3 reasons why you need a cash back credit card in your wallet
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
My family has circled the globe and taken numerous memorable trips that were earned by swiping our rewards-earning credit cards to rack up points miles — and we don’t plan to walk away from that strategy anytime soon. However, 2020 has taught and reinforced lots of lessons. One of those lessons was that nothing is ever certain. None of those points and miles-fueled trips we originally planned, booked thought we were taking this summer actually happened.
What happened instead was more time at home, transforming the backyard to somewhere we wanted to spend time and even a few closer-in cabin and home rentals. Traditional airline miles and hotel points won’t help cover most of those expenses. What we needed instead was old-fashioned cash. Or perhaps even better, we wanted a credit card that earned cash back rewards we could use however we wanted.
For more TPG tips delivered each morning to your inbox, sign up for our free daily newsletter.
The only card I’ve applied for since the world went upside down, is a cash-back credit card. In fact, I’d argue that just about everyone needs a cash-back credit card in their wallet.
Related: Best cash-back credit cards
For when you need cash
A few decades ago, I was graduating from grad school, moving to a new city, starting a new job and in serious need of cash. The rewards credit card I had at the time allowed me to cash out points for $25 Target gift cards, and that’s exactly that I did. I needed groceries, light bulbs, paper towels and other very non-exciting items more than a flight or hotel stay.
I may have thought I was saving those points for a trip, but I ended up using them to bridge the gap a bit when expenses were high and income was low. Having a true cash-back card to shop wherever I wanted would have been even better than just Target gift cards. While of course, everyone should have an actual cash savings account for rainy days, it is nice to have a cash-back rewards balance that you can dip into when you need it, too.
The threshold to dip into your cashback rewards doesn’t need to be quite as high as into your actual emergency cash savings. In fact, you could even use cash-back rewards to pay for parts of a trip that can’t be covered with regular points and miles. You can basically use it for almost anything you’d pay with cash.
A few months ago, with 100-degree temperatures on the horizon and public pools closed due to the pandemic, I’d argue that using cash-back rewards for a backyard stock tank pool and DIY deck was the type of cash back redemption I’d feel good about.
For when you want to keep things simple
I like complicated multi-stop, open-jaw, international airline award redemptions using airline award chart sweet spots. But sometimes when life gets a bit crazy, simple is best. Having a cash-back credit card means you really can’t ever go wrong when cashing out.
While every cash-back card works a bit differently, typically you can use the rewards to offset charges on your credit card statement, or perhaps even have the rewards deposited right into your checking account.
You don’t need to be a points-and-miles pro to click a few buttons and use cash-back rewards to cover the cost of a charge, all while keeping your cash safe and sound.
Maximize your purchases
If you want to make the most of all your everyday purchases, then sometimes a cash-back card may be helpful in maximizing those dollars spent. For example, I got the card I did as it helped me earn a 2.625x rate on everyday charges since I met the criteria for a 75% bonus thanks to my banking with Bank of America.
The Citi® Double Cash Card (earn 2% cash back; 1% back when you make purchases, 1% when as you pay your bill) is another very solid cash-back option on everyday purchases.
Some other examples available in the cash back arena are the 6% cash back on purchases at U.S. supermarkets (on up to $6,000 of spending each calendar year, then 1%) and 6% on select U.S. streaming subscriptions provided by the Blue Cash Preferred® Card from American Express, 4% cash back on dining and entertainment from the Capital One® Savor® Cash Rewards Credit Card or 3% cash back provided by the Bank of America® Cash Rewards credit card in the category of your choice monthly (gas, online shopping, dining, travel, drug stores, or home improvement/furnishings) (on the first $2,500 in combined eligible purchases each quarter; then 1%).The information for the Capital One Savor card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
And while some cash-back credit cards do come with an annual fee, many don’t have annual fees, allowing you the opportunity to maximize purchases while potentially avoiding spending any extra cash.
Related: Best cash-back credit cards of 2020
Not long ago we had to replace our gas line with no notice to the tune of $3,800 (with our gas and hot water cut off until we got it done). That was a painful amount of cash to spend on a gas line, but because I had a card that gave me a 2.625x rewards rate that very unexciting expense got me $99.75 closer to whatever I wanted.
Hopefully, I’ll spend that cash towards something fun like future high-end vacation home rental or maybe even splurge on a short private jet flight for my upcoming 40th birthday, but you never know. It’s also possible I’ll end up needing to use that cash back for groceries and light bulbs, just as I’ve done before. That’s the beauty of cash-back rewards — they are there to be used however you want and need.
Featured image by Rattanakun Thongbun / EyeEm / Getty Images
Welcome to The Points Guy!
WELCOME OFFER: 60,000 Points
TPG'S BONUS VALUATION*: $1,200
CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners
*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.
- Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
- 2X points on dining at restaurants including eligible delivery services, takeout and dining out and travel & 1 point per dollar spent on all other purchases.
- Get 25% more value when you redeem for travel through Chase Ultimate Rewards®. For example, 60,000 points are worth $750 toward travel.