5 things to keep in mind when you’re deciding between a rewards card and a cash-back card

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As credit card issuers change and devalue their points programs, you might debate the merits of opening a cash-back card instead.
Cash-back cards have their advantages: They generally don’t have annual fees, there are no restrictions on how you can redeem that cash, and you can keep earning miles, points, and status when you book with cash back.
However, points earned through rewards cards are usually more valuable than cash, especially if you’re a frequent traveler. Points-earning cards also usually have lucrative sign-up or welcome bonuses.
See Business Insider’s list of the best rewards credit cards »

Points- and miles-earning credit cards have grown increasingly popular in the last few years, and with that we’ve seen loyalty programs devalue and make using your rewards more difficult. So, is it time to switch to cash-back cards? Below, see how cash-back cards stack up against those that earn points and miles instead.

Keep in mind that we’re focusing on the rewards and perks that make these credit cards great options, not things like interest rates and late fees, which will far outweigh the value of any points or miles. It’s important to practice financial discipline when using credit cards by paying your balances in full each month, making payments on time, and only spending what you can afford to pay back.

Cash-back cards often don’t have annual fees

While most rewards-earning credit cards carry annual fees ranging from $50 to $550, cash-back cards tend to be fee-free.

Several cards that earn at least 2% cash back during the first year have no annual fee, like the Citi® Double Cash Card (1% cash back when you buy, plus 1% cash back when you pay), Fidelity Rewards Visa Signature Card, and Discover it® Cash Back. If you put a good amount of your spending on one of these cards can add up to substantial rewards.

If you want a card that earns you bonus cash back on certain spending categories without having to pay an annual fee, you have options, too. Here are some of the best ones:

Wells Fargo Propel American Express® card — Earns 3x points (3% return) on categories like travel and gas stations
Chase Freedom — Earns 5% cash back on rotating quarterly bonus categories, on up to $1,500 in purchases each quarter you activate
Ink Business Cash Credit Card — Earns 2% to 5% bonus cash back on select categories tailored to business users (on the first $25,000 in combined purchases each account anniversary)

Once you tally up your earnings for the year, there’s no need to compare the value gained from the rewards to the annual fee you’re about to pay. Thus, you don’t have to contemplate whether a card is worth keeping or not because of the annual fee.

There are some exceptions to this no-annual-fee rule, like the Blue Cash Preferred® Card from American Express, which has a $95 annual fee. This card earns 6% back at US supermarkets …read more

Source:: Businessinsider – Finance


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