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The pros and cons of cash-back credit cards

Aug. 19, 2022
12 min read
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Editor’s note: This post has been updated with new information.

Whether due to the pandemic or recent inflation, your credit card reward strategy may look different today than it did a few years ago.

Even if you haven't put your travel credit cards to rest in your sock drawer, you may find yourself shopping around for a simple cash-back card to add to your wallet.

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Let’s go over the pros and cons of cash-back credit cards and consider the best options available for applicants.

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Why should I get a cash-back card?

First, let’s go through the advantages a cash-back card may have over travel credit cards.

Cash-back card options have improved

Over the years, issuers have upped the ante in this segment by raising the value of cash-back cards. There are more options available to consumers than ever before. Plus, issuers have released increased sign-up bonuses and generous benefits on cash-back cards that may even start to compete with travel rewards credit cards in your wallet.

The ever-popular Chase Freedom Unlimited has historically been known for earning a solid 1.5% rate on all purchases, no matter the category. But it also earns 5% back on Lyft purchases (through March 2025) and travel booked through Ultimate Rewards as well as 3% back on dining and drugstores — all while continuing that solid 1.5% non-bonus category rate.

(Photo by John Gribben for The Points Guy)

The Chase Freedom Flex is its cash-back card with rotating quarterly bonus categories. On this card, you'll earn 5% back on the first $1,500 spent each quarter on those purchases (activation required). Not only that, you’ll get 5% back on Lyft purchases (through March 2025) and travel booked through Ultimate Rewards, 3% back on dining and drugstores, and 1% on all other purchases.

Both cards also offer temporary partner benefits, such as three free months of DoorDash DashPass, getting you free delivery on orders over $12 and reduced service fees. (You must enroll by Dec. 31, 2024.)

Another example to look at is the Citi Custom Cash℠ Card. This card offers bonus categories that adapt to your spending each month. Cardholders will automatically earn 5% back on the first $500 spent on their top eligible spending category from 10 different category options each billing cycle (then 1%), making this a truly customizable card that changes as you spend.

(Photo by John Gribben for The Points Guy)

Business cash-back card options can be just as prolific, too.

The U.S. Bank Business Triple Cash Rewards World Elite Mastercard® is an underrated option that was just refreshed last year and serves as a terrific card for small-business owners who want to minimize their costs but maximize their cash-back earnings on business expenses. The card earns 5% cash back on prepaid hotels and car rentals booked directly in the Travel Rewards Center. There’s a 3% rewards rate on eligible purchases at gas stations, EV charging stations, office supply stores, cellphone service providers and restaurants, and 1% on all other eligible purchases. Plus, cardholders receive up to a $100 annual software credit.

The card also offers a solid sign-up bonus of $500 cash back after spending $4,500 in the first 150 days of account opening. For a card with no annual fee, the U.S. Bank Business Triple Cash should be top of mind for new businesses or independent employees just starting.

You want no (or lower) annual fees

Typically, annual fees only increase over time. Last year, Amex raised the annual fee of The Platinum Card® from American Express from $550 to $695 (see rates and fees).

If annual fees that cost hundreds of dollars no longer appeal to you, maybe it’s time to trim down those costs altogether.

(Photo by Isabelle Raphael for The Points Guy)

While there are usually many statement credits and perks to help justify high annual fees, many consumers simply don’t have the time or energy to maximize each and every benefit.

On the other hand, many cash-back cards do not charge annual fees, and you’d be hard-pressed to find one with an annual fee over $100. That’s significantly more manageable for any budget, and you won’t ever have to worry about whether you’re maximizing the card to justify paying its annual fee.

As long as you pay your bills on time and in full, you’ll likely avoid any sort of fee altogether and be able to focus on earning more cash back for the purchases that matter to you.

(Just remember that many cash-back cards charge foreign transaction fees — so if you plan to use your card outside the U.S., look for one that waives those fees.)

Your spending has changed

Travel credit cards tend to offer the highest earning rates on, well, you guessed it — travel.

If your travel budget has decreased significantly and you spend more money closer to home, you should get a card that rewards you accordingly. Perhaps you’ve switched your game plan altogether and have your sights set on other large purchases — such as a massive home improvement project or buying a new car — rather than significant travel.

