Choosing a Cash-Back Credit Card

Airline miles are passé. Today, cold, hard cash is the No. 1 reward that consumers are demanding for their credit card spending, according to a new Capital One survey.

If you're not getting this perk, it's like you're missing out on free money.

At our house, virtually every purchase from groceries to karate lessons goes on one of these cards -- which is paid off each month -- in order to get hundreds of dollars back.

These days, there are a lot of programs to choose from: Forty-three percent of credit card rewards offers last year promoted a cash-back program, up from 27 percent in 2008, says Lisa Hronek, senior analyst at Mintel Comperemedia, in this post at Bankrate.com.

It's important to choose the card that's right for you and your spending habits. In its recent 2012 Credit Cards Rewards Survey, Bankrate breaks down cash-back cards by fee, introductory bonus, reward rate and expiration period.

Here's what you should consider. Nearly half the credit cards in Bankrate's survey, or 48 percent, pay 1 percent cash back from the first dollar you spend, up slightly from last year's 44 percent. Consider that your baseline as you shop around, says Greg McBride, CFA, senior financial analyst at Bankrate.

Of course, if you're like me, you don't want to settle for what most people are getting. A few cards offer a sweeter deal, Bankrate says. The Accelerated Rewards American Express Card from Bank of America, for example, offers a payout rate of 1.25 percent, while Fidelity's three rewards cards all offer a 2 percent return.

But these higher-rate cards are in the minority. Only one in seven cards give back more than 1 percent from the start of your spending, Bankrate says.

And you might get more cash back overall on lower-percentage cards that pay more -- up to 6 percent -- in certain categories, such as gas, dining and groceries.

Which card you choose also might be determined by how you spend each year. Many of the cards offered tiered payouts based on spending, with more stingy rewards for frugalistas.

Big spenders might want to check out one of the top-paying cards that bounce back 2 percent of purchases or check out those with annual bonus rewards in addition to their cash-back payout.

The biggest pet peeve among cash-back customers was expiring rewards. This use-it-or-lose-it feature was a part of one-third of the cards surveyed by Bankrate.

You can compare rewards cards, including their annual percentage rates, fees and requirements with Bankrate's online tool.

Read more: 8 Tips for (Really) Frugal Living