Cash Back or Points? Exploring Your Rewards Credit Card Options

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Do you own a credit card? Are you looking to apply for a new one? Are you still deciding between a cash back or rewards card?

There are about 1.5 billion credit cards in the United States. The cards differ in features. But most offer rewards for your usage. 

Two of the most popular types of rewards are the cashback and point system. Interestingly, there is a longstanding “cash back or points” debate.

Cash backs involve rebates coming from credit card companies. For a certain amount you spend, they give a small amount of it back to you once a year. On the other hand, the other card gives you points for every purchase you make.

You can accumulate these points to enjoy different kinds of rewards.

Which of the two is the better option? Let’s look at the benefits and disadvantages of both types of rewards.

Settling the Debate

Rewards are one of the most exciting features of credit cards. Surprisingly, 31% of credit card holders do not redeem their rewards. For first-time owners and for those who are applying for a new card, there is the choice of cash back or points.

Which of the two types of rewards is better? Let’s zoom in on their pros and cons.

The Pros of Cash Back

Finding a cashback card is easy. But before making a decision, you need to understand the benefits it offers.

• You save an amount in every purchase you make. Though the savings may seem small on a per purchase basis, you will get to enjoy all of them in a single payment by the end of the year.
• If you have a higher credit score, you may qualify for cash back credit cards with the finest rewards.
• You may enjoy higher cash back rates on your gas and groceries.

The Cons of Cash Backs

On the flip side, here are the disadvantages to consider:

• Most cash back cards come with high interest rates. Some credit card companies charge up to as much as 30% APR.
• You will also have to pay the annual fees. You need to maximize your purchases to get the most out of these fees.
• Some credit card companies put caps on cash backs. This means there is a maximum amount of rebates you can enjoy per year.

The Pros of Points

When it comes to credit card rewards points, here are the advantages they offer:

• You can exchange your points for different kinds of rewards. You can trade them for air miles, gift certificates, or cash credits. 
• Receiving rewards gives you a different kind of excitement. After spending via your credit card, you await that free hotel stay or a relaxing day at the spa as your reward.

The Cons of Points

As for the disadvantages, there are also a few:

• It may take you some time to redeem your rewards. This is true for people who use their cards sparingly.
• Confusion may set in when it comes to converting your points. One reward point is not equivalent to one dollar.

Cash Back or Points? The Verdict

If you are someone who doesn’t spend that much, go for a cash back credit card. The same thing for consumers who prefer saving money over rewards.

If you have lots of self-discipline and you love the thrill of receiving rewards, then go for cards that offer points. 

Use Your Credit Cards Smartly 

Whether it is cash back or points, the bottom line is using your credit cards wisely. We invite you to check our other articles on credit cards and finance. We discuss topics that will help you manage your expenses and get the most from your credit card purchases.