Are Cashback Cards Really Worth It, Or Are They Just Gimmicks And An Excuse to Spend More?

At the moment, the most popular offer associated with taking out a new credit card is the cash-back reward. Whether it’s a flat-rate or rotating category card, something about this benefit attracts credit card users who look to earn “free” money every month. 

However, because this credit card benefit is so wildly popular right now, it begs the question of whether it’s a benefit that is really worth it or a gimmick that has you spending more. This is precisely the question being asked in one Quora thread, and it’s a very worthwhile discussion. 

To be honest, I think this is a very fair question. It’s completely okay to distrust the credit card company, as there is almost zero chance they offer cash-back rewards just to give us money back. 

The Real Question 

In the first question on the Quora thread, “Tom” asks whether “cash back credit cards have been beneficial to you, or does it feel more like a gimmick?” The reality is that credit card companies are always making money, so if they have to spend money to make even more money, this is precisely what they will do. 

Well, Tom doesn’t seem to mind, and he indicates that his credit cards are his favorite form of payment, especially since he doesn’t have any cards with an annual fee. If he can use a credit card to pay somewhere, this is exactly what he will do. 

Tom also loves the protection you get with credit card purchases, including price and purchase protection, car rental insurance, the ease with which you can dispute false or fraudulent charges, and travel insurance. In Tom’s view, credit cards are just better than debit cards in every meaningful way. 

All in all, Tom doesn’t seem to care if the credit card company hopes he spends more because he’s getting something out of the deal, but this does lead straight to whether cash-back rewards are still more of a gimmick than an actual customer benefit. 

Gimmick Or Not? 

If you want to get right down to it, there is a strong argument to be made that cash-back rewards are very much a gimmick from the credit card company. There is no question Discover, Chase, American Express, and other banks are using cash-back reward benefits and sign-up offers of $200 – $500 in the first 90 days to get you to spend more. 

The challenge really comes down to the consumer knowing how to best spend their money. This could be construed as a “gimmick,” so to speak, if someone is making a purchase they don’t need only because they see cash-back rewards accumulate. In this regard, you could say that cash-back is more of a marketing tool to make people spend than an actual benefit. 

However, if you can resist the urge to overspend and use credit cards to earn cash-back rewards for purchases you would typically make on credit cards, then it’s hard to say it’s a straight gimmick. For example, purchases at gas stations or grocery stores are rarely made with cash, so the credit card is the next best thing. As these location types are ideally suited for rewards, customers will rack up benefits every week, month, and year. 

Do Not Overspend

To get right to the heart of Tom’s question, the reality is that it doesn’t matter if cash-back rewards are a gimmick or not if you can control your spending. Unfortunately, this isn’t always true as almost half of Americans using credit cards can carry a balance. 

The hope is that you can pair cash-back credit cards with the ability to pay off your balance every month. The credit card company makes far more money from interest than anything else, including fees, so there is a hope that you are carrying your balance, which is much more of a gimmick than anