Thinking of applying for a cashback credit card? Here are the advantages and disadvantages of getting one.
What is a Cash Back Credit Card?
Cashback credit cards are credit cards that can help you simplify your finances, earn rewards on spending and at the same time gives you extra benefits that debit cards don’t offer. Its rewards are simpler to understand than travel rewards which make it a good option for a first rewards credit card.
Advantages of Cash Back Credit Cards
Annual Fee: Most cashback credit cards have no annual fee charge. This implies that you don’t have to sacrifice some your rewards for a fee, and you can as well keep the card open fee-free even if you decide to use a different one in the future.
Shopping Benefits: Some cashback credit cards offer benefits that can protect your purchases or help you save money. Some of these perks include, extended warranties, lowest advertised price match, return guarantees, cell phone protection, etc.
APR Offers: Most but not all cashback credit cards offer a 0% APR on purchases or balance transfers for a limited time. This will enable you to pay down a big purchase, or existing debt, without paying interest.
Sign-Up Bonuses: Some cards offer sign-up bonuses like travel rewards credit cards, many cash-back credit cards offer a signup bonus if you meet a minimum spending requirement within the first few months. Some of these bonuses can be worth hundreds of dollars.
Cash Rewards: Some offer cash back for each dollar you spend, some rewards at a flat rate, others give higher levels of cashback on certain categories, like gas or groceries, that either stays the same or rotate each quarter.
Disadvantages Of Cash-Back Credit Cards
Earning Caps: Most cashback credit cards gives you uncapped rewards, while others set caps on the amount of cashback you can earn for regular or bonus category spending.
Foreign Transaction Fees: Cashback credit cards most often tack on a 3% fee to purchases made abroad.
No Travel Rewards: Most cashback credit cards do not give an option for travel rewards.
High Ongoing APR: An average credit card APR is set at, at least17%, but some cash-back credit cards exceed that. Your ongoing APR will be dependent on your creditworthiness, thus if you don’t have exceptional credit, you’ll get an APR on the higher end of the card’s range.
At the end of the day is what you want that determines if you should get a cashback card or not. Thus if you are more interested in earning cash than travel rewards and you are disciplined enough to earn rewards on your spending without accumulating debt then you should get a cashback card. You can also compare cashback credit cards, rewards schemes, sign up bonuses, and perks and opt for a card that fits your spending style and rewards preferences.