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Are cash-back credit cards worth it?

March 19, 2022
7 min read
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About two years ago, travel was put on hold for many. With so much up in the air, many people swapped their travel rewards credit cards for cash-back credit cards. But now that travel is picking back up, you may be rethinking your credit card approach. Are cash-back credit cards still worth it? Or, should you be switching over to a travel credit card to earn points and miles?

Of course, there are pros and cons for each type of card, and you'll find that there isn't one perfect credit card approach for everyone. Your credit card purchases, goals and personality will play large parts in helping you decide which option is ideal for you.

Still, there are some helpful tips and insights available to help you make the right decision.

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(Photo by Marko Geber/Getty Images)

When cash-back cards make sense

Cash-back credit cards are simple. There's no guessing game involved, as the terms are pretty straightforward. Every time you swipe your card, you know exactly how much you'll get back in return. It's almost instant gratification.

You can decide what you want to do with the cash at any point — whether it's putting it in your savings account or using it for a particular purchase. You can even separate the rewards earned to put in a travel fund if your goal is to earn rewards toward travel without sacrificing the flexibility that cash-back cards provide.

Additionally, once you redeem your rewards for cash back, it doesn't expire. Once it's in your bank account, it's yours to keep. There's no need to worry about what happens if you stop using the credit card or even close it.

There are even two types of cash-back credit cards available: fixed rate and category bonus. Having these options makes it possible to tailor your strategy so you get the best cash-back credit card for your needs.

Related: Comparing flat-rate with bonus-category cash-back credit cards

Why you may prefer a travel card

If you're looking to maximize your rewards, particularly for travel purposes, then a travel rewards credit card may be the better choice for you. A travel credit card allows you to earn points and miles to apply toward that once-in-a-lifetime trip. There are a variety of options, ranging from hotel-specific cards to airline cobranded cards to flexible rewards cards.

You'll often find that you can use your travel rewards at a significantly better value than if you opted for just cash back. With many 2% cash-back credit cards now available, you'll want to make sure you're earning more than 2% in value for every purchase you make with a travel rewards credit card. This can definitely work in your favor if you're looking to use your rewards to stay in a suite in the Maldives or fly in business class to Europe.

But aside from the points you earn, travel credit cards offer many other incentives. For starters, several airline and hotel credit cards offer opportunities to earn status with the respective airline or hotel. This is well worth using a travel credit card for many travelers, as those elite status perks are invaluable. Other options offer ways to save money on your flight or hotel stay through perks like complimentary checked bags, free daily breakfast and even complimentary airport lounge access.

There's one catch, though: Travel rewards credit cards require more work, so they're not as simple as cash-back credit cards.

Until you go to redeem your rewards, the value of your rewards can be unknown. In addition, there are times when programs change their rewards structures for the worse before you have the opportunity to redeem your points. Many reward programs are also subject to availability within a certain room type or cabin, so your redemption options may be limited.

(Photo courtesy of gettyimages)

Combining cash-back and travel cards

Your options are not limited to either a cash-back credit card or a travel rewards credit card. You may find that it actually makes more sense to have both a travel rewards card and a cash-back card (or perhaps several of each) in your wallet. This will allow you to truly earn the most rewards on every single purchase you make. Since each credit card awards a different amount of cash or rewards depending on the category type, you can pick the card that works best for each individual purchase.

This is also the perfect time to get a combination of cards that are within the same family, such as Chase Ultimate Rewards or Citi ThankYou Rewards.

For example, if you combine the cash-back Chase Freedom Unlimited with the travel reward-earning Chase Sapphire Preferred Card or Chase Sapphire Reserve, you can earn the most number of Chase Ultimate Reward points on every purchase you make — and then combine your earnings into a single account. This strategy requires you to pull out a different card based on your purchase, but with a little bit of effort, you'll be on your way to traveling for free.

Additionally, Citi has its own combination strategies with the Citi Premier® Card, the Citi® Double Cash Card and the Citi Rewards+® Card. Since each card offers different points on category purchases, using the card that will earn you the highest number of rewards on that particular purchase will earn you premium travel in no time. And then you can pool your earnings into a single account when you're ready to maximize your ThankYou points.

Related: 3 reasons why you want a cash-back credit card in your wallet

Should you switch to a cash-back card?

