Should you get a cash back or travel credit card?

If you're in the market for a new credit card, you may be wondering which type is right for you: a cash back credit card or a travel rewards credit card. Both types of cards offer their own unique benefits and drawbacks, and the best choice for you will depend on your individual spending habits and financial goals. 

In this blog post, we'll take a closer look at the pros and cons of both cash back and travel credit cards, and when you should consider one over the other.

Cash back credit cards

Below we outline the pros and cons of cash back credit cards, and when you should consider one instead of a travel rewards credit card.

Pros

1. Cash back rewards are simple and easy to understand. 

With cash back credit cards, you'll typically earn a certain percentage of your purchases back in the form of cash rewards. These rewards can be redeemed for statement credits, checks, or even direct deposits into your bank account.

2. Flexibility in redeeming rewards.

Cash back rewards can be used for a wide range of purchases, including gas, groceries, and other everyday expenses. This makes them a great choice for anyone who wants to use their rewards to help offset the cost of their daily expenses.

3. No annual fees.

Many cash back credit cards with a low or no annual fee, which can save you money in the long run.

Cons

1. Lower earning potential.

While cash back rewards are simple to understand, they typically offer a lower earning potential compared to travel rewards credit cards. The percentage of cash back you earn on purchases is usually between 1-2%, which may not be as lucrative as other rewards programs.

Note: in order to maximize cash back rewards, Beami recommends using a combination of cash back credit cards that offer higher earning rates on the categories in which you spend the most each month. Read how Beami found an additional $3,104 and $1,314 in cash back its customers could have earned last year.

2. Limited redemption options.

Unlike travel rewards, cash back rewards can only be redeemed for cash or statement credits, which may not be as exciting for some people.

3. No travel perks.

Cash back credit cards don't usually offer any travel perks, such as airline miles or hotel points, which could be a downside for frequent travelers.

When to consider a cash back credit card

If you're looking for a simple and straightforward way to earn rewards on your everyday purchases, a cash back credit card may be the right choice for you. Cash back rewards are ideal for people who want to offset the cost of their daily expenses, without having to worry about complicated redemption options or annual fees.

Travel rewards credit cards

Below we outline the pros and cons of travel rewards credit cards, and when you should consider one instead of a cash back credit card.

Pros

1. High earning potential.

Travel rewards credit cards offer a higher earning potential compared to cash back credit cards. With these cards, you can earn points or miles on every purchase, which can be redeemed for flights, hotels, and other travel expenses.

2. Travel perks.

Travel rewards credit cards often come with a range of travel perks, such as airline lounge access, free checked bags, and hotel room upgrades. These perks can help you save money on your travels and make your trips more comfortable.

3. Flexible redemption options.

Many travel rewards credit cards offer flexible redemption options, allowing you to redeem your points or miles for a wide range of travel expenses, including flights, hotels, rental cars, and more. Sometimes, it’s even possible to redeem points for another airline or hotel partner with lower redemption points.

Cons

1. Annual fees.

Many travel rewards credit cards come with an annual fee, which can range from $95 to $450 or more. If you don't travel frequently, the annual fee may not be worth it.

2. Complicated redemption options.

While travel rewards credit cards offer more redemption options than cash back cards, they can also be more complicated. Some redemption options may require a certain number of points or miles, and there may be blackout dates or other restrictions.

3. Higher interest rates.

Travel rewards credit cards may come with higher interest rates compared to cash back credit cards, which could be a downside if you carry a balance from month to month.‍

When to consider a travel rewards credit card

If you're a frequent traveler who wants to earn rewards on your travel expenses, a travel rewards credit card may be the right choice for you.

Conclusion

In conclusion, the decision to choose between a cash back credit card or a travel rewards credit card ultimately depends on your personal preferences and spending habits. If you're looking for a simple and straightforward way to earn rewards on your everyday purchases, without the need for travel perks, a cash back credit card may be the right choice for you. On the other hand, if you're a frequent traveler looking to maximize your rewards on travel expenses, and are willing to pay an annual fee and navigate more complex redemption options, a travel rewards credit card may be a better fit. Whichever type of credit card you choose, make sure to read the terms and conditions carefully and use it responsibly to avoid incurring high interest charges or fees. Happy shopping!

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