Credit and debit cards are everywhere these days. They’re in high demand because they offer convenience, fraud protection, and rewards programs, among other things. So it's no surprise that the competition between financial institutions and credit companies to bring in new users is quite fierce.
With so many credit cards available to choose from, banks are now pushing refined debit cards that come with multiple incentives to users in order to stand out. Cash-back debit cards are just one example of this.
Read on to learn more about cash-back debit cards and their benefits, and check out our list of the best ones currently out there.
Cash-back debit cards: What are they?
Debit and credit cards may appear to be the same at first glance, but they have their differences.
When you use a debit card, you draw money directly from your checking or savings account. No borrowing is involved. By using a cash-back card, you're able to earn cash-back or points that you can redeem to make other purchases at various retailers.
Cash-back debit cards versus rewards credit cards
Credit cards are revolving lines of credit, meaning that you're able to borrow up to a certain amount of money continuously. But every month, you must liquidate your balance. Otherwise, you'll pay interest and late fees.
With credit cards, you can, however, increase your credit limit. On the other hand, with a debit card, you can only spend whatever amount you have in your bank account.
Cash-back cards are a type of rewards card. The ways you can earn cash-back — and how much — depends on the card. Flexible redeeming options are standard regarding credit cards. In comparison, cash-back debit cards are usually more limited in scope.
Are they worth it?
Credit cards can be more challenging to obtain, as you need a good credit score and a credible repayment history. This depends on your spending habits, preferences, and lifestyle. Debit cards are great tools to help you adhere to a budget and to reduce excessive spending.
However, a cash-back card can be beneficial since you have mandatory expenses you must pay for regardless, like groceries and rent, so you might as well receive kickbacks for these purchases. And, there are no credit checks when you want to open a checking account.
Things to look for when choosing a cash-back card
One: Flat cash-back rates.
Some credit cards offer users a standard, reliable cash-back rate on every purchase they make up to a specific amount. For example, let’s say you earn one percent cash-back when you spend up to $3,000 each month. In this scenario, you can potentially earn up to $30 in cash-back rewards on a regular basis. Typically, you will also have the option of setting up automatic transfers and have your earnings dropped right into your savings account.
Two: Cash-back on prepaid cards.
A prepaid card means that you must load a specific amount of funds onto the card before using it. No borrowing is involved, as you are using your own funds to make purchases. That said, there are still certain card types that offer unlimited cash-back even though you are not using a traditional credit or debit card. Rewards can be used online or in-store, and in most cases, you can redeem your rewards immediately.
However, this type of cash-back card may come with extra fees, such as monthly utilization fees and a fee each time you reload your card.
Three: Customizable cash-back options.
Cardholders are eligible for deals and discounts from retailers, but only from a select few. Once you sign up for the card, you're able to customize which deals you'd like to receive and from where. Any cash-back you earn will show up in your credit account after approximately 30 days.
Four: Business cash-back cards.
This can be a smart option to keep in mind, especially if you have your own business or work as a freelancer. There are a variety of rewards cards out there that offer flat rate cash-back on necessary purchases you make in relation to your job. Some even offer no monthly, annual, or ATM fees as well. This way, you don’t have to use your personal savings to cover professional costs and, in a way, you’ll be reimbursed each time this does occur.
Five: Cash-back cards for big spenders.
Next up, we have cash-back cards specifically tailored for those who make large purchases. So long as those purchases require a signature, as a cardholder, you will typically earn an unlimited, flat percentage in cash-back.
Six: Point Card
You work hard for your money, and in return, Point is a card that works hard for you. Besides offering every cardholder unlimited cash-back on all purchases, you are also eligible for bonus cash-back on subscriptions, food delivery, rideshare services, and coffee shops. So, unlike some of the other card types described above, Point comes with flexibility and freedom regarding how you spend your money and receive rewards.
Furthermore, users can enjoy peace of mind thanks to the multiple safety features of Point membership, including car rental and phone insurance, and fraud protection with zero liability.
What’s more, there are no interest fees.
Ultimately, Point is an alternative, modern instrument that promotes monetary independence while still allowing you to enjoy the benefits of making everyday purchases. For these reasons, Point is an excellent tool to have at your disposal at any stage of your financial journey.
The bottom line
Remember, there is no such thing as the "perfect credit or debit card," and no cash-back program is flawless either. But there are many choices out there for you to choose from. Regardless of what option ends up catching your eye, you'll be on your way to healthy, responsible financial growth.
Made to spend.
