You’ve probably seen the term “cash back” and “rewards” when searching for a good credit card for your needs. But what do those terms really mean? Which one is best? Let’s take a closer look…
Cash Back Credit Cards – What they are and how they work
A cash back credit card is a specific type of rewards credit card which gives you cash back (such as 1%) for every purchase you make, every day. Depending on which card you’re talking about, this cash back can be credited back to the credit card account, paid directly to the account holder, deposited into your bank account, etc.
So essentially, a cash back credit card is a rewards credit card, just a specific type.
Rewards Credit Cards – What they are and how they work
A rewards credit card is a more general term for a credit card which offers rewards for making purchases. Typically you will earn 1 point on every purchase you make (some offer more, some less). Depending on which card you have, these points can be redeemable for:
- Cash Back – via credit back to your account, check, direct deposit into your bank account.
- Travel Rewards – such as air miles, hotels, cruises, car rentals, etc.
- Merchant specific rewards – some offer cash back, or discounts, when you shop at certain stores.
- Gift Cards – many cards offer the option to redeem your points for gift cards for your favorite store or restaurant.
Cash back and rewards cards will generally be better suited to people who pay off their balances each month, to avoid finance charges. However, cards like Citi Double Cash offer a long introductory 0% period of 15 months, so you can make purchases and not pay a dime in interest for that time, and still get the double cash back that card offers.
Cash Back vs. Rewards – Which Is Better?
Generally, I believe a good cash back credit card is best for my needs. But as I mentioned before, cash back credit cards is basically a specific type of rewards credit card, so determining which one is better for you will require some research. Some rewards cards offer more discounts for purchasing from specific retailers or using the rewards for specific things. So you will have to ask yourself a few questions such as:
- Would I benefit from a certain rewards card because it offers more discounts or rewards for a certain retailer that I use often?
- Some rewards cards have rotating categories which you have to enroll in each quarter. Would you benefit from those, or would you just forget to enroll and miss out on the extra rewards?
- Would a simple cash back card suit you better, avoiding enrolling in different categories and using certain retailers?
This is a topic that definitely needs lots of thought and research, as not everyone is the same. I like a good straightforward cash back rewards credit card myself, but some people may be better served with a credit card which offers more rewards for, lets say, car rentals, or airlines.
My Pick For The Best Cash Back Credit Card
Right now I think there’s only one sheriff in town when it comes to cash back credit cards – Citi Double Cash. You just can’t beat the 1% cash back on every purchase, and then another 1% cash back when you pay off your purchase – even if you don’t pay it off right away.
I’ve heard several people say they have been invited to apply for Citi Double Cash card, and were directed to either www.citi.com/doublecashapplynow or www.citi.com/applynowdoublecash. Both of those are the same credit card by the way, the Citi Double Cash card.
Take a look at that card, and if it sounds good to you, I say go ahead and apply!