, Amazon, PayPal) up to $1,500 in purchases per quarter, then 1% after. At the end of your first year, Discover matches all the cash back you earned — effectively doubling your first-year earnings. No annual fee.

    • Cash back rate: 5% on rotating categories (up to $1,500/quarter), 1% all else
    • Annual fee: $0
    • First-year bonus: Cashback Match (all first-year cash back doubled)
    • Best for: People willing to track categories for maximum return

    5. Blue Cash Preferred from Amex — Best for Groceries

    The Blue Cash Preferred earns 6% cash back at U.S. supermarkets (up to $6,000/year), 6% on select U.S. streaming services, 3% on transit and gas, and 1% on everything else. It has a $95 annual fee ($0 intro year), but grocery spenders who spend over $3,200 per year on groceries come out ahead versus a no-fee card.

    • Cash back rate: 6% groceries/streaming, 3% transit/gas, 1% all else
    • Annual fee: $95 (waived first year)
    • Welcome bonus: $250 after $3,000 spend in 6 months
    • Best for: Families with high grocery and streaming spending

    How to Choose the Right Cash Back Card

    The best cash back card depends on where you spend most:

    • You want simplicity: Get a flat-rate 2% card (Wells Fargo Active Cash or Citi Double Cash). Put everything on it, never think about categories.
    • You spend heavily on groceries: The Blue Cash Preferred’s 6% at supermarkets beats the flat 2% cards as long as you spend at least $3,200 per year on groceries.
    • You dine out frequently: The Chase Freedom Unlimited’s 3% at restaurants outpaces a flat 2% card for dining-heavy spenders.
    • You want maximum return and can track categories: The Discover it paired with a flat-rate card can maximize returns across all spending.

    Cash Back vs Points: Which Is Better?

    Cash back cards are simpler and more predictable. A 2% cash back rate is always worth 2 cents per dollar. Points cards can offer higher theoretical value — some airline miles are worth 1.5 to 2 cents each — but only if you are willing to learn the system and plan redemptions carefully.

    If you just want to earn without effort, cash back is almost always the better choice. If you are willing to optimize for maximum value, points cards (like the Chase Sapphire Preferred) can offer more. For a direct comparison of the top travel cards, see our guide to the best travel credit cards of 2026.

    How to Maximize Cash Back Earnings

    • Use your cash back card for all purchases you would make anyway — groceries, gas, bills you can pay by card
    • Pay the balance in full each month. Cash back cards typically carry 20–29% APR. One month of interest on a carried balance wipes out months of cash back
    • Use a tiered approach: a grocery specialist card for supermarkets + a flat 2% card for everything else
    • Stack rewards with store loyalty programs where possible

    If you are building credit and cannot yet qualify for the cards above, see our guide to the best credit cards for fair credit. And if you have existing credit card debt, see whether a balance transfer card can help you pay it down at 0% interest first.

    Frequently Asked Questions

    What is the best flat-rate cash back credit card?

    The Wells Fargo Active Cash Card and Citi Double Cash both earn 2% back on all purchases with no annual fee. These are the highest flat-rate cash back cards available from major issuers in 2026.

    Do cash back cards charge annual fees?

    The top flat-rate and bonus-category cash back cards have no annual fee. Cards with very high category rates (like 6% on groceries) sometimes charge an annual fee of $95, but the math works out for high spenders in those categories.

    How much can I earn with a cash back card?

    At 2% cash back, someone who puts $2,000/month in purchases on their card earns $480/year. At 5% on a $400/month grocery budget, that is an extra $240/year just in groceries.

    Is cash back taxed?

    No. Cash back rewards from credit cards are treated as rebates by the IRS, not income. You do not owe taxes on cash back earned through normal spending.

    Get Personalized Financial Guidance

    Answer a few questions and get personalized recommendations tailored to your situation.

    Get My Recommendation

    Affiliate Disclosure: This article contains affiliate links. AskMyFinance may earn a commission when you click links and purchase products. This does not affect our editorial independence or the products we recommend. We only include products we believe provide value to our readers.

    Related Articles