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5 things to keep in mind when you’re deciding between a rewards card and a cashback card

Who doesn’t like earning a bit on the side when they have to spend money on necessary things? Credit cards make that happen through reward points, cashback and loyalty benefits. Many credit cards out in the market offer reward points and loyalty bonuses, some also offer cashback. Cash back credit cards are more flexible in usage since you are getting real cash in return for your transactions. However, a person who has various shopping needs ranging from supermarkets, apparel, movies to travel and currency exchange might earn more rewards through a reward points credit card. But it is safe to say that the ultimate credit card should offer both reward points and cashback. One should check out this type of card if they are not already having one. There are a few fundamental differences in cashback cards and reward cards that one should be aware of in case they are looking to apply for one.

 5 Things to keep in mind while deciding between a rewards card and a cashback credit card. Source: mymoneymantra.com

Things to keep in mind when you’re deciding between a rewards card and a cashback credit card

Sign-up bonus is higher in Reward Cards:

Both cash back credit cards and rewards cards offer sign up bonuses and discounts but rewards cards usually have a high sign up bonuses compared to cashback cards. The cashback is rather simpler compared to the overwhelming number of points you receive in rewards cards. Reward cards seldom have any caps on how many points you can score but cash back credit cards come with a yearly limit on the earnings you can have. Sign-up bonuses and discounts make a good portion of your yearly savings; calculating your estimated yearly savings through both types of cards before applying is recommended. The points are often transferable in rewards cards, this will help in reaching the threshold for certain purchases.

Annual Fees is lower in Cashback cards:

Cash back credit cards have relatively lower annual fees compared to rewards cards, oftentimes cash back credit cards are free of annual charges. Even if there is a fee, it is more likely to be waived off in the first year. Although the fee is a barrier in rewards cards, usually it is easier to earn points compared to earning a cashback. Annual fees go higher for a card as the possibility of savings goes up, you might have to end up taking one with a moderate annual fee.

Redeeming Cashback is easier:

Cash back credit cards come with flexible usage methods, it is very easy to redeem. You can transfer this credit into a debit account or use it to make repayment to your credit card. It is almost like having real money in your hands. However, reward points are sometimes rather complicated to use, you cannot redeem points at every store or a supermarket. You can only use them in places that are covered by the card. Sometimes card issuers can restrict usage of points to certain purchases.

Points could be more valuable than cashback:

Sometimes reward points earned could be fared as more valuable than the same amount of cash back earned. Rewards points are more lucrative to the receiving businesses so they end up offering value-added services on top of services claimed with reward points. For example, if you book an airline ticket, airport lounge access is provided additionally, free of charge. You may also be given free trip cancellation and insurance. But there is always a risk of card issuers devaluing the rewards points whenever they choose to, you might have to earn more points than you previously had to, to make certain purchases through rewards. Rewards cards are complicated in this way.

Ultimate card has both Cashback and Reward points:

If you do not mind paying annual fees to obtain the dream card that helps you earn both cash back and reward points, you could check out the Ultimate Credit card from Standard Chartered bank. It has an amazing rewards scheme, which earns you 5 reward points on every 150 INR spent. Discounts up to 25% can be utilized in restaurants and dining. 5% cashback on duty-free purchases and lounge access in over 5000 airports. A card that has both benefits of rewards and cashback does not only help you strategize your spends but it will also give you the flexibility to choose between rewards and cashback based on your preferences.

Whether you are a travel enthusiast or a movie fanatic or a foodie who likes to check out fancy restaurants, you will like what these cards have to offer. It is important to understand that both reward points cards and cash back credit cards are there to save your money, one should not get carried away in getting more reward points; resulting in spending more money compared to the utility of rewards. Various credit cards available in the market have different rewards offerings and different percentages of cashback. As discussed, a credit card with both reward points and cashback could help you save more money than other individual cards combined.

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