Cashback vs. Rewards Credit Card: Which One Fits You Best?

Picking the right credit card can feel tricky, especially when you’re trying to decide between a cashback vs. rewards credit card. Both offer great perks that make your spending more rewarding, but they work in different ways. 

This guide will help you understand the key differences, along with the pros and cons of cashback and rewards cards, so you can choose the one that best fits your lifestyle and financial goals.

What’s the Difference Between Cashback and Rewards Credit Cards?

Let’s start with the basics. A cashback credit card gives you back a percentage of the money you spend, usually credited automatically to your account. Think of it as a bit of bonus cash that helps reduce your credit card bill.

On the other hand, a rewards credit card earns you points for every peso spent. Points earned can then be traded in for all sorts of stuff: think gift vouchers, cool merchandise, air miles, or even waiving your annual fee. The thing is, you usually need to rack up a certain number of points before you can actually use them, and sometimes, redeeming those points takes a bit of extra effort.

In simple terms:

• Cashback = Money back on your purchases (easy to understand and redeem)
• Rewards points = Points you collect and exchange for prizes or discounts (more flexible but requires some planning)

Pros and Cons: Cashback Credit Cards

To make your choice easier, here are some key pros and cons of cashback credit cards you should know.

Advantages

• Straightforward savings. Cashback cards are easy to understand. You know exactly how much you’ll get back, usually expressed as a percentage of your spending. For example, if your card offers 5% cashback on dining, spending ₱1,000 on a meal earns you ₱50 back.
• Automatic redemption. Most cashback cards credit your rebates automatically to your credit card account every month, so you don’t have to do anything to enjoy your rewards.
• Maximize rewards in key categories. Many cashback cards offer higher rebates on specific spending categories like groceries, gas, or dining, allowing you to earn more where you spend the most.
• Great for predictable spenders. If your monthly expenses are consistent, cashback cards can help you save a steady amount of money every billing cycle without fuss.

Disadvantages

• Caps and limits. Cashback rewards usually have a monthly or annual cap. For example, you might only earn cashback up to ₱1,000 per month, after which you won’t get any more rebates until the next cycle.
• Minimum spend requirements. Some cards ask you to hit a minimum spend before you start earning cashback, which might not work for everyone’s budget.
• Annual fees. Cashback cards often come with higher annual fees, sometimes between ₱2,500 to ₱3,500, so you need to weigh the savings against these costs.

Pros and Cons: Rewards Credit Cards

Now, let’s check out the upsides and downsides of a rewards credit card.

Advantages

• Flexibility of redemption. With rewards points, you can swap them for all kinds of perks like merchandise, gift certificates, air miles, or even cash vouchers. It’s a great option if you enjoy picking out your own rewards.
• Accelerated points for specific categories. Some rewards cards offer bonus points for certain types of spending, like shopping or dining, helping you rack up points faster.
• Ideal for travelers. If you want to earn air miles for flights, rewards cards often let you convert points into airline miles, which can save you money on travel.
• Potential for big rewards. With strategic spending and choosing the right card, you can accumulate points that translate into significant value over time.

Disadvantages

• Points can expire. Rewards points usually have an expiration date, so it’s a good idea to keep an eye on them and use them before they disappear.
• Redemption process can be complex. Unlike cashback, redeeming points might require browsing through catalogs, understanding conversion rates, or meeting minimum redemption thresholds.
• Spending caps. Just like cashback cards, rewards cards may limit how many points you can earn each billing cycle.
• May not suit casual spenders. If you don’t spend much or don’t like managing points, rewards cards might feel like more of a hassle than they’re worth.

Which One Should You Choose? Cashback vs Rewards

If you’re a beginner credit card applicant, we’ve come up with a quick rundown to help you make the right choice:

Tips for First-Time Credit Card Applicants

If you’re new to credit cards, it’s smart to get familiar with the basics before jumping in. Make sure you know key credit card terms like interest rates, fees, and billing cycles so you can use your card with confidence.

When deciding between cashback vs. rewards cards, consider your spending habits. Do you want simple, hassle-free savings, or do you enjoy collecting points and redeeming them for travel or gifts? Your answer will guide you toward the best card type.

Choosing Your Perfect Credit Card: The Bottom Line

Choosing between a cashback vs. rewards credit card boils down to your lifestyle and preferences. If you want straightforward savings with minimal fuss, a cashback card is your best bet. But if you love the idea of collecting points and redeeming them for travel or exclusive perks, a rewards card might be more your style.

No matter which card you choose, be sure to review the fine print and understand the associated fees. Choosing a card that fits how you spend will help you get the most bang for your buck.

At Cards.ph, we’re here to guide you through your options and help you make smart, informed decisions for a healthier financial future.

Ready to start exploring? Just head over to Cards.ph where you can easily find and compare the best credit cards out there. We’ve got a great mix of top cashback and rewards credit cards, all tailored to fit your needs. Your perfect card is just a few clicks away!