Are Cash Back Credit Cards Worth It?

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

What are cash back rewards?

Cash back rewards are credit card rewards that offer cash savings when you redeem them. Redemption options can vary by card but may include:

• Statement credits. You may be able toget a statement credit with your cash back rewards that may lower your credit card balance.
• Direct deposit. A card issuer may let you deposit the cash value of your rewards directly to your bank account.
• Donations. You may be able to donate to a charitable cause using your cash back rewards.
• Purchases. Some rewards programs let you apply your cash back rewards when making a purchase at select merchants.
• Gift cards. You may have the option to redeem your rewards for gift cards.

Cash back rewards credit cards have different rules for how you earn rewards. Some cash back rewards cards give you a flat percentage of cash back rewards for each purchase, usually with no limit to how much you can earn. Other rewards cards offer tiered rewards with a higher rate on specific categories with potential limits to what you can earn and an unlimited lower rate of rewards on all other purchases. And some cards offer even higher rates on spending categories that rotate throughout the year but may also include limits to how much you can earn.

For example, with the Discover it® Chrome Gas and Restaurant Credit Card,you can earn cash back on your next road trip with 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% cash back on everyday purchases at different places each quarter, up to the quarterly maximum when you activate.

You can compare each rewards program to determine which aligns best with your spending.

How to decide if rewards credit cards are worth it

A cash back rewards card can be worth it if you earn more in rewards than you’ll spend on fees and interest. As you’re comparing the options, consider these questions:

• Will you be tempted to overspend? Earning rewards can seem appealing but spending more than you can pay back each month will likely cost you interest. To get the most out of your cash back rewards card, the value of the rewards you earn would need to exceed what you pay in interest.
• Does the card have an annual fee? Some credit card companies charge a yearly fee for using their card. You’ll want to be sure you can earn enough rewards to compensate for the extra cost of an annual fee. Discover doesn’t have an annual fee on any of its cards.

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

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

• You want to focus on travel reward redemptions. A travel rewards credit card may appeal to you if you want more reward redemption options geared toward travel expenses.
• You spend regularly with a certain brand. Some branded credit cards, like airline and hotel cards, let you earn extra rewards when you make purchases with that brand, such as booking a flight through a specific airline. And you can redeem your rewards for things like free flights. They may also offer extra perks, including free checked bags.

You 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 travel expenses may make the most sense for you. It may help to consider a card’s rewards, fees, and benefits before deciding if a cash back credit card is worth applying for.