Why Cash Back Credit Cards Are a Smart Move for Most Transactions

Some people don’t like using credit cards because they think those cards will land them in debt. But it’s not credit cards themselves that lead to debt — it’s not managing them appropriately.

If you charge up a storm on a credit card and carry your balance forward for months on end, you could accrue loads of interest. If you pay off your credit cards in full every month, you can reap the rewards without losing money.

Now there are different credit cards you can choose from as a consumer. But here’s why cash back credit cards are a smart move for almost anyone.

1. You know what you’re getting

Have you seen some of the travel reward credit card programs out there? While these cards might offer their share of perks, the rules can be confusing.

You get a certain number of points on flights and hotel stays, which may be worth different amounts of money depending on where and how use them. It’s enough to make your head spin.

Cash back credit cards tend to have a much simpler formula. Some cash back credit cards give you the same percentage of cash back on every purchase you make. Others offer extra cash back in certain categories, like gas or supermarkets. But even then, it’s easy to figure out what you’re getting.

If you get 1% back on most purchases but 3% back on gas with your card, a $100 department store purchase will give you $1 back while $100 worth of gas will give you $3 back. It’s easy math.

2. You can use your cash back to avoid debt

When you rack up points or miles on a travel rewards credit card, you can use them to offset the cost of future travel. But ultimately, cash back is king.

Points toward a flight won’t help your financial situation if you have a $50 bill due this month and you’re short on funds in your checking account. With a cash back credit card, you get access to money you can use for any purpose. And that money could bail you out of a jam.

3. You get added protection

When you pay for purchases using cash or a debit card, you’re not necessarily covered if something goes wrong, such as if you bring home a defective item. But with a cash back credit card, you get that additional protection.

Granted, this perk isn’t unique to cash back credit cards. It’s a general benefit that credit cards tend to offer. But it’s a nice thing to have nonetheless.

4. You can build credit while scoring free money

While some people might think that credit cards hurt your credit, if you manage your spending well, a cash back credit card could help you build credit. If you pay your credit card bills on time and in full every month, it could lead to a credit score boost.

Then, when you go to apply for a loan, you’re likely to score a more favorable interest rate due to having great credit. So not only might a cash back credit card put cash in your pocket, but it could save you money when you seek to borrow in the future.