Cash-back credit cards are reward cards that reward you with a tiny percentage of every purchase. They can help you organize your funds, get points for your purchases, and access additional benefits that debit cards don't provide. A cash-back card is also a smart option for a first rewards credit card because cash-back incentives are often easier to understand than travel rewards. Cash-back credit cards have advantages and disadvantages. Depending on your purchasing habits, a different sort of card may provide better rewards or save you money in the long run.
Consider the following advantages and disadvantages before applying for a cash-back credit card:
The Pros and Cons of Cash-Back Credit Cards
Pros- Cash prizes are available.
- There is usually no annual charge.
- Sign-up bonuses are a possibility.
- The Benefits of Shopping
- Offers with 0% APR are possible.
- APRs that are consistently high
- Fees for international transactions
- Earnings limits
- Few companies provide travel incentives.
The Benefits of Cash-Back Credit Cards are Explained
Cash rewards: While each cash-back credit card has its own earning structure, they all provide the same simple, easy-to-use benefit: cash back for every dollar spent. Some credit cards provide fixed rewards, such as 1.5 percent cash back on all purchases.Others, such as Chase Freedom, offer more cash back on particular purchases, such as gas or groceries, that either remain the same or rotate every quarter. Most don't charge an annual fee. The majority of the best cash-back credit cards don't have an annual fee. That means you won't have to give up some of your rewards to pay a charge, and you can keep the card open without paying a fee even if you decide to switch to another card in the future. This is important since a longer credit history can help you improve your credit score. An annual fee is charged by a few cash-back credit cards. If you go with one of them, make sure the benefits you get outweigh the cost. Many cash-back credit cards provide sign-up bonuses, similar to travel rewards credit cards, if you satisfy a minimum spending threshold within the first few months. These bonuses can be worth a lot of money. Shopping Advantages:Some cash-back credit cards (as well as many travel rewards credit cards) provide features that might help you protect your purchases or save money. A lowest-advertised-price match, extended warranties, return guarantees (or a refund if a merchant refuses to accept a return), cell phone protection, and other benefits are available. These features aren't available on all cards. For a complete list of advantages, consult your card's benefits handbook. APRs of 0% are available in some cases. For a limited time, some cash-back credit cards offer 0% APR on purchases and balance transfers. This will allow you to pay off a large purchase or existing debt without incurring interest charges.Explained: The Drawbacks of Cash-Back Credit Cards
A high continuing APR: If you choose a cash-back card with a 0% APR deal, it won't stay that way indefinitely. As of August 2021, the average credit card APR is just over 20%, and many cash-back credit cards charge significantly more. Your continued APR will be determined by your creditworthiness, so if you don't have excellent credit, you'll be charged the card's highest APR. You're better off foregoing rewards and looking for a card with a low ongoing APR if you don't think you'll be able to pay off your debt in full each month. Foreign transaction fees: Foreign transaction costs are more likely to be waived with travel credit cards. Cash-back credit cards, on the other hand, frequently charge a 3% foreign transaction fee. Some cash-back credit cards allow you to earn unlimited rewards, while others impose limits on how much money you can get back for normal or bonus-category spending. There are no travel rewards: Some cash-back credit cards, such as the Chase Freedom, provide an online gateway where you may redeem rewards for cash or free travel. A travel rewards card is a better option if you want to spend rewards, especially for travel expenses or transfer points to airline or hotel partners.Are You a Good Candidate for a Cash-Back Credit Card
Make sure you're more interested in earning cash than in collecting travel rewards before you sign up for a cash-back credit card, and that you have the self-discipline to earn rewards on your spending without going into debt. Paying interest on a balance will quickly deplete your cash back and expose you to a potentially high APR. Compare the rewards programs, sign-up bonuses, and advantages of cash-back credit cards. You'll be able to locate a card that suits your spending habits and rewards preferences if you do enough research.