Personal Finance

I Like Credit Card Rewards as Much as Anyone - but Cash Back Cards Are Simply Better

David Beren

Published: December 11, 2024 9:17 am

Key Points

• Credit Card reward programs are a big reason to use credit cards. 
• There is no question that cash-back is king. 
• Travel rewards still appeal to a large group of people. 
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If there is one online shopping benefit that came out of the COVID pandemic, it’s that credit card use continued to climb. In 2016, around 31% of all purchases were handled with cash, and today, the number of purchases with cash is half what it was six years ago, to the tune of around 16%. 

Along with battery security and purchase protection, credit card companies’ perks and rewards have only improved. As popular as travel rewards can be, cash-back cards have become the most popular option for many consumers, who can earn hundreds of dollars back every year. 

Cash-Back Rewards Have Improved 

One of the biggest reasons to favor cash-back rewards is how well the rewards have improved over time. There was a time not too long ago when the best cash-back cards offered at most were 1% cash-back on purchases. Today, cards like the Capital One Quicksilver and Chase Freedom Unlimited all offer 1.5% back on all purchases. 

However, cards like Discover It can get even more interesting, which offer 5% rotating categories on gas, groceries, retail stores like Walmart, and more. With many of these cards allowing you no limits on cash-back rewards, you can shoot for the stars with your earning potential depending on how much you spend annually. 

For example, if you spent $20,000 on your Chase Freedom Unlimited card, you could earn around $300. Alternatively, if you go for the Wells Fargo Active Cash card, which offers unlimited 2% cash rewards, you would have $400 in rewards. This is free money!

Rewards Are Easy to Claim

Another big benefit of a cash-back card over another reward type like travel is that the rewards are far easier to claim. Most credit card companies offer the option of putting your cash-back rewards toward your balance, sending you a check, or depositing the money in your bank account. In other words, the redemption rules are straightforward to follow and understand, as you have to claim the money and then spend it however you choose. 

On the other hand, with a travel credit card, you have to jump through hoops to find the correct travel dates, choose only from the hotels listed, and pick from an airline the credit card partners with, etc. 

This isn’t to say it’s impossible to book a once-in-a-lifetime trip, but receiving your cash-back rewards can take no time at all. Booking travel using something like the Capital One Venture card with accrued points takes much more time to think through, plan, and book. 

Rotating Reward Categories

When you think about ways to boost your cash-back reward, something like the Chase Freedom card can do that. You will get 1.5% cash back on all your purchases, and over a year, rotating categories will help you earn even more. The benefits of these categories can help you double or even triple the value of your cash-back rewards at the end of any quarter and over 12 months. 

For example, in the first quarter of 2024, Chase offered a 5% bonus on every grocery store purchase, fitness club membership, and spa service. The second quarter had 5% cash-back rewards on hotel, restaurant, and qualifying Amazon purchases. 

Fast forward to the third quarter, and any purchase at a gas station, live entertainment, or movie theater earned 5% cash back. Last but not least, in the fourth quarter, you can get 4% cash back on purchases made at McDonald’s, pet shops, veterinary services, and even select charities. 

Cash-Back Cards Are For Everyone

The good news for cash-back rewards cards is that there is something for everyone. If you love grocery shopping and often have big bills, something like the Blue Cash Preferred card from American Express might be the answer. This card earns 6% cashback up to $6,000 yearly in purchases at any US supermarket. 

If you love going out all the time, the Capital One Savor Cash Rewards offers a 3% cash-back bonus on dining and entertainment. Of course, the Wells Fargo Active Cash Back rewards card is a good option for the all-around spender, allowing you to earn 2% cash back on every purchase. In other words, you earn $2 for every $100 you spend, which is hard to ignore. 

Are you someone who shops at Walmart or Amazon? Both of their respective credit cards offer 5% cash back on all purchases, and if you’re anything like me and my family with Amazon, this quickly adds up over the year. 

Best of all, only two or three cash-back rewards cards have an annual fee, including a few American Express cards and a few scattered others. Add the benefit of multiple sign-up bonuses that offer even more cash-back in your first 3 months, and the benefits of going with a cash-back rewards card are super clear. 

Cash-Back Versus Travel Points

There is no question that the cash-back versus travel point argument isn’t going away in the credit card world. Both sides have plenty of supporters, and there are arguments in favor of both, even if we’re already proving that cash-back is king. 

If you love to travel throughout the year, travel credit cards can be highly beneficial if you navigate the appropriate redemption guidelines. Travel credit cards can also offer better travel insurance and rental car protection, and some cards, like those from the airlines directly like American Airlines, Delta, or United Airlines, can even give you better boarding lines and access to their exclusive lounges. 

However, it’s much easier to argue that cash-back rewards will benefit more people overall.