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Credit Card Rewards: Cash Back vs. Travel Rewards



Credit card rewards

Credit cards come with a variety of features ― so much so that consumers often struggle to determine what features suit them the most. Among many other features, consumers also consider what rewards — cash back or travel rewards — a credit card issuer gives to its client. In this article, we will compare the pros and cons of each type of credit card rewards, helping you select the card that suits you best.

Cash back credit cards

Cash back credit cards reward consumers by giving them a certain percentage of their spending as a cash back. Typically, the percentage of cash back ranges from 1% to 5% of the spending amount, depending on the type of transactions.


●   Earn and redeem cash backs: When you use your cash back credit card for your purchases, you essentially earn a discount on your spendings in the form of cash back. Although you pay the full amount from your credit card at the time of purchase, the cash back on each transaction is available for use at the end of the month. You can either use the cash back as a statement credit, or you can choose to transfer the cash back to your bank account.

●    Low or no annual fees: Cash back credit cards have low to no annual fees, so you can quickly recover your annual fees by making even your regular purchases with your credit card.

●    Easy to use: Cash back credit cards are easier to use: you just need to make your usual spendings and earn cash backs with each transaction, unlike travel reward credit cards where you have to follow the required protocols and restrictions to be able to redeem your points at hotels and airlines.

●    Sign-up bonuses: Many cash back credit cards offer sign-up bonuses provided you cross the minimum spending thresholds in the first few months, which is an attractive point for consumers to opt for cash back credit cards.


●     High APR: If you are ill-disciplined with clearing your outstanding balance, your cash back credit card can cost you a lot with its high APR rate. Generally, the cash back credit cards charge a higher APR, so if you can’t afford to pay the outstanding in full, you might consider cards with low APR.

●   Earning limits: Many cash back credit cards cap your cash back earnings up to a certain limit, so you must consider the earnings cap limit before selecting your credit card.

Travel Rewards Credit Cards

Travel rewards credit cards give you a certain number of reward points or free miles when you spend on travelling and, in some cases, everyday spendings as well. Let’s look at the pros and cons of travel rewards credit cards:


●    Higher sign-up bonuses: Travel rewards credit cards offer higher sign-up bonuses as compared to the cash back credit cards, which can benefit you if you spend more on travel or other eligible expenses.

●   Perks: Travel reward credit cards can offer additional perks such as free checked bags, access to airport lounges, seat upgrades, free night stay at some hotels, etc.

●     High-valued points: The points or free miles you earn with travel reward credit cards are worth more than the cash back. Usually, each point you earn gives you a value of more than 1$, which can significantly reduce your next bill.


●     Higher annual fee: The higher benefits come with a high cost. Travel rewards credit cards have high annual fees, so it will take you longer to breakeven.

●     Difficult to use: To redeem or use the reward points, you will have to meet certain conditions and use different time-consuming methods, which is a downside of the travel rewards credit cards.


The cash back credit cards and travel reward credit cards both have their positive and negative points. If you are a frequent traveler, you should choose the travel reward credit card. However,  if you are not a lavish spender, you can use the cash back credit card. 

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