The pros and cons of cash-back credit cards
Editor's Note
Cash-back credit cards have become increasingly popular in recent years, enticing consumers with the promise of earning rewards while spending.
These cards offer a certain percentage of cash back on eligible purchases, making them an attractive option for those looking to maximize their rewards.
Let's go over the pros and cons of cash-back credit cards and consider the best options available for applicants.
Why should I get a cash-back card?
First, let's review the advantages of a cash-back card over travel credit cards.
Cash-back card options have improved
Over the years, issuers have raised the value of cash-back cards, giving consumers more options. Plus, issuers have released increased sign-up bonuses and generous benefits on cash-back cards that may even start to compete with the travel rewards 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 Chase Travel℠, as well as 3% back on dining and drugstores — all while continuing that solid 1.5% non-bonus category rate.
The Chase Freedom Flex®, meanwhile, is a 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).
In addition, you'll get 5% back on Lyft purchases (through March 2025) and travel booked through Chase Travel, 3% back on dining and drugstores and 1% back on all other purchases.
Another example is the Citi Custom Cash® Card (see rates and fees). 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.
Business cash-back cards can offer great rewards
Business cash-back card options can be just as prolific, too.
The U.S. Bank Triple Cash Rewards Visa® Business Credit Card is an underrated option that serves as a terrific card for small-business owners who want to minimize costs but maximize their cash-back earnings on business expenses.
The card earns 3% cash back on eligible purchases at gas stations, electric vehicle charging stations, office supply stores, cellphone service providers and restaurants and 1% on all other eligible purchases. Cardholders also receive up to a $100 annual software services credit.
For a card with no annual fee, the U.S. Bank Business Triple Cash should be a top choice for new businesses or independent employees just starting out.
The information for the U.S. Bank Business Triple Cash Rewards has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
You want no (or lower) annual fees
Typically, annual fees only increase over time. For example, Amex raised the annual fees on its Delta cobranded cards in February 2024.
If annual fees that cost hundreds of dollars no longer appeal to you, maybe it's time to trim down those costs altogether.
While there are usually many statement credits and perks to help justify high annual fees, many consumers don't have the time or energy to maximize every benefit.
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 fees altogether and be able to focus on earning more cash back for the purchases that matter to you.
(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 set your sights on other large purchases — such as a massive home improvement project or buying a new car — rather than significant travel.
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 (see rates and fees) 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.
- Tiered-earning card: These cards tend to offer higher earning rates but only for certain bonus categories. The Capital Savor Cash Rewards Credit Card offers 3% on dining, entertainment, popular streaming services and grocery stores (excluding superstores like Walmart® and Target®), plus 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 the first $1,500 you spend in select quarterly rotating categories when you activate.
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 more lucrative in the long run.
Related: Chase Freedom Flex vs. Chase Freedom Unlimited comparison: Rotating categories or flat cash back?
You want to refinance your debt
Suppose you've found yourself with credit card debt. Some cash-back cards come with a 0% introductory annual percentage rate financing offer that could potentially help you consolidate your debt and reduce interest charges — all while earning additional cash-back rewards.
The Chase Freedom Unlimited is a good choice for a 0% introductory APR period for 15 months from account opening on purchases and balance transfers (19.99% - 28.74% variable thereafter).
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 of cash-back cards in recent years, they still do not compete with some of the top travel cards on the market. In other words, you'll almost never be able to get complimentary airport lounge access, companion certificates or free night awards with a cash-back card.
And while not paying an annual fee can be a positive for some, it's a double-edged sword, as no-annual-fee cards tend to have less valuable benefits.
Redemption options aren't as comprehensive
With cash-back cards, you'll usually only receive rewards worth up to 1 cent apiece, typically for statement credits, direct deposits or checks.
But just because you add a cash-back card to your wallet doesn't mean you have to say goodbye to your travel credit cards forever. You can use both and have them complement your diversification strategy of earning cash back plus 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.
You can also redeem your points for cash back if you wish. As mentioned earlier, you'll probably want to keep that travel rewards card for the no foreign transaction fee benefit when you travel internationally.
That's because the line between cash-back cards and travel cards has blurred over the years. 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 rewards.
Our top picks for cash-back cards
While you can see our full roundup of the best cash-back cards here, we'll list some of our top picks below (including some that were mentioned above):
| Card | Annual fee | Welcome offer | Earning rate |
|---|---|---|---|
| Blue Cash Preferred® Card from American Express | $0 introductory annual fee for first year, then $95 (see rates and fees) | Earn a $250 statement credit after spending $3,000 on eligible purchases within the first six months of card membership. | 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 as Reward Dollars that can be redeemed as a statement credit or at Amazon.com checkout. Terms apply |
| Citi Double Cash® Card | $0 | Earn $200 cash back after spending $1,500 on purchases in the first six 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 Travel, 3% on dining and drugstores and 1.5% on all other eligible purchases |
| Bank of America® Customized Cash Rewards credit card | $0 | Earn a $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, EV charging stations, online shopping/cable/internet/cellphone plans/streaming, dining, travel, drugstores or home improvement and furnishings, plus 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® Card | $0 | Earn $200 cash back after spending $1,500 on purchases in the first six months of account opening. | 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 Savor Cash Rewards Credit Card | $0 (see rates and fees) | Earn a one-time $250 cash bonus after spending $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 (excluding superstores like Walmart® and Target®), 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 keep track of than travel rewards.
Plus, we've entered a new era with 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 consider adding a cash-back card to your wallet and shifting your travel rewards and credit card strategy.
Related: How to choose the best credit card for you
For rates and fees of the Amex Blue Cash Preferred, click here.