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Are Cash Back Credit Cards Worth It?

Published April 18, 2022
4 min read

Let’s learn more: The value of cash back cards

  1. Cash back rewards let you earn cash back on every purchase.

  2. The rewards can be simple to understand and use.

  3. Compare cash back cards to see which has the best rewards structure for your lifestyle.

Cash back credit cards offer a way to earn rewards for purchases you’re going to make anyway. However, you’ll want to consider how cash back cards work, your personal preferences, and the specific cards’ features when deciding if a cash back card is worth it.

What are cash back credit card rewards?

Cash back credit card rewards are credit card rewards that you can exchange for cash, or cash-like rewards. The redemption options can vary depending on the credit card, but you’ll often be able to redeem cash back rewards for:

  • Statement credits. Get a credit card statement credit for your cash back rewards, which could lower your credit card bill.
  • Check or direct deposit. The card issuer may be able to mail you a check or directly deposit the rewards into a linked bank account.
  • Donations. You may be able to donate your cash back rewards to a charitable cause.
  • Purchases. Some programs let you use your cash back rewards when you’re making a purchase at select merchants.
  • Gift cards. You may have the option to redeem your rewards for gift cards.

Cash back credit cards have different rules for how you earn the rewards. Some cards give you the same amount for each purchase, others have static bonus rewards categories, and some have rotating bonus rewards categories.

For example, with the Discover it® Chrome Gas and Restaurants you can earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter.1 Or, with the Discover it® Cash Back Credit Card, you can earn 5% Cashback Bonus at different places each quarter up to the quarterly maximum, when you activate. Both cards offer unlimited 1% cash back on other purchases.

You can compare cash back cards to figure out the rewards you can receive for your usual spending.

How to decide if rewards credit cards are worth it

Whether you earn cash back, miles, or points, a rewards card can be worth it if you know you’ll earn more in rewards than you’ll spend on fees and interest. As you’re comparing the options, consider:

  • Do the bonus categories align with your spending? You’ll earn the most rewards if there’s a good match. If not, a flat-rate rewards card might make more sense.
  • Will you be tempted to overspend? Earning rewards can seem appealing, but spending an extra $1 to earn 5% in rewards doesn’t make sense.
  • Do you regularly carry a balance? You might wind up paying more in interest than you earn in rewards if you accrue lots of interest charges.
  • Does the card have an annual fee? You’ll want to be sure you can earn more than enough rewards to make up for the extra cost. Discover does not have an annual fee on any of its cards.

In addition to the general factors to consider when looking at rewards credit cards, there are a few pros and cons that are specific to cash back cards.

Factors that make cash back rewards worth it

Cash back cards may be a good option for you because:

  • They are simple to understand. You’ll know exactly how much you earn in rewards for each purchase. With points and miles, the value per point or mile can vary depending on the program and how you use the rewards.
  • The rewards won’t decrease in value. Some points or miles programs have “devaluations,” and you’ll suddenly need more rewards for the same redemption option. With cash back rewards, your $1 in rewards is always worth $1.

Similar to other rewards cards, cash back credit cards can also offer extra bonuses and perks. For instance, with a Discover cash back card, you can get an unlimited dollar-for-dollar match of all the cash back you earn at the end of your first year, automatically.2

Reasons you may not find a cash back credit card to be worth it

You may find that other types of rewards cards are a better option if:

  • You want to focus on travel redemptions. Points and miles rewards can be a better option if you’re certain you want to redeem your rewards for travel.
  • Other cards offer specific perks. Some airline and hotel cards offer extra benefits, such as free checked bags or status in the loyalty program, that you might not get with a cash back credit card.

You also don’t need to limit yourself to a single rewards card. Having a cash back card for everyday spending and a different rewards card for when you travel can sometimes make sense. But consider the rewards, fees, interest rates, and benefits of the different options before applying.

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