Credit cards are convenient to have and can be helpful when you need a loan or want to build your credit, but that’s not all. With so many credit cards on the market, there is a lot of competition for members. As a result, companies offer rewards to entice people to use their card. This is great news for us, consumers because it means we get more for our money!
While there are several types of rewards cards, those for cash back and travel are two of the most popular. What are they and which is better for you? Let’s investigate.
Cash Back Rewards Credit Cards
Cashback credit cards allow you to “earn back” a percentage of what you spend in cash. The rewards are often between .5% to 2% of your net annual spendings. Most cards also offer higher cash back rewards of up to 6% on certain purchase categories such as gas, groceries, pharmacy transactions, or even spending on Amazon.
How often you get your cash back rewards depends on the terms of your card company. Some will offer monthly rewards while others give them on an annual basis or when you reach a certain amount.
When it’s time to get your cash back, you can typically opt for a check, direct deposit, or statement credit. Some companies may also allow you to convert your cashback to reward points which can be used for shopping in their portal.
If this sounds like a good fit for your needs, here’s a rundown of the pros and cons.
- Allows you to get back money on all of your purchases.
- Enables you to save more on normal, everyday expenses like grocery shopping.
- For those with a score above 720, cash back card rewards are excellent. They can be up to 2% on all purchases with select purchases reaching up to 6%.
- You may even receive a cash bonus for spending a specific amount on your card in a specific period. Signup bonuses range from $50 to $200.
- Cash back cards lack the features and benefits offered by niche specific cards so if you fit into a niche (like travel), you may find more value in another card.
- Caps may be placed on cash back so be sure to check.
- Bonus categories often require quarterly online enrollment.
- The cash back cards with the best bonus rates often charge annual fees.
- Cash back cards often have higher interest rates than cards that don’t have a rewards program.
Top Cashback Credit Cards
Now that you know how they work, let’s take a look at some of your top options for cash back cards.
With no annual fee, the Chase Freedom credit card is certainly one to consider. You will earn 1% cash back on all purchases made on the card, while 5% cash back (up to $1500) is offered in specific categories which change every three months.
For example, for the first 3 months of the year you may get 5% back on gas, then the second 3 months you might get it back on groceries. Furthermore, you can earn up to 15% cash back when you shop through Chase.
Other perks include a $150 bonus if you spend $500 within three months of opening your account and 0% APR on purchases and balance transfers for the first 15 months. Afterward, it reverts to an APR between 15.49% to 24.24%.
When it’s time to get your cash, you can opt for gift cards, direct deposit, a check, or a statement credit.
Next up, is the Citi Double Cash Card. With it, cash back comes in the form of 1% on all purchases and an additional 1% when you make credit card payments. There are no caps on cash back, no category restrictions, and no annual fees.
Other features include interest-free balance transfers for 18 months, access to Citi Private Pass where you can purchase tickets to exclusive events, and Citi Price Rewind which helps you get the best deals on purchases you make.
Earn 2% back across the board with some other perks!
As with the other cards above, the Discover It Cashback Match card has no annual fees. It also has the added benefit of no foreign transaction fees.
As for the rewards, you will earn 1% cash back on all purchases made on the card while some quarterly rotating categories enjoy a 5% cash back reward. These include restaurants, gas stations, Amazon, and more.
All rewards can be redeemed at any time in the form of a cash payout or through Amazon.com. Should you choose to let them build up, they will never expire.
Other benefits include a $75 credit on your statement after making a purchase on amazon.com within three months of getting the card, and a cash back match after your first year up to $200.
The card has a 0% APR for the first 14 months for purchases and balance transfers. It then reverts to 11.49% – 23.49% for standard variable purchases as well as a 3% fee on balance transfers thereafter.
Travel Rewards Credit Cards
If you travel frequently, a travel credit card can be very beneficial. Instead of providing cash back, these cards give you travel-related rewards like free airline miles, free hotel rooms, and access to airport lounges. Many offer great sign-up bonuses but often come with annual fees. However, the annual fees quickly pay for themselves if you travel enough. Let’s look at the pros and cons.
