Choosing the right credit card can feel overwhelming. With so many options available, most Americans end up comparing two of the most popular benefits: rewards points and cashback. Both can help you save money and earn value on your everyday purchases but the better choice depends on your spending habits and financial goals.
In this guide, we’ll break down credit card rewards vs cashback, explain how they work, and help you decide which type of card is right for you.
How Cashback Credit Cards Work
Cashback cards are the simplest type of rewards card. They give you a percentage of your spending back, either as:
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Statement credits
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Direct deposits into your bank account
Example:
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1.5% cashback on all purchases → Spend $1,000 → Get $15 back.
Some cards offer rotating categories (like groceries, gas, or restaurants) with higher cashback percentages.
Pros of Cashback Cards
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Easy to understand and redeem.
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No complicated points systems.
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Great for people who want consistent savings.
Cons of Cashback Cards
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Rewards are usually capped at around 1–5%.
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You may miss out on higher-value travel redemptions.
👉 Best for people who want straightforward savings with no extra effort.
How Rewards Credit Cards Work
Rewards cards earn points or miles instead of cash. These can be redeemed for:
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Gift cards
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Merchandise
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Experiences
Example:
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2 points per $1 spent on dining → 10,000 points = $100 in travel credits.
Some programs, like Chase Ultimate Rewards or American Express Membership Rewards, allow you to transfer points to airline and hotel partners for even more value.
Pros of Rewards Cards
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Higher redemption potential (especially for travel).
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Big sign-up bonuses worth hundreds of dollars.
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More flexible in how you redeem.
Cons of Rewards Cards
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Can be confusing to manage.
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Best value often requires travel redemptions.
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May come with higher annual fees.
👉 Best for people who want maximum value and travel perks.
Key Differences: Credit Card Rewards vs Cashback
| Feature | Cashback Cards | Rewards Cards |
|---|---|---|
| Ease of Use | Simple, straightforward | More complex, requires strategy |
| Value Potential | 1–5% back on purchases | Can exceed 2–3¢ per point for travel |
| Annual Fees | Often none | Frequently $95–$550+ |
| Flexibility | Cash, statement credit, gift cards | Travel, gift cards, merchandise |
| Best For | Everyday spenders, minimal effort | Frequent travelers, maximizers |
Which Card Saves You More?
Scenario 1: Everyday Spender
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Spends $2,000/month on groceries, gas, and bills.
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With a 2% cashback card → $480/year back.
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With a rewards card (1 point = 1 cent) → $480 in travel.
If they don’t travel much, cashback wins.
Scenario 2: Frequent Traveler
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Same $2,000/month spend.
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Uses points to book a flight worth $750 for 50,000 points.
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Value per point = 1.5 cents instead of 1 cent.
In this case, rewards cards beat cashback.
Other Factors to Consider
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Annual Fees
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Cashback cards: Many have no fees.
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Rewards cards: Often $95+, but perks (like lounge access or free hotel nights) can offset the cost.
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Sign-Up Bonuses
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Rewards cards: Often $500–$1,000+ value if you meet spending requirements.
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Cashback cards: Smaller, usually $150–$250.
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Redemption Options
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Cashback = cash in your pocket.
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Rewards = more options, but sometimes less flexibility.
FAQs About Credit Card Rewards vs Cashback
Which is better: cashback or rewards?
Cashback is best for simplicity; rewards are best for maximizing value, especially for travel.
Do cashback cards ever have annual fees?
Yes, but most popular ones (like Citi Double Cash) are free.
Are rewards points taxable?
Generally, no. Rewards and cashback are considered rebates, not income.
Can you have both types of cards?
Yes! Many people carry one cashback card and one rewards card to cover all spending.
Final Thoughts
So, credit card rewards vs cashback which one should you choose?
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If you want simplicity and guaranteed savings, a cashback card is best.
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If you travel often and want to squeeze maximum value from your spending, a rewards card is the smarter choice.
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For many Americans, the ultimate strategy is carrying both: use a cashback card for everyday purchases and a rewards card for travel or dining.
At the end of the day, the right card is the one that matches your lifestyle. Evaluate your spending habits, compare offers, and pick the card that helps you get the most value out of your money.
