The ACCC Breaks Down the Benefits And Drawbacks Of Using Cash Back Credit Cards

Sep 22, 2022 By Triston Martin

There is a wide variety of rewards credit cards on the market, and cardholders can earn a percentage of cash back on purchases made with these cards. Consumers should be aware of the annual fees and interest rates associated with such offers before applying, even though they may initially seem attractive. The American Consumers Credit Counseling Service is a nonprofit organization that provides consumers with a list of the advantages and pitfalls of cashback personal loans. Steve Trumble, CEO and founder of American Consumers Credit Counseling, says, "it's crucial to know what you're getting back before actually signing on for a credit card containing cashback offers." Most cashback credit cards offer higher interest rates and annual fees. Find out if the benefits you receive from the card outweigh the costs of maintaining the account.

The Benefits and Drawbacks of Using Cash Back Credit Cards

Benefits of Credit Cards That Offer Cash Back

Cash Rewards

Although the specifics of how cashback credit cards earn rewards vary by issuer, all of them provide the same simple, convenient perk: a certain percentage of your spending is returned to you in cash. For example, some cards may offer a flat 1.5% cash back, including all purchases. Some, like Chase Freedom, offer bonus cash back on fixed or rotating categories of purchases like gas and grocery.

No Annual Fee

There is usually no yearly charge for most of them: The best cashback credit cards on the market typically don't have annual fees. That way, you might keep your card open without incurring any costs, even if you ultimately opt to use a different card. It's good enough to justify it because having a longer credit profile can boost your credit score.

Many Offer Bonuses When You Sign Up:

Many cashback credit cards, similar to travel benefits, provide a welcome bonus once a certain amount is spent within the initial few months. The value of these incentives can reach several hundred dollars.

Shopping Perks:

A few cash back credit cards (and many rewards points credit cards) come with perks that protect your purchases or help you save money. Features such as price matching (to the lowest advertised price), insurance products, refund guarantees (or reimbursement if the retailer won't accept the return), cell phone security, and many others are provided. A wide variety of cards do not include these capabilities.

Apr Offers:

You may be able to get a cashback credit card with an introductory 0% APR upon purchases as well as balance transfers. You can eliminate interest charges while paying off a large purchase or outstanding debt.

Cash-Back Credit Card Drawbacks

Apr That Stays High:

The introductory 0% APR period on your cashback credit card won't last forever. As of August 2021, the average annual percentage rate (APR) for credit cards was slightly over 20%, and the APR for many cash back cards is significantly higher. Your creditworthiness will determine your continued APR; therefore, if your credit is less than perfect, you can expect to be charged an APR closer to the upper end of the card's range.

Fees for International Transactions:

Most credit cards designed for travelers don't charge additional fees while purchasing abroad. However, a 3% surcharge is often added to all transactions made with a cashback credit card.

Earning Caps:

While these cashback credit cards have no limits on how much you may get back on either normal or bonus spending categories, others do.

No Travel Benefits:

Reward points earned on cashback credit cards, such as Chase Freedom, can be redeemed for statement credits, gift cards, and even airfare and hotel stays through a dedicated website. Travel rewards credit card is a good option if you plan to spend your rewards for travel-related purchases or transfer them to airline or lodging partners.

Should You Get A Credit Card That Gives You Cash Back?

You should get a working capital credit card if you plan to use it to earn cash rather than travel incentives. You can exercise enough self-control to earn rewards upon regular spending without going into debt if you know. Interest payments swiftly nullify cashback, and you open yourself up to just a potentially high annual percentage rate. Evaluate the benefits, incentives, and sign-up offers of several cashback credit cards. You may locate a card that suits your spending habits and gives you the benefits you want with a little digging.


The value of points and miles might decrease with time, much like currency. However, I believe cash is more adaptable, straightforward to understand, and easier to track than vacation incentives. In addition, we now live in a world with a dizzying array of credit card possibilities. Therefore travel credit cards could be ideal for everyone due to the haziness of their redemption policies. It could be time to reevaluate current cashback rewards in your credit card strategy and perhaps add a cashback card to your wallet.

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