(Photo by Maskot/Getty Images)

Here are a few types of cash-back cards to choose from:

  • Flat-rate-earning card: These cards offer the same cash-back rate, no matter the purchase, offering the utmost simplicity. The Citi® Double Cash Card is a great example that offers up to 2% on all eligible purchases — you’ll earn 1% when you buy and 1% when you pay your bill. Plus, for a limited time, the Citi Double Cash Card comes with a $200 cash-back sign-up bonus after spending $1,500 on purchases in the first six months of account opening.
  • Tiered-earning card: These cards tend to offer higher earning rates but only for certain bonus categories. The Capital One SavorOne Cash Rewards Credit Card offers 3% on dining, entertainment, popular streaming services and grocery stores (excluding superstores like Walmart and Target), and 1% on all other purchases.
  • Rotating-category card: These cards offer different bonus categories that rotate monthly or quarterly. As mentioned above, the Chase Freedom Flex provides 5% on rotating categories each quarter you activate, on the first $1,500 spent.

As you can see, these earning rates are all catered toward the everyday spender rather than the lavish traveler, so you may find these cards to be more lucrative in the long run.

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

You want to refinance your debt

Suppose you’ve been dabbling in credit card debt. In that case, many cash-back cards come with a 0% introductory annual percentage rate financing offer that could potentially help you reallocate your debt and reduce interest fees for the time being — all while earning additional cash-back rewards.

For example, the Chase Freedom Unlimited offers a 0% introductory APR period for the first 15 months from account opening on purchases and balance transfers (then a variable APR of 17.24% – 25.99% applies).

Why shouldn't I get a cash-back card?

All the pros aside, there’s still an opportunity cost associated with cash-back cards. Here are some of the considerations to be mindful of:

Limited cardholder benefits

While many issuers have improved the ancillary benefits on cash-back cards in recent years, they still do not compete with some of the top travel cards on the market today. In other words, you’ll almost never be able to get complimentary airport lounge access, companion certificates and free night awards with a cash-back card.

While not having an annual fee (or paying a smaller one) can be a positive to some, it’s a double-edged sword and can easily be a drawback for others. Therefore, it’s definitely worth considering your willingness to activate and maximize those benefits on your travel card.

Redemption options aren’t as comprehensive

With cash-back cards, you’ll usually only get up to 1 cent apiece in value from your rewards, typically for statement credits, direct deposits or a check. But just because you add a cash-back card to your wallet doesn’t mean that you have to say goodbye to your travel credit cards forever. You can certainly have both and have them play well into your diversification strategy of earning both cash back and points and miles.

For example, take the Chase Sapphire Preferred Card, one of the most popular travel cards out there. Carrying it along with Chase’s no-annual-fee cash-back card options — like the Chase Freedom Unlimited or the Chase Freedom Flex — can fit well into your strategy, since you can transfer those points to the Sapphire Preferred to turn them into fully transferable Chase Ultimate Rewards points.

(Photo by John Gribben for The Points Guy)

Or, you can redeem your points for cash back if you’d wish. And as mentioned earlier, you’ll probably want to keep that travel rewards card for no foreign transaction fees when you do travel internationally.

That’s because the line between cash-back cards and travel credit cards has blurred over the years, as more often than not, you can redeem your points and miles for cash back. Although not the most lucrative option, it’s better than never redeeming your points.

Our top picks for cash-back cards

While you can see our full roundup of best cash-back cards here, we’ll list some of our top picks below (including some that were mentioned above):

CardAnnual feeWelcome offerEarning rate
Blue Cash Preferred® Card from American Express$95 (see rates and fees).Earn a $350 statement credit after you spend $3,000 in purchases on your new card within the first six months.Earn 6% cash back on purchases at U.S. supermarkets (on up to $6,000 in purchases per calendar year, then 1%) and on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations and on transit, and 1% cash back on other eligible purchases. Cash back is received in the form of Reward Dollars that can be redeemed for statement credits. Terms apply.
Citi Double Cash$0.For a limited time, earn $200 cash back after spending $1,500 on purchases in the first 6 months of account opening.Earn unlimited 1% cash back when you buy, plus an additional 1% when you pay for those purchases.
Chase Freedom Unlimited$0.Earn an additional 1.5% on all purchases up to $20,000 spent in the first year.Earn 5% cash back on Lyft purchases (through March 2025) and travel purchased through Chase Ultimate Rewards, 3% on dining and drugstores, and 1.5% on all other eligible purchases.
Bank of America® Customized Cash Rewards credit card$0.Earn $200 online cash rewards bonus after making at least $1,000 in purchases in the first 90 days of your account opening.Earn 3% cash back in the category of your choice: gas, online shopping, dining, travel, drugstores or home improvement and furnishings, and 2% cash back at grocery stores and wholesale clubs on the first $2,500 in combined choice category/grocery store/wholesale club purchases each quarter, then earn 1%.
Citi Custom Cash$0.Earn $200 cash back after you spend $1,500 on purchases in the first six months of account opening. This bonus offer will be fulfilled as 20,000 Points, which can be redeemed for $200 cash back.Earn 5% cash back on your top eligible spending category on up to $500 spent each billing cycle and 1% unlimited cash back on all other purchases.
Capital One SavorOne Cash Rewards Credit Card$0.Earn a one-time $200 cash bonus once you spend $500 on purchases within the first three months from account opening.Earn unlimited 3% cash back on dining, entertainment, popular streaming services and grocery stores, plus 1% on all other purchases.

