One disadvantage of cash back cards is that it can get expensive to carry a balance from month to month because of high APRs. Cash back credit cards may also have earning caps that could limit your ability to earn bonus cash back, and the initial bonuses aren't as big as they are with travel cards. On the other hand, cash back does offer more flexibility since you can use it for anything.
- Lower value compared to other rewards.Cash back cards are a useful way to save money, but they may not save you as much overall as the best travel credit cards. Travel cards tend to offer higher earning rates, bigger initial bonuses, and points and miles that can be redeemed for more than 1 cent each. They may also offer lucrative perks and benefits that aren’t normally found on cash back cards, such as free flights and hotel stays or airport lounge access.
- Earning caps.Sometimes, a bonus cash back offer only applies to purchases up to a certain dollar limit within a given timeframe. When you reach that limit, you’ll earn the card’s base rewards rate on purchases in that category for the remainder of the period, meaning that the card may be less valuable than it appears, depending on your spending habits.
- May lose rewards.On some cash back cards, you can lose your rewards if you don’t use your card for an extended period or if your account gets closed. Plus, you may not be able to earn new rewards if you fall behind on payments.
- Delayed access.It can take a while after you make a purchase before you’ll actually have access to the cash back you’ve earned. You may have to wait a few days or up to several weeks before you can redeem. Bonuses are likely to take longer to hit your account than normal purchase-based rewards.
- High annual fees.Some of the best cash back credit cards charge annual fees to compensate for their lucrative rewards. You can still save lots of money with these cards, so long as you earn enough to compensate for the fee.
- High regular APRs. Cash back cards typically come with tradeoffs, and the cards with the most valuable rewards often charge interest rates. Fortunately, you can avoid paying interest on a cash back card if you pay your balance in full every month.
Most of these drawbacks apply to other types of rewards cards as well. However, both cash back and other types of rewards cards can help you save money, build credit, and finance large purchases. You can compare the best cash back credit cards to see which offers match up well with your spending habits, or consider a travel rewards card if cash back isn’t the right fit for you.
This answer was last updated on 09/12/24 and it was first published on 11/21/23. 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.
