Pros and cons of cash back reward system

Advertising Disclosure

Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from many credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. Credit-Land.com has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » Research » Guides » Travel with Credit Cards » Pros and cons of cash back reward system

Pros and cons of cash back reward system


Updated: December 26, 2012

Add to Favorites:
More and more credit card companies are offering reward points to its customers for using their credit cards against monetary transactions. Rewards offered include gaining airline miles to shopping and dining discounts. Cash back credit card offers are also one kind of reward being offered to the customers by different financial institutes. Depending on the need, a credit card user can determine if he will benefit from cash back or point based reward systems. This can be best determined by understanding the pros and cons of both the points as well as cash back reward system. Pros and cons of cash back reward system Cash back reward programs offered by the different card issuing institutes allow the user to earn rebates on the basis of a percentage of the regular daily charges. This percentage is a flat rate however in some cases, a tier-based method is applied.  The earnings on the credit card usage vary from one to five percent, where the card is used and for what purpose. Advantages of cash back over point reward points
  • Point reward system is beneficial only in certain cases. Cash is always treated as king. Cash or check handed over by the credit card companies can be used for different purposes as a dollar. Using the cash will have no limits and unlike in case of reward points, they will not be specific in use. Point rewards, on the other hand can be used for only specific reasons as mentioned in the card’s rules and regulations. They can either be in gas stations, dining in specific restaurants or shopping. This makes the use of reward points limited.
  • Cash back rewards may also be used to credit card bills. Users often give their credit card companies standing instructions to use the cash back earned in balancing their credit amounts. Point rewards cannot be used for repaying credit card bills. They can be used only for pre determined products and schemes.
  • While in point reward schemes, the rewards are granted only after accumulation of specific number of reward points. To achieve this specific number more of specific purchases are to be made and this proves to be disadvantageous for the user. On the other hand cash back offers can be used anytime. As per the slab crested by the particular credit card company, the cash back schemes can be availed any time
  • Understanding point reward system is very difficult. In contrast, the use of cash back reward schemes is very beneficial.
Disadvantages of cash back over point reward schemes
  • Many credit card issuing institutes offer cash back schemes to its users only once in a year.
  • In case of cash back rewards, higher incentives might not be granted for some particular products or use. This again limits the use of cash back. Moreover, some credit card companies also offer only point rewards for particular usages.
If tier based, the cash back reward points become difficult to understand.

Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

How to Subdue Wedding Expenses and Earn up to $1,000 for Honeymoon

How to Subdue Wedding Expenses and Earn up to $1,000 for Honeymoon

Posted: June 21, 2017

Whether you are married or not, we all agree that marriage is incredibly important for a person. It signifies the beginning of two people as a team, as a family, of a long commitment. It is a newly born union and the sign of your choice, ... Continue reading
How To Choose The Best Credit Card For Everyday Spending

How To Choose The Best Credit Card For Everyday Spending

Posted: June 21, 2017

When you reach for your wallet to pay for groceries, gas, dinner out, or any other everyday purchase, are you searching for cash, a debit card, or a credit card? Many people hesitate to charge this type of everyday spending to a credit ... Continue reading
How to Save Money. Best Credit Card Deals and Tips.

How to Save Money. Best Credit Card Deals and Tips.

Posted: June 20, 2017

We all've been through or may find ourselves in such an emergency when money is needed immediately. Lucky you are if you have savings for unexpected expenses. If not, it's never too late to start saving money. There are different ways to ... Continue reading