Rewards vs. Cashback: Which credit card is best for me?

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There is an old proverb which accurately states that ‘a penny saved is a penny earned’ and some of the best credit cards around the world take this philosophy to heart. With growing competition in the market to provide the best credit card in UAE, card issuers find themselves in a constant struggle to provide their cardholders with more savings than their competitors can. As a result, we have seen the emergence of some extremely enticing credit card incentives and the birth of the ‘compare credit cards online’ phenomenon. After all, with so many options to choose from, how else would you identify the best credit card for you?

While credit cards in themselves are no new phenomenon, the last decade has seen a rise in many new forms of card benefits, one of which is the trend of cash back credit cards. As we go on to take a look at some of the best credit card offers available in UAE today, it is important to first understand the difference between a rewards credit card and a cash back credit card.

1. Rewards Credit Cards

A rewards credit card is one that enrols the cardholder into a loyalty or points-earning program. Loyalty programs may be set up by the bank themselves or as a partnership between the bank and a third party organization (such as a retail store or an airline). It is important to remember when comparing credit cards online that not all rewards program points are worth the same.

How it Works: The cardholder earns loyalty points for every purchase made with the Bank’s credit card. Point earning potential varies with the type of purchase, the category of purchase and more. For example, most of the best credit cards offer higher point earning potential on international transactions as compared to local ones. These points can then be redeemed for various products and services such as flight tickets, electronics, complimentary hotel stays and more.

Hint: The key to comparing credit cards online is focusing on the card’s redemption categories, as they are good indicators of what benefits can actually be achieved.

2. Cashback Credit Cards

Cashback credit cards allow the cardholder to save on daily expenditures and popular attractions. Some of the best credit cards in UAE offer cashback up to as much as 10% of the transaction amount.

How it Works: The cardholder uses the credit card for purchases and by doing so earns back a certain percentage of the transaction amount as cashback. The cashback is then credited into the cardholder’s account (typically during the next month’s cycle), to be used as required. However, most customers fail to take the category wise offers and monthly limits into account when they compare credit cards online.

Hint: Only a few of the best credit cards in UAE offer unlimited cashback redemption. Most cards have a monthly limit or ‘cap’ on the cashback that can be earned. Furthermore, most credit cards offer lower cashback on spending categories such as fuel, education bills, etc.

Why Pick a Rewards Credit Card?

Rewards cards carry a huge range of incentives and depending on the particular loyalty program can be a great option for customers who spend or travel regularly.

Some of the best credit cards in UAE offer redemption of loyalty points for travel benefits such as complimentary travel insurance, unlimited airport lounge access, huge hotel discounts, flight upgrades and more. However, the most commonly seen use of loyalty points is for a waiver of the card’s annual membership fee.

A rewards credit card is typically packed full with extra benefits in addition to the loyalty program membership. As such, a rewards card is ideal for customers that are able to utilize a majority of these benefits. Note that when comparing credit cards online, it is important to read the associated conditions attached such as required minimum spending and limits on complimentary services offered.

Why Pick a Cashback Credit Card?

Cashback cards offer the incredible saving potential to the cardholder. Not only are cashback cards a serious contender for the title of the best credit card in terms of local spending, but the cards are also an equally strong competitor across international spending.

Whereas rewards cards offer points on purchase, which need to be saved and collected for redemption possibilities, cashback credit cards provide a monthly cashback amount that is credited directly into the cardholder’s account. Cashback cards are the best credit card in terms of immediate and observable savings.

The most important thing to remember when comparing credit cards online is that not every purchase is eligible for cashback. Various factors such as minimum transaction amount, maximum cashback limit, monthly cashback caps and category of purchase can influence just how much a cardholder will save.

Rewards or Cashback?

We have seen some of the features of the best credit cards in UAE - cashback and rewards both. So, when it comes to that final decision of cashback or rewards, here are a few questions to help make the choice a lot easier.

Q1. What do I spend the most on and how much is my average monthly expenditure?

Q2. Are my expenditures mostly in local currency or in international ones?

Q3. How much would I save in a month through cashback deals?

Q4. Approximately how much would my redeemed rewards be worth?

Q5. What rewards will I actually be able to utilize?

Over to you

You should now be ready to compare credit cards online and find the best credit card in UAE that matches your spending habits. Good luck.