You’ve got a credit card in your wallet; the time has come to make it work for you. As an everyday user, there’s no better way to get more value out of your card than using it to earn cashback or sign-up bonuses. But which is better? And how do you decide between them?
Cashback
When it comes to rewards, a 3 percent cash back credit card is usually the better option. Cashback makes sense if you pay off your balance in full every month or travel often and shop online. It’s also ideal for people who are disciplined with their spending and have no interest in accumulating points that they may never use.
However, if you’re a big spender, credit card rewards will be more valuable to you than cash back. In this case, it wouldn’t make sense for you to take advantage of your card’s 1% rewards program when you could get $1 back per dollar spent on purchases using another card instead!
Sign-up bonuses
Sign-up bonuses are usually around 0.5%-1% of your spending and can be used to buy travel or gift cards. However, they’re only available for a limited time, so if you want to take advantage of one, ensure you do it within the specified timeframe (usually within 3 months).
Sign-up bonuses can be used on any card, although they normally require you to open a new credit card account with the bank issuing that sign-up bonus offer. SoFi professionals say, “Win a welcome bonus between $10–$10K as rewards points.”
Some banks also offer frequent flyer miles on credit cards, which can be redeemed for free flights. Credit card rewards programs generally require monthly payments and have annual fees ranging from $30-$95 per year, depending on how valuable their rewards are compared with other options available in your area (like cashback).
Which should you choose?
In general, cashback is the better option. It’s usually easier to get than bonus rewards, which you can use for any purchase. With bonus rewards on your credit card, you have to decide if they’re worth using up some of your points (or miles) on a specific item that may not be available elsewhere.
If you are looking for a free flight or hotel stay, then a bonus reward card would be fine because there will only be one flight/hotel chain with these promotions at any given time. Otherwise, cashback will always be more flexible than bonuses because there are generally more options for redeeming cash back than there are for redeeming points or miles.
Cashback is usually the better option
Cashback is usually the better option if you’re planning to use the card for a while. For example, if you want to get a $250 statement credit for spending $2,500 in 90 days and close your account after 30 days or so, however, sign-up bonuses are better.
It’s also worth noting that some cards offer both types of rewards; you can get 2% back on purchases or 20% off travel purchases through Expedia, for example.
In this article, you’ve looked at the pros and cons of cashback cards and sign-up bonuses. Hopefully, you are more informed about how each type of reward can work for you by now.
