The biggest pros of cash back credit cards are savings on every purchase, offers with $0 annual fees and 0% introductory APRs, the prevalence of initial bonuses, and protection against devaluation. The biggest cons of cash back credit cards are lower earning rates compared to travel rewards cards and high regular APRs.
Beyond that, the overalladvantages and disadvantages of using credit cards apply to cash back credit cards, too. The advantages include convenience and credit-building on the positive side, with the risks of overspending and hurting your credit standing as potential disadvantages.
Top 5 Pros and Cons of Cash Back Credit Cards
| Pros | Cons |
| Cash back is straightforward | Limited total value compared to travel rewards |
| Credit card companies cannot devalue cash back | Potential for earning caps and enrollment requirements with bonus rewards categories |
| Signup bonuses are common among cash back credit cards | Rewards expiration due to account closure, missed payments and/or inactivity |
| Many cash back credit cards don’t have annual fees | High regular APRs are the norm with rewards cards |
| Cash back credit cards often have 0% intro APR deals | Some of the best cash back credit cards have annual fees |
At a glance, it may seem like cash back credit cards are at least as troublesome as they are beneficial. And they certainly can be, if you pick the wrong card for your lifestyle. The key is to maximize the pros of a cash back credit card and minimize the cons in the context of your own personal habits and preferences.
Pros of Cash Back Credit Cards
- Cash back is straightforward. Rewards from a cash back credit card are earned in dollar amounts, and redeem in dollar amounts, leaving little room for confusion.
- Credit card companies cannot devalue cash back. Cash back is the most stable form of credit card rewards because its units are in dollar amounts. The value of points and miles, however, are up to the card issuer, and can change at any time.
- Signup bonuses are common among cash back credit cards. Cash back credit cards can come with cash signup bonuses. Though these generally come with a spending requirement, a cash back card will give you a percentage of that spend back, plus the cash bonus.
- Many cash back credit cards don’t have annual fees. There are definitely exceptions to this, but there are so many cash back credit cards on the market without annual fees, you’ll have more than a few to choose from.
- Cash back credit cards often have 0% intro APR deals. If you want to make a big-ticket purchase but you’re worried about a cash back credit card’s high regular APR, find one with a 0% APR period on purchases. That gives you time to pay off the purchase without paying interest.
Cons of Cash Back Credit Cards
- Limited total value compared to travel rewards. Travel rewards have the potential to be more valuable than cash back rewards, unit for unit, especially if you redeem them for travel. So if you travel frequently, you’re likely to profit more with a good travel credit card than a cash back credit card.
- Potential for earning caps and enrollment requirements with bonus rewards categories. If a single cash back category is the reason you’re applying for a certain credit card, check the card’s terms for spending or earning caps in that category. Caps are usually a dollar amount within a certain timeframe, like a quarter or a year. Also, you may have to enroll to “activate” a new category every quarter with some cash back credit cards, so your earnings may not be automatic.
- Rewards expiration due to account closure, missed payments and/or inactivity. Some cash back credit cards have rules in their terms stating that you forfeit any earned rewards if you make a late payment or your account is closed for any reason. Some cash back rewards expire if you don’t use the credit card for a certain length of time.
- High regular APRs are the norm with rewards cards. Even if a cash back credit card comes with a 0% APR intro period, it’s likely to have a high regular APR. Paying interest can negate the overall value of cash back earnings very quickly.
- Some of the best cash back credit cards have annual fees. Though there are many free cash back credit cards, the ones that give the highest cash back rates - beyond 5% back - will more than likely charge an annual fee.
The many upsides of cash back credit cards are likely why74% of Americans prefer cash back rewards over miles, hotel points, or even free gas. It’s hard to argue with getting a percentage of your purchases back for free, after all, and the cons simply aren’t significant enough to overcome the pros. That said, the downsides should also be accounted for when you’re shopping around for a cash back credit card.
If you’d like a recommendation, check out WalletHub’s picks for the best cash back credit cards on the market right now.
This answer was last updated on 06/10/24 and it was first published on 02/18/20. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