In short: It depends. If you prefer instant rewards versus points and miles to use at some point in the future, then yes, a cash-back card is the way to go. Or, if you want to avoid worrying about award availability, capacity controls and blackout dates, then a cash-back card would suit you well.

Keep in mind, too, that a limited travel schedule in the near future may make it harder to justify switching to a travel rewards card, as your earnings will just sit unused in your account.

Bottom line

There's no definitive answer as to whether a cash-back credit card is worth it, as every individual is unique. Fortunately, the strategy you pick now doesn't have to be your strategy forever. You can always change up your credit card rewards approach at any time when your situation changes.

But for now, determine your goals and how involved you want to be with your rewards to figure out whether or not a cash-back credit card is worth it.

Featured image by Getty Images/EyeEm
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

TPG featured card

Best starter travel card
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

1 - 3X points
3XEarn 3 Points per $1 spent at Restaurants and Supermarkets
3XEarn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
1XEarn 1 Point per $1 spent on all other purchases

Intro offer

Earn 80,000 ThankYou® points60,000 points
For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening

Annual Fee

$95

Recommended Credit

670-850
Excellent, Good
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

The Citi Premier’s 3 points per dollar spent across a wide range of popular categories is one of the more lucrative offerings in the world of points and miles. The Citi Premier comes with a $95 annual fee and is currently offering a solid sign up bonus of 80,000 points after you spend $4,000 on purchases within the first three months. It also has some valuable transfer partners to make the most of your rewards. Add in access to Citi Entertainment plus a $100 hotel credit for any single-stay hotel booking that exceeds $500 or more, excluding taxes and fees, booked through the Citi travel website, there are few reasons why the Citi Premier should not be in every traveler’s wallet.

Pros

  • Earns 3x points on restaurants, supermarkets, gas stations, air travel and hotels.
  • $100 annual hotel savings benefit (on single hotel stay bookings of $500 or more, excluding taxes and fees, booked through thankyou.com)
  • Points transfer to 16 airline programs, from JetBlue to Virgin Atlantic.
  • World Elite Mastercard benefits, extended warranty, damage and theft protection.

Cons

  • $95 annual fee
  • Lacks travel protections that other travel rewards cards come with
  • For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening
  • Earn 3 Points per $1 spent at Restaurants and Supermarkets
  • Earn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
  • Earn 1 Point per $1 spent on all other purchases
  • Annual Hotel Savings Benefit
  • 80,000 Points are redeemable for $800 in gift cards when redeemed at thankyou.com
  • No expiration and no limit to the amount of points you can earn with this card
  • No Foreign Transaction Fees on purchases
Best starter travel card
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

3XEarn 3 Points per $1 spent at Restaurants and Supermarkets
3XEarn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
1XEarn 1 Point per $1 spent on all other purchases
  • Intro Offer
    For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening

    Earn 80,000 ThankYou® points
    60,000 points
  • Annual Fee

    $95
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    670-850
    Excellent, Good

Why We Chose It

The Citi Premier’s 3 points per dollar spent across a wide range of popular categories is one of the more lucrative offerings in the world of points and miles. The Citi Premier comes with a $95 annual fee and is currently offering a solid sign up bonus of 80,000 points after you spend $4,000 on purchases within the first three months. It also has some valuable transfer partners to make the most of your rewards. Add in access to Citi Entertainment plus a $100 hotel credit for any single-stay hotel booking that exceeds $500 or more, excluding taxes and fees, booked through the Citi travel website, there are few reasons why the Citi Premier should not be in every traveler’s wallet.

Pros

  • Earns 3x points on restaurants, supermarkets, gas stations, air travel and hotels.
  • $100 annual hotel savings benefit (on single hotel stay bookings of $500 or more, excluding taxes and fees, booked through thankyou.com)
  • Points transfer to 16 airline programs, from JetBlue to Virgin Atlantic.
  • World Elite Mastercard benefits, extended warranty, damage and theft protection.

Cons

  • $95 annual fee
  • Lacks travel protections that other travel rewards cards come with
  • For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening
  • Earn 3 Points per $1 spent at Restaurants and Supermarkets
  • Earn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
  • Earn 1 Point per $1 spent on all other purchases
  • Annual Hotel Savings Benefit
  • 80,000 Points are redeemable for $800 in gift cards when redeemed at thankyou.com
  • No expiration and no limit to the amount of points you can earn with this card
  • No Foreign Transaction Fees on purchases