Cash Back Vs. Rewards Credit Cards

Ah, the sweet rewards of using credit!

Not only do you get immediate gratification with the buy now-pay later plastic, but now, many credit cards offer rewards and incentives for using their card to make purchases. You can get cash back, or gift cards, or �reward points� that you can spend on merchandise or services from various merchants. There are also cards that allow you to designate your �cash back� points to a charity � sometimes called affinity cards � and those that put your cash back into a special savings account for college.

Great deal, right? You spend your money and get something in return. The catch is, of course, that you�re paying interest and card fees to get your cash back rewards. But if you�re going to be using the credit card anyway, you might as well get something back out of it, right?

Most cash-back cards give you 1-2% cash back on most of your purchases. You�ll get a check at specified periods for the amount of your �rewards cash�. You can cash the check and spend the money on anything you want.

Reward cards give you 1-5 reward points for every dollar that you spend at different merchants and types of merchants. Most pay you 5 reward points for purchases made at their �Merchant Thank You� network, and for purchases made at gas stations, drug stores and supermarkets. You�ll get 1 reward point for every dollar that you spend at other merchants. You can then redeem your reward points for particular items from the merchants that belong to the credit card�s merchant network.

Which is the better choice?

Each kind of credit card reward has its own pros and cons, and the better choice depends on what�s most important to you.

Cash-back Rewards � Pros

Cash can be used anywhere, for any kind of purchase. Gives 1% - 2% cash back on all purchases.

Cash-back Rewards � Cons

Rewards points cards may give rewards of higher value, particularly for purchases at merchant networks stores, gas stations and supermarkets. Cash-back can only be used when a check is issued.

Rewards Points � Pros

Rewards points are often higher value than cash-back. If you use the credit card for purchases made within the merchant member network, you can get as much as 5% value back when you spend your reward points.

Reward points are available to use on a rolling basis. Some card companies may require you to accumulate a certain number of rewards points before redeeming them, but reward point rewards are often more easily available than cash-back rewards. Reward points can be used for cash rewards in some circumstances.

Reward Points � Cons

Reward points can only be redeemed from particular merchants and/or on particular merchandise.

Whichever your choice, it makes good sense to get something back when you choose to use credit. If you�re a frequent credit card user, the rewards can certainly add up. Among the merchants that belong to various Merchant Member networks are such well-known companies as airlines, Saks Fifth Avenue, Evelyn & Crabtree and Smarter Edge.

Joseph Kenny has been writing articles on personal finance subjects for almost 5 years, often suggesting new and ingenious ways of saving some money.
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