Bottom line

While cash is always subject to inflation, points and miles are likewise subject to devaluation. But I’d argue that cash is much more flexible and simpler to conceptualize and keep track of than travel rewards.

Plus, we’ve entered a new era where there are more credit card options than ever, and travel credit cards may not be the best fit for everyone, since the redemption options aren’t always as clear. It may be time to think about adding a cash-back card to your wallet and shifting your travel rewards and credit cards strategy.

For rates and fees of the Amex Platinum Card, click here.
For rates and fees of the Amex Blue Cash Preferred, click here.

Additional reporting by Emily Thompson.

Featured image by Getty Images/Maskot
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.

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  • Airline points transfer ratios are poor
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  • Limited Time Offer: Earn 100,000 Bonus Marriott Bonvoy Points after spending $4,000 in purchases on your new Card in your first 3 months of Card Membership. Offer expires 11/2/22.
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Best Marriott card for Business Owners
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
3 / 5
Go to review

Rewards Rate

6X6x points at hotels participating in the Marriott Bonvoy® program.
4X4x points for purchases made at restaurants worldwide, at U.S. gas stations, on wireless telephone services purchased directly from U.S. service providers and on U.S. purchases for shipping.
2X2x points on all other eligible purchases.
  • Intro Offer
    Limited Time Offer: Earn 100,000 Bonus Marriott Bonvoy Points after spending $4,000 in purchases on your new Card in your first 3 months of Card Membership. Offer expires 11/2/22.

    Earn 100,000 points
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  • Annual Fee

    $125
  • 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 Marriott Bonvoy Business Amex is a stacked card with a rewards rate that will help you earn bonus points on everyday and business-related purchases. You'll earn 15 elite night credits each calendar year, and receive automatic Gold elite status. Finally, the free night award certificate with a redemption level of 35,000 points or less can get you hundreds of dollars in potential value each year.

Pros

  • 6x points on eligible purchases at hotels participating in the Marriott Bonvoy program
  • 4x points at restaurants worldwide, U.S. gas stations, wireless telephone services purchased directly from U.S. service providers and U.S. shipping
  • 2x points on all other eligible purchases
  • Earn a free-night award each card renewal month (up to 35,000 points)
  • Receive 15 elite night credits to jump-start status
  • Transfer Marriott points to 40+ airlines

Cons

  • Airline points transfer ratios are poor
  • Must spend $60,000 in a year for second free-night award
  • Limited Time Offer: Earn 100,000 Bonus Marriott Bonvoy Points after spending $4,000 in purchases on your new Card in your first 3 months of Card Membership. Offer expires 11/2/22.
  • 6x points at hotels participating in the Marriott Bonvoy® program.
  • 4x points for purchases made at restaurants worldwide, at U.S. gas stations, on wireless telephone services purchased directly from U.S. service providers and on U.S. purchases for shipping.
  • 2x points on all other eligible purchases.
  • Receive a 7% discount off standard rates for reservations of standard guest rooms at hotels that participate in the Marriott Bonvoy program when you book directly. Terms and Conditions Apply.
  • Receive 1 Free Night Award every year after your Card renewal month. Plus, earn an additional Free Night Award after you spend $60K in purchases on your Card in a calendar year. Awards can be used for one night (redemption level at or under 35,000 Marriott Bonvoy® points) at hotels participating in Marriott Bonvoy®. Certain hotels have resort fees.
  • Enjoy Complimentary Marriott Bonvoy Gold Elite Status with your Card.
  • Terms apply.
  • See Rates & Fees