As per reports, credit card spending has increased by 43% year on year in November 2021. Credit cards are popular not only for the easy access to the credit they offer but also for the various rewards, cash-backs, and loyalty programs they are loaded with.

Credit card issuers offer redeemable reward points and cash points to customers on spending. The two most popular ways of offering rewards to customers are cash-back and travel rewards. 

Cash-back credit cards offer statement credits, and cash redemptions on purchases and travel rewards offer more focused redemptions. Customers may often get confused between the two reward methods. A wrong choice when selecting a credit card may lead the cardholders to not get the benefits they can fully avail and enjoy. 

Here is a detailed analysis of cash-back and travel reward credit cards and other rewards credit card companies offer. 

Cash-back credit cards

Cash-back credit cards offer rewards on everyday spending. The benefits offered by cash-back credit cards reflect directly in the statement credits or as cash redemptions. As the name suggests, cash-back rewards come as cash and not as points. The cardholder can redeem his cash-backs in the form of gift cards, a cheque, or a bank deposit. 

Travel reward credit cards

Travel reward credit cards are more focused on certain categories like airfare, dining, lounge access, and other travel-related perks. The redemption value on travel is the best on these credit cards. The redemption benefits these cards offer are often higher than the annual fees on these credit cards. 

Cash-back Credit Cards Pros

Cash-back credit cards offer several advantages, such as:

• Cash-back credit cards generally do not have an annual fee and may even offer a small joining bonus to the cardholder. It brings down the cost of maintaining a credit card. 
• Cash-back credit cards may offer a 0% APR on balance transfers and new and old purchases. If the cardholder plans to carry forward credit through a balance transfer, cash-back credit cards can help him save on the applicable interest.
• Rewards on cash-back credit cards are easier to track than on other cards.

Cash-back Credit Cards Cons

A few disadvantages of a cash-back credit card are:

• Cash-back credit cards usually offer lesser perks than travel credit cards. 
• Cash-back credit cards charge a foreign transaction fee which can be hefty if the cardholder is travelling abroad. 
• The welcome bonus on cash-back credit cards is lesser than travel reward credit cards.

Travel Reward Credit Cards Pros 

Travel reward credit cards offer several advantages, such as:

• Travel reward credit cards offer several perks to the cardholder like free airport lounge access, partner discounts at hotels, dining discounts, etc. 
• There are no foreign transaction fees on a travel reward credit card. 
• Some travel reward credit cards also offer travel insurance to cardholders. 
• Travel reward credit cards offer a large welcome bonus and statement credit to the cardholders.

Travel Reward Credit Cards Cons

A few disadvantages of a travel reward credit card are:

• The annual fee on travel reward credit cards is high.
• Travel reward credit cards charge a high APR on the unpaid balance. 
• The rewards a travel credit card offers may not be redeemable at all hotels or airlines, restricting their use.

How to earn reward points on a credit card

Customers can redeem their credit card points in the following ways:

• Through internet banking
• By placing a call to the customer care department of the issuer
• By getting the reward points through a post
• By shopping at a partner store of the issuer

Things to know before redeeming the reward points on a credit card

Before redeeming credit card points, credit cardholder should know a few points:

• Credit cardholders need to earn a minimum number of points to be able to redeem them. Every card issuer has a different minimum point requirement. 
• The reward points on a credit card have an expiry date before which the cardholder needs to redeem them. 
• Card issuers usually charge a small fee on the reward point redemption. 

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The final word

Cash-back credit cards and Travel credit cards both have pros and cons. The spending habits of the cardholder are the basis on which one should choose the right card. A person who travels frequently and can encash travel benefits can opt for a travel card while a person who needs more shopping and purchase benefits can opt for cashback cards and credit card reward points.