Aquib Nawab
Personal Finance
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Cashback credit cards work by giving you a small percentage of cash back for every dollar spent on eligible purchases, and you can redeem this cashback in multiple ways, including statement credits, direct deposits, and gift cards.
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Credits: Canva
Points cards function uniquely, awarding points for eligible purchases. Purchases with bank-branded (e.g., American Express or Capital One) and co-branded cards tied to specific airlines or hotels (like Hyatt or Delta).
Points-based credit cards usually feature more enticing sign-up bonuses, but they often entail higher spending requirements. In contrast, cashback credit cards offer smaller bonuses with easier-to-meet minimum spending requirements.
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Credits: Canva
In rewards, points credit cards excel for travel spending with high rates. Conversely, cashback cards reward diverse categories like gas, groceries, dining, and more. Some cashback cards feature rotating bonus categories for added rewards.
Points-based credit cards offer versatile redemption options, including cash or travel, with rates varying depending on your choice. Meanwhile, cashback credit cards provide simpler cash redemption like statement credit, checks, gift cards, and more.
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Credits: Canva
Points-based credit cards can come with annual fees that range from $95 to $695 or more, depending on the card's features and benefits. In contrast, cashback credit cards typically do not have an annual fee.
Points-based credit cards frequently offer extra benefits like complimentary luggage, hotel stays, lounge access, and TSA Precheck. In contrast, cashback cards provide broader perks such as purchase protection and extended warranties.
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Points-based credit cards are tailored for travel rewards, perfect for frequent travelers. Cashback cards, especially those with rotating categories, demand active participation to maximize rewards but excel in rewarding everyday spending.
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Converting rewards points into cash or travel value depends on your card issuer, with cash redemptions typically at a rate of $0.01 per point and travel redemptions at $0.015 per point. Some cards offer direct transfers to hotel and airline partners.
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Your choice between cash back and points hinges on your travel frequency and spending patterns. Points cards are ideal for brand loyalty and frequent travelers, while cashback cards offer simplicity and flexibility. Some cards offer both options.
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