- You earn points for each mile that you travel, which you can redeem for free flights later on.
- Some airlines partner with travel credit cards. You can earn extra points when you purchase their flights.
- Travel credit cards offer discounts, help with accommodations if you have missed a flight, and preferential booking for movies, concerts, and sporting events.
- The rewards usually outweigh annual fees.
- Perks like lounge access and global entry fee waivers can make traveling much more convenient and enjoyable.
- High annual fees are placed on some of the cards.
- Certain offers will come with restrictions, so it is important to read all the terms and conditions in detail.
- The rewards will lose value if your traveling frequency declines.
- Cards with generous rewards often have a high APR.
Top Travel Reward Credit Cards
Here are three of the top travel cards.
This card requires a high credit score, between 690 and 850, to secure. There are no annual fees for the first year after which you will be charged $95 per year.
By spending $4,000 within the first 3 months of opening your account, you qualify for 50,000 bonus points. When converted, these points reward you with $625 which can be used towards airfare or hotel accommodation. The points can also be turned into $500 cash.
Rewards are earned on travel purchases (2x points), restaurants (2x points) and other purchases (1x point per dollar).
Extra features include trip insurance in case you cancel, accident insurance while traveling, lost luggage replacement, trip delay reimbursement, auto rental collision damage waiver, and emergency assistance.
This card is ideal for business owners or freelancers who travel frequently and want to earn rewards on their travel purchases. It offers 2 miles for each dollar spent as well as a 50,000 point bonus if you spend $4,500 in the first 3 months. There are no categories to limit where or what you can buy and your miles never expire.
As for the costs of the card, the annual fee is $59 (but it’s waived for the first year) and there are no foreign transaction fees. The ongoing APR for transfers and purchases is 17.49% (variable) which is good compared to many other business cards.
Other features with the card include purchase security, lost luggage replacement, complimentary concierge service, and travel and emergency assistance.
A credit score of between 690 to 850 is needed to apply for this travel card. There are no annual fees or foreign transaction fees which are a huge plus!
By spending $1000 in the first 90 days of opening your account, you qualify for 20,000 online bonus points. These can be converted into $200 on your credit statement which then can be used for any form of travel.
Each $1 spent on the card earns 1.5 points. A point is worth 1 cent. All customers from Bank of America, Merrill Lynch, and Merrill Edge will earn bonuses of between 10% to 75% when any points are redeemed. Points can be put towards any airline flight or hotel chain. There is no cap on how much you can earn and points don’t expire.
They offer 0% APR for the first year, after which it will be between 15.49% and 23.49%.
With the American Express Gold Card, there is no annual fee for the first year after which you will be charged $160 per year. There are no transaction fees on foreign purchases, which is always a plus when traveling. If you spend $1,000 within the first 90 days of opening your account, you will earn 25,000 points.
Earn 2x points on any airline ticket purchased directly from the airline itself as well as at restaurants in the United States. All other purchases made with the card earn 1x points. Book at specific hotels, aligned with the card, and you can earn 2x points as well as a $75 credit to spend on dining, spas, or activities at the hotel.
This card has no interest charges because the full balance is due each month.
Extra features include a global assist hotline, baggage insurance plan, car rental damage and loss insurance, and roadside assistance.
Choosing the Best Option for You
So which is the best option for you, a cash back credit card or a travel rewards card? Well, it comes down to where you spend your money and which rewards will benefit you most. If you are a frequent traveler, having one or two travel cards is a good idea. If you stay home most of the time buy groceries and drive around town, then the cash back card would be better. Savvy consumers have both types of cards in their wallet and use whichever card provides the best rewards on each purchase.
For those who are already a current holder of one or both of these cards, consider if it is truly benefiting you. Is the card you have still the most beneficial to your spending habits? As time goes on, we often change our lifestyles so don’t forget to look through your wallet periodically to see if you have the cards that are still offering you the most for your spending.
Compare Reviews on Travel and Cash Back Reward Cards
Now you know the ins and outs of these two types of cards. You have a good understanding of how they work, the options available, and which one is the right fit for you. Head over to our personal credit cards review and comparison page for detailed reviews and feedback from other users.