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The biggest pros and cons of cash back credit cards are convenience, saving money and credit-building on the positive side, with the risk of overspending and hurting your credit standing as potential disadvantages. The main pros and cons of cash back credit cards are thus quite similar to the overall advantages and disadvantages of using credit cards.
There are other, more specific perks and drawbacks associated with cash rewards cards in particular, too. Other benefits of cash back credit cards include the fact that cash back is the most straightforward type of credit card rewards, the $0 annual fees that many cash back credit cards offer, and the availability of cash back credit cards to people of all credit levels. On the other hand, cash back cards may provide less overall value compared with travel rewards; even cash back rewards can expire sometimes; rewards cards of all types usually have high regular APRs; and some of the best options have annual fees.
When you boil down each side of the cash back coin, cash back credit cards have more stable rewards overall than other rewards credit cards. And, assuming you pay your balance in full every month, you’re likely to profit from them. It’s hard to argue with getting a percentage of your purchases back for free.
The many upsides of cash back credit cards are likely why 74% of Americans prefer cash back rewards over miles, hotel points, or even free gas. The cons are simply not enough to overcome the pros. That said, the cons should also be accounted for when you’re shopping around for a cash back credit card.
Top 5 Pros and Cons of Cash Back Credit Cards
Pros |
Cons |
Cash back is straightforward |
Limited total value compared to travel rewards |
Credit card companies cannot devalue cash back |
Potential for earning caps and enrollment requirements with bonus rewards categories |
Signup bonuses are common among cash back credit cards |
Rewards expiration due to account closure, missed payments and/or inactivity |
Many cash back credit cards don’t have annual fees |
High regular APRs are the norm with rewards cards |
Cash back credit cards often have 0% intro APR deals |
Some of the best cash back credit cards have annual fees |
At a glance, it may seem like cash back credit cards are at least as troublesome as they are beneficial. And they certainly can be, if you pick the wrong card for your lifestyle. The key is to maximize the pros of a cash back credit card and minimize the cons in the context of your own personal habits and preferences.
Pros of Cash Back Credit Cards:
- Cash back is straightforward. Rewards from a cash back credit card are earned in dollar amounts, and redeem in dollar amounts, leaving little room for confusion.
- Credit card companies cannot devalue cash back. Cash back is the most stable form of credit card rewards because its units are in dollar amounts. The value of points and miles, however, are up to the card issuer, and can change at any time.
- Signup bonuses are common among cash back credit cards. Cash back credit cards can come with cash signup bonuses. Though these generally come with a spending requirement, a cash back card will give you a percentage of that spend back, plus the cash bonus.
- Many cash back credit cards don’t have annual fees. There are definitely exceptions to this, but there are so many cash back credit cards on the market without annual fees, you’ll have more than a few to choose from.
- Cash back credit cards often have 0% intro APR deals. If you want to make a big-ticket purchase but you’re worried about a cash back credit card’s high regular APR, find one with a 0% APR period on purchases. That gives you time to pay off the purchase without paying interest.
Cons of Cash Back Credit Cards:
- Limited total value compared to travel rewards. Travel rewards have the potential to be more valuable than cash back rewards, unit for unit, especially if you redeem them for travel. So if you travel frequently, you’re likely to profit more with a good travel credit card than a cash back credit card.
- Potential for earning caps and enrollment requirements with bonus rewards categories. If a single cash back category is the reason you’re applying for a certain credit card, check the card’s terms for spending or earning caps in that category. Caps are usually a dollar amount within a certain timeframe, like a quarter or a year. Also, you may have to enroll to “activate” a new category every quarter with some cash back credit cards, so your earnings may not be automatic.
- Rewards expiration due to account closure, missed payments and/or inactivity. Some cash back credit cards have rules in their terms stating that you forfeit any earned rewards if you make a late payment or your account is closed for any reason. Some cash back rewards expire if you don’t use the credit card for a certain length of time.
- High regular APRs are the norm with rewards cards. Even if a cash back credit card comes with a 0% APR intro period, it’s likely to have a high regular APR. Paying interest can negate the overall value of cash back earnings very quickly.
- Some of the best cash back credit cards have annual fees. Though there are many free cash back credit cards, the ones that give the highest cash back rates - beyond 5% back - will more than likely charge an annual fee.
There are many kinds of rewards credit cards on the market today, from travel rewards cards to luxury hotel credit cards to simple flat-rate cash back cards. But unless you’re specifically looking to save on frequent travel, cash back is king.
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