Pros and Cons of Using a Cash Back Credit Card

Cash back credit cards are a popular type of rewards credit card that offer a percentage of the purchase amount back to the cardholder in the form of cash back rewards. While cash back credit cards can be a great way to earn money back on everyday purchases, they also come with potential drawbacks that should be considered. In this article, we’ll discuss the pros and cons of using a cash back credit card.

Pros of Using a Cash Back Credit Card

• Earn Cash Back Rewards: The primary benefit of using a cash back credit card is the ability to earn money back on purchases made with the card. Depending on the card, cash back rewards can range from 1% to 5% or more of the purchase amount. Over time, these rewards can add up and provide a significant amount of cash back.

• Easy to Use: Cash back credit cards are often very easy to use, with rewards being automatically credited to the cardholder’s account each month. This makes it easy to track rewards earned and use them towards future purchases or to receive statement credits.

• No Need to Redeem Points: Unlike some other rewards credit cards that require points to be redeemed for rewards, cash back credit cards offer a straightforward way to earn and redeem rewards. Cardholders can simply use the rewards as a statement credit or request a cash deposit into their bank account.

• Can Help with Budgeting: Using a cash back credit card for everyday purchases can help with budgeting by providing an easy way to track spending and earn rewards at the same time.
  
  

Cons of Using a Cash Back Credit Card

• Higher Interest Rates: Cash back credit cards often come with higher interest rates than other credit cards. If the cardholder carries a balance on the card, they could end up paying more in interest charges than they earn in cash back rewards.

• Fees: Some cash back credit cards charge annual fees, balance transfer fees, or foreign transaction fees. These fees can eat into the cash back rewards earned and make the card less valuable overall.

• Limited Rewards Categories: Some cash back credit cards only offer cash back rewards for purchases made in certain categories, such as groceries or gas. This can limit the amount of rewards that can be earned on other types of purchases.

• Temptation to Overspend: Using a cash back credit card can be tempting, as it provides an incentive to make more purchases to earn more rewards. This can lead to overspending and carrying a balance on the card, which can result in high interest charges.

• Not Always the Most Valuable Option: Depending on the cardholder’s spending habits and the type of rewards they prefer, a cash back credit card may not always be the most valuable option. For example, a travel rewards credit card may be more beneficial for someone who travels frequently.
  
  

Conclusion

Cash back credit cards can be a great way to earn money back on everyday purchases, but they also come with potential drawbacks. It’s important to carefully consider the pros and cons before applying for a cash back credit card and to choose a card that fits your spending habits and financial goals. By using the card responsibly and paying off the balance in full each month, cardholders can take advantage of the rewards while avoiding high interest charges and fees.