Compare cash back, reward credit card programs

Cash back and reward credit card programs appear quite similar and are generally lumped together by most banks and credit card companies. However, there are significant differences in how you earn and what you can do with your earned "currency."

Which type of cash back or reward credit card program is right for you? It all depends on your tolerance for dealing with points versus earned cash back credits, and whether you consider spending points for rewards merchandise to be more fulfilling than getting a cash back check a few times a year.


Cash back rewards programs are true to their name in that they pay you cash back or rebate a percentage of the money that you have spent on your credit card. This is the most straightforward type of reward and is the appropriate credit card reward for seekers who want cash in exchange for their credit card loyalties. You may get less value with a cash back program, but it does not require any effort to keep track of points or miles to get your reward.

Other types of credit card reward programs pay you points for your purchases, typically at a rate of one point per dollar spent on the card. The devil is in the details, though, and credit card companies tend to set their advantage with how they price award merchandise in terms of required points to redeem for the things you desire. But, compared to buying the merchandise at retail prices, it is still a good deal -- especially since you have earned it for simply using your credit card on other purchases.

Some rewards credit cards have very specific currency -- such as gas reward cards -- either issued by banks in partnership with gasoline retailers or generic gasoline rewards cards. Points earned on these types of cards are accumulated in a points bank and applied as a credit to future gasoline purchases. These can be a good deal if you must drive a lot and have a significant monthly gasoline bill. As with other types of statement credit rewards, consumers may not enjoy rewards in the form of debt reduction as much as those that provide a gift or real cash in their pockets.

Neither cash back nor rewards credit card programs will make you rich, but they will get you a bit further toward your financial destination, or literally farther down the road.

Updated May 4, 2009

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