Overview: Cashback vs. Rewards and Travel Credit Cards
If you are someone who is just setting foot into the world of reward offers credit cards, or if you are someone who just wants to step up their game a little, one of the first questions to address is: what type of card do I require?
The good news for you all out there is that you can find amazing options among the top travel credit cards and cashback credit cards. Probably, in the end, you might find yourself wanting both cashback credit cards and a points credit card.
In order to help you seek the answer to the question stated above, we have detailed the pros and cons of the various kinds of credit cards and the rewards program that is associated with them by studying things such as the welcome offers, the value of the rewards, redemption of rewards, perks, and the ease of use. You can come to a wise decision after you have taken into account your spending habits as well as your past experiences (if any).
Welcome Bonuses and Offers
What one earns on their credit card expenditures is quite important, and we will get to that next. But before that, when we talk about the quick accumulation of the rewards gained from credit card expenditures, there is nothing that can beat the welcome offer of a card. The first few months of your new reward offers credit cards are potentially the ones that are the most lucrative as the bonuses can be worth quite the amount.
You are likely to find the best offers on points and miles on the rewards and travel credit cards as compared to cashback credit cards.
However, there is a downside attached to big bonuses – it is that you will find them to come with large minimum expenditure criteria. It is possible that incurring such large spending in the first few months of your credit card might be out of your budget. You should bear in mind your spending habits while choosing the minimum spending limits.
If you are out there in the market, you can find both – cashback credit cards and travel credit cards that provide the cardholder with high-value returns on multiple spending categories. The type of card that you should opt for depends on your budget break down.
It is no rocket science to know that cards that offer points and miles tend to offer the best of rewards on travel spending while the cashback rewards often favor expenditures incurred on everyday purchases such as supermarket spends and fuel spends.
The bonus categories offered on a card can either be good or bad for you depending on your spending pattern. If you are someone who travels quite often, have a high-value cashback on supermarket spending will not have much value for you. Similarly, if you prefer your backyard over a resort overseas, you will not hold much value for those travel points on your expenditures.
Another thing to bear in mind is that some of the credit cards provide cashback that is of a low percentage on all of the spending but might boost this percentage as bonus rewards for a limited period that changes throughout the year.
Annual Membership Fee
The big bonuses that are offered to you with your credit cards often bring with them a big annual membership fee. However, this is not the case always. But, the one thing that is true is that there are no cashback credit cards that charge a hefty fee for the annual membership. Another thing that’s true is that many of the cashback credit cards in the market offer quite modest welcome bonuses and decent cashback percentages and they do not charge the cardholder any annual fee.
However, the travel credit cards often come with a hefty annual fee that also brings with it huge benefits and perks. Many such card providers out there levy a heavy membership fee for a year just for the privilege of getting to use their cards.
The endnote here is that if you are someone who is sensitive about the annual fee that you are required to pay to own a card despite the perks you get in return for paying them, then you should look at opting for either cashback credit cards or starter travel credit cards.
Benefits and Perks
Big annual fees and bonuses also lead to big perks such as airport lounge access, offers on car rentals, entertainment offers, discounts on cab facilities, among much more. This plays in the favor of cardholders that own miles and reward offers credit cards.
Cashback credit cards tend to have fewer perks. In fact, these cards have known to follow a trend wherein they eliminate or reduce some of the popular perks. But you should be able to find a card that offers basic benefits such as:
- Extended Warranty – This benefit provides coverage against any of the new purchases made on your card against any damage or loss up to a fixed amount per claim as well as per account.
- Purchase Protection – This perk allows the cardholder to enjoy an extended warranty on their purchase. Under this, the original manufacturer’s warranty is extended generally for a period of up to one year.
- Zero Liability: This feature offered by the card providers protects the cardholder against any unauthorized charges made on their credit card or their account.
Ease of Use
If you are seeking for a rewards program that is easy to understand, then you should probably consider one of the cashback credit cards. Many of the travel and reward offers credit cards require quite a lot of one’s attention. The only exception of cashback cards in the one with rotating bonus rewards – this will require you to keep a lookout for your rewards.
But both – cashback and points credit cards cannot simply be left on autopilot mode. In some cases, you might have to remember the terms of your cards and use them as per that to maximize the returns you earn on your purchases.
If this is too much of an effort and you wouldn’t like to go ahead with it, you should probably stick to a cashback card with a simpler rewards plan.
Redemption of Rewards
Last but not least is the most important difference between the types of cards. Cashback credit cards are quite straightforward in terms of the rate of rewards’ redemption. However, when it comes to the points and miles it can be confusing. For example, 1 AED might equal to 1% cashback point for a cashback card. Whereas, the same AED may very rarely be equal to 1 point or mile.
This all defines the complexity that is involved in miles and points’ cards. But, there is a learning curve.
The Bottom Line
If your main priority is to get the best of the value of a card then opt for either reward offers credit cards or travel credit cards. You are likely to get far more return out of them in the form of bonus offers, the points on spending, the perks and benefits, and the redemption options available as compared to what is offered on a cashback card.
However, not everyone can put in the effort and time required to track their spending, this is when cashback credit cards kick in the picture. There is nothing flawed with either of the mentioned perspectives.
The only major mistake that one can make is not taking advantage of the free money that is provided by the card issuers in the form of welcome bonuses.
Also, always remember to pay your balances in full to enjoy the best out of any of the rewards and perks without carrying any debt on your shoulders!