When it comes to selecting the right credit card, two of the most common choices people face are credit card rewards and cashback options. Both offer valuable perks, but the decision between the two can leave many feeling torn. After all, who doesn’t want to earn extra money or rewards just by using their credit card? But credit card rewards vs cashback—which is better for you?
In this post, we’ll break down the differences between these two popular credit card options, weigh their pros and cons, and help you decide which type of card best suits your financial goals.
What Are Credit Card Rewards?
Credit card rewards come in many forms: points, miles, or even other types of redeemable rewards. The idea behind a rewards credit card is simple: you earn a certain number of points or miles for each dollar you spend. Over time, you can accumulate enough points to redeem for travel, merchandise, gift cards, or even statement credits.
The rewards you earn often come with different redemption options, giving you flexibility. However, rewards cards typically come with higher annual fees and interest rates, and their rewards programs can be more complex to navigate.
Types of Credit Card Rewards
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Travel Miles: Ideal for frequent travelers, miles can be redeemed for flights, hotel stays, or other travel-related expenses.
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Points: These are often more versatile than miles and can be redeemed for travel, shopping, dining, or even cash back.
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Other Rewards: Some cards offer exclusive perks such as access to special events, discounts, or even concierge services.
What Are Cashback Credit Cards?
Cashback credit cards are simpler. As the name suggests, these cards offer you a percentage of your spending back in the form of cashback. Typically, you earn a certain percentage on every purchase, such as 1% or 2%, but some cards offer higher percentages in specific categories like groceries, gas, or dining.
Cashback cards are a great option for people who want to earn rewards without the hassle of dealing with points or miles. The rewards are straightforward—just a cash deposit or credit to your account.
Types of Cashback Credit Cards
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Flat-Rate Cashback: Offers a consistent cashback rate on all purchases. For example, you might earn 1.5% cashback on every purchase.
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Category-Based Cashback: Offers higher cashback percentages for specific categories like dining, travel, or groceries. For example, you might earn 5% on travel and 1% on other purchases.
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Rotating Categories: Some cards feature quarterly rotating categories, where you can earn higher cashback rates in different categories each quarter (e.g., 5% back on gas during one quarter, and 5% on groceries the next).
Credit Card Rewards vs Cashback: Pros and Cons
Now that we’ve established the basics, let’s dive into the pros and cons of credit card rewards vs cashback.
Pros of Credit Card Rewards
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Higher Value for Travel Perks
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If you’re a frequent traveler, credit card rewards are typically more valuable for earning travel-related benefits. Travel miles, for instance, can offer great redemption opportunities for flights, hotels, and car rentals.
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More Flexible Redemption Options
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You have more ways to use your rewards, including gift cards, merchandise, and travel.
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Exclusive Offers
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Many rewards cards offer unique perks like airport lounge access, concierge services, and travel insurance.
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Cons of Credit Card Rewards
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Complex Redemption
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Rewards programs can sometimes be complicated, with blackout dates, restricted redemption options, and varying point values. It can be frustrating to fully understand how to maximize your points.
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Higher Fees
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Rewards cards tend to come with higher annual fees and interest rates, which could reduce the value of the rewards if you carry a balance.
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Rewards Expiry
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Some rewards points or miles expire after a certain period if they’re not used.
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Pros of Cashback Credit Cards
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Simplicity
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Cashback is straightforward—you earn a percentage of your spending back in cash or statement credits. No need to track points or deal with complicated redemption processes.
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No Restrictions on How You Use Your Rewards
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You can use the cashback however you want, whether it’s to pay off your bill, save, or buy something else entirely.
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Lower Fees
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Many cashback cards come with no annual fee and lower interest rates compared to rewards cards.
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Cons of Cashback Credit Cards
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Lower Value for Travel
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While cashback is great for everyday spending, it doesn’t offer the same value for travel-related perks that rewards credit cards do.
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Limited Bonus Categories
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While some cashback cards offer rotating bonus categories, the spending limits or restrictions can be inconvenient. Plus, they may require activation each quarter.
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How Do Credit Card Rewards Compare to Cashback?
When considering how credit card rewards compare to cashback, it really depends on your spending habits and goals. If you’re someone who prefers flexibility and doesn’t want to bother with complex reward systems, a cashback credit card might be the right choice.
On the other hand, if you’re a frequent traveler or enjoy the perks of exclusive rewards, a rewards credit card can offer more value, especially if you are diligent about understanding the terms and maximizing your rewards.
Which is Better: Credit Card Rewards or Cashback?
The decision ultimately comes down to your personal preferences:
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Credit Card Rewards are ideal if you:
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Travel frequently and want to earn miles.
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Enjoy a variety of rewards redemption options.
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Don’t mind paying higher fees or navigating complex reward systems.
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Cashback Credit Cards are better if you:
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Prefer simplicity and no-fuss rewards.
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Want a consistent and straightforward rewards program.
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Don’t want to pay high annual fees.
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Best Credit Cards for Rewards and Cashback
If you’re still unsure about which card is best for you, here are some top picks for both credit card rewards vs cashback options:
Best Credit Cards for Rewards
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Chase Sapphire Preferred® Card: Earn 2x points on travel and dining, and 1 point per dollar on all other purchases. Points can be redeemed for travel at a higher value when transferred to travel partners.
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American Express® Gold Card: Earn 4x points on dining at restaurants, including takeout and delivery. Ideal for foodies and frequent travelers.
Best Cashback Credit Cards
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Citi® Double Cash Card: Earn 2% cashback—1% when you buy, and 1% when you pay. No categories to track, making it a great choice for simplicity.
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Discover it® Cash Back: Offers 5% cashback on rotating categories like grocery stores, restaurants, and gas stations (up to the quarterly limit), plus 1% on all other purchases.
FAQs: Credit Card Rewards vs Cashback
1. Which is better, credit card rewards or cashback?
It depends on your preferences. Cashback cards are simpler and more straightforward, while rewards cards are ideal for those who want to earn travel benefits and other exclusive perks.
2. How do credit card rewards compare to cashback for beginners?
For beginners, cashback cards are easier to understand and use. Rewards cards may require a bit more effort to maximize, but they offer greater flexibility.
3. What credit card offers the best cashback rewards?
The Citi® Double Cash Card offers one of the best cashback rates at 2% on all purchases, making it a strong contender for those who want simple and effective cashback.
4. Can I switch from a rewards credit card to a cashback credit card?
Yes, many credit card issuers allow you to switch between card types. Just keep in mind that you may lose any accumulated rewards if you do so.
5. What are the best credit cards for both cashback and rewards?
Some cards offer both rewards and cashback benefits, such as the Chase Sapphire Preferred® Card. These cards may give you a mix of travel benefits and straightforward cashback options.
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