Why Cash Back Credit Cards Suck

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In the financial industry and the world of credit card blogs, one common recommendation is to just use a flat cashback credit card that earns rewards. For some people, this can make sense. However, I’m here to tell you that if you have ANY interest at all in traveling, cash back credit cards are NOT the best choice. In fact, cashback cards can flat out suck, compared to the alternatives!

Why Cashback Credit Cards Suck

In essence, cash back cards suck because they don’t allow you to maximize value and make “aspirational” redemptions.

Many of the best cashback credit cards earn about 2% rewards on every purchase. The highest that signup bonuses typically reach on these cards is $500. While that’s certainly a decent chunk of change, it’s nothing compared to the value you can get from a good travel card.

For example, let’s compare some recent redemptions I’ve made with my own travel credit cards.

I got the Chase United Explorer Business card with a signup bonus of 75,000 miles. This could have earned me up to 3 domestic round-trip tickets, or even a round-trip to Asia from the US. I made an odd but incredibly lucrative redemption which fit my travel plans perfectly – 2x 1-way tickets from Eastern Europe to Hawaii.

This redemption cost me a total of 70,000 United miles and $150 in fees. So, essentially the whole sign-up bonus on the Explorer card.

The cash price of those tickets? More than $2,500.

That means I got more than $2,400 in value out of ONE credit card signup bonus.

The most I could have got cash-back from any single signup bonus is about $500, maybe a bit more with a targeted offer.

Likewise, I used the signup bonus on a Marriott credit card for 3 nights in a luxury hotel in Hawaii, which priced out a whopping $1,900. Again, this was from a single credit card signup bonus.

If you’re someone who likes to fly first class or business class, the value can get even more insane.

For example, this guy scored the equivalent of a $60,000 First Class round-the-world ticket using miles and paid just $300 out of pocket. Granted, he used a ton of miles – but try doing that with cashback offers!

 

Signup Bonus Comparisons

On cashback credit cards, signup bonuses are usually fairly low (i.e. SunTrust Bank issued credit cards). There are a few juicy ones, but they rarely exceed a few hundred dollars. Here are some top options:

 

Cashback Signup Bonuses

Capital One Savor – $500 cashback after spending $3,000 in the first 3 months

Chase Ink Business Unlimited – $500 cashback after spending $3,000 in the first 3 months

Uber Visa Card – $100 cashback after spending $500 in the first 3 months

American Express Blue Cash Preferred – $200 cashback after spending $1,000 in 3 months

 

Travel Signup Bonuses

Barclays Arrival + – 70,000 mile signup bonus (worth $700 towards travel)

Chase United Business Explorer – 75,000 mile signup bonus (worth $600-$2,500+ towards flights)

Citi AAdvantage Platinum Select – 50,000 mile signup bonus (can be matched to 70,000) (worth $600-$2,000+ towards flights)

As you can see, the value of the travel card signup bonuses is generally higher. And really, there’s not many lucrative cash bonuses to chase – while there are many great travel cards to try out.

 

When Cashback Cards DO Make Sense

We’ve established that travel credit cards often offer a better overall value than their cash-back equivalents. However, in some circumstances, cashback credit cards may actually make sense.

We primarily recommend cashback credit cards for those who don’t like to travel and won’t be able to take advantage of using miles & points for vacations.

Other than that, cashback might make sense for businesses who spend a lot on credit cards and wouldn’t be able to use all their accrued miles.

But for everyone else, travel rewards cards are the way to go!

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