Pros and cons of cash back reward system


ADVERTISING DISCLOSURE: is an independent, advertising-supported web site. receives compensation from most 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. 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

The content is accurate at the time of publication and is subject to change.
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.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Other Travel with Credit Cards Research:

Related Research:

Top 5 Cards for Travel from Our Partners: Summer 2018 – Expert’s Choice

Top 5 Cards for Travel from Our Partners: Summer 2018 – Expert’s Choice

Posted: February 12, 2018

The sun shines more and more each day, flowers are in bloom and you already feel how hot it is getting - summer is here. Summer holidays are almost here, and you are in need of dire preparation. You can lift in spirits and let CreditLand ... Continue reading
Cash Back or Travel Rewards? Here’s How to Decide On The Right Card

Cash Back or Travel Rewards? Here’s How to Decide On The Right Card

Posted: February 10, 2018

If you're trying to find the perfect rewards credit card, you might feel like you're drowning in options. There are just so many out there, and many of them look similar. This can make it tough to decide on a card. One thing people often ... Continue reading
Price Protection: Credit Cards That Will Refund a Price Drop

Price Protection: Credit Cards That Will Refund a Price Drop

Posted: February 8, 2018

Those who often find themselves buying stuff and then discovering that they could pay less for the same item they've just bought, will appreciate this credit card benefit – price protection. This is the least known and the most neglected ... Continue reading
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!