A Brief Introduction to Cashback Cards or Rewards Credit Cards
Cashback cards and rewards credit cards are two types of credit cards that offer benefits and incentives to cardholders. These cards allow users to earn cashback or rewards points for their purchases, providing an extra perk for using a credit card instead of cash or debit.
What is a Cashback Card?
A cashback card is a credit card that allows users to earn a certain percentage of their spending back in cash rewards. These cards usually have a set cashback rate for different categories, such as groceries, gas, or dining out. Some cashback cards also offer a flat cashback rate for all purchases.
The cashback earned can be redeemed in a variety of ways, such as statement credit, direct deposit to a bank account, or a check mailed to the cardholder. Some cashback cards may also offer additional benefits, such as extended warranties or travel insurance.
Types of Cashback Cards
There are several types of cashback cards available, each with its own earning structure and benefits. Here are a few common types of cashback cards:
Cashback on select categories
These cards offer a higher cashback rate for particular categories, such as groceries or gas. For example, a card may offer 5% cashback on groceries, 3% on gas, and 1% on all other purchases.
Cashback on rotating categories
Similar to the previous type, these cards also offer a higher cashback rate for specific categories, but the categories change every few months. Cardholders typically need to activate the categories each quarter to earn the increased cashback rate.
Flat cashback rate
These cards offer a flat cashback rate on all purchases, typically between 1-2%. This type of cashback card is straightforward and easy to understand, as there are no categories to track or rotate.
Signup bonus
Some cashback cards offer a signup bonus, where cardholders can earn a certain amount of cashback after spending a specified amount within a given timeframe, such as $200 after spending $1,000 in the first three months.
What is a Rewards Credit Card?
A rewards credit card is a credit card that offers points, miles, or other types of rewards for purchases made with the card. These rewards can then be redeemed for travel, merchandise, gift cards, or even cash back.
The earning structure for rewards credit cards can vary, but most offer a flat rate for all purchases or higher rewards for specific categories. These cards may also offer additional benefits, such as airport lounge access or travel insurance.
Types of Rewards Credit Cards
There are several types of rewards credit cards available, each with its own earning structure and benefits. Here are a few common types of rewards credit cards:
Points-based rewards
These cards offer rewards points for every dollar spent, which can then be redeemed for travel, gift cards, or merchandise. The value of the points can vary depending on the redemption option.
Cashback rewards
Similar to cashback cards, these cards also offer cashback for purchases made. However, instead of a percentage, cardholders earn a set amount per dollar spent. For example, a card may offer $1 cashback for every $100 spent.
Airline or hotel rewards
These cards are co-branded with a specific airline or hotel chain and offer rewards in the form of miles or points for that brand. These rewards can then be used towards flights, hotel stays, or upgrades.
Signup bonus
Just like cashback cards, some rewards credit cards may offer a signup bonus, where cardholders can earn a certain amount of points or miles after spending a specified amount within a given timeframe.
Which Card Should I Choose?
When deciding between a cashback card or rewards credit card, it ultimately depends on your spending habits and preference. If you want cashback as a reward and prefer a straightforward earning structure, then a cashback card may be the best choice. On the other hand, if you enjoy travel and prefer to earn points or miles towards flights or hotel stays, then a rewards credit card may be a better option.
It’s important to consider the annual fees, interest rates, and any other card benefits when choosing a cashback card or rewards credit card. It’s also essential to use the card responsibly and pay off the balance in full every month to avoid accumulating debt and interest charges.
Final Thoughts
Cashback cards and rewards credit cards offer a variety of benefits and perks for credit card users. Whether you prefer to earn cashback or points for travel and merchandise, there is a card available to suit your needs. Just remember to use the card responsibly, pay off your balance in full every month, and choose a card that aligns with your spending habits and preferences.
If you’re interested in applying for a cashback card or rewards credit card, be sure to do your research and compare different options to find the best fit for you. Happy hunting!
