Pros and Cons of Cash-Back Credit Cards

Figuring out rewards is a snap, but earning them may not be.

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Cash-back credit cards are rewards cards that give you a small percentage of each purchase back as a reward.

They can help you simplify your finances, earn rewards on spending, and take advantage of extra perks that debit cards don’t offer. Since cash-back rewards are typically easier to understand than travel rewards, a cash-back card is also a good option for a first rewards credit card.

Cash-back credit cards have both benefits and drawbacks. Depending on your spending, another type of card might offer better rewards or save you more money over the long term.

Before you sign up for a cash-back credit card, consider these pros and cons.

Cash-Back Credit Card Pros and Cons

  • Cash rewards

  • Usually no annual fee

  • Potential for sign-up bonuses

  • Shopping perks

  • Potential for 0% APR offers

  • High ongoing APRs

  • Foreign transaction fees

  • Earning caps

  • Few offer travel rewards

Pros of Cash-Back Credit Cards Explained

  • Cash rewards: Each cash-back credit card has its own earning scheme, but they all offer the same straightforward, easy-to-use benefit: cash back for each dollar you spend. Some cards offer rewards at a flat rate, such as 1.5% back on all purchases. Others, such as Chase Freedom, provide higher levels of cash back on certain categories of purchases, such as gas or groceries, that either stay the same or rotate each quarter. 
  • Most have no annual fee: Most of the top cash-back credit cards on the market don’t charge an annual fee. That means you won’t sacrifice some of your rewards to a fee, and you can keep the card open fee-free even if you decide to primarily use a different one in the future. That’s worthwhile, because a longer credit history can strengthen your credit score.


A few cash-back credit cards do charge an annual fee. If you choose one of them, make sure the rewards you earn will be greater than the fee.

  • Many offer sign-up bonuses: Like travel rewards credit cards, many cash-back credit cards offer a sign-up bonus if you meet a minimum spending requirement within the first few months. These bonuses can be worth hundreds of dollars.
  • Shopping perks: Some cash-back credit cards (as well as many travel rewards credit cards) offer benefits that can safeguard your purchases or save you money. These perks include a lowest-advertised-price match, extended warranties, return guarantees (or a refund if a store won’t accept a return), cell phone protection, and more. Not all cards offer these features. Read your card’s benefits guide for a detailed breakdown.
  • Some have 0% APR offers: Some cash-back credit cards offer 0% APR on purchases or balance transfers for a limited time. That will let you pay down a big purchase, or existing debt, without paying interest.

Cons of Cash-Back Credit Cards Explained

  • High ongoing APR: If the cash-back card you choose has a 0% APR offer, it won’t stay that way forever. The average credit card APR is just over 20% (as of August 2021), and many cash-back credit cards charge even more. Your ongoing APR will be based on creditworthiness, so if you don’t have exceptional credit, you’ll receive an APR on the higher end of the card’s range.


If you don’t think you can pay off your balance in full each month, you're better off forgoing rewards and looking for a card with a low ongoing APR.

  • Foreign transaction fees: Travel credit cards are more likely to waive foreign transaction fees. Cash-back credit cards, on the other hand, commonly tack a 3% fee onto purchases made abroad. 
  • May have earning caps: Some cash-back credit cards let you rack up unlimited rewards, while others set caps on the amount of cash you can receive back for regular or bonus-category spending. 
  • No travel rewards: A few cash-back credit cards, like the Chase Freedom, let you redeem rewards for cash-back or for free travel through an online portal. If you’re looking to use rewards specifically for travel expenses, or to transfer points to airline or hotel partners, a travel rewards card is likely a better choice. 

Is a Cash-Back Credit Card Right for You?

Before you sign up for a cash-back credit card, make sure you’re more interested in earning cash than travel rewards, and that you’re sure you have the self-discipline to earn rewards on your spending without racking up debt.

Paying interest on a balance can quickly negate cash back, and it will leave you vulnerable to a potentially high APR.

Compare cash-back credit cards’ rewards schemes, sign-up bonuses, and perks. With enough research, you’ll find a card that fits your spending style and rewards preferences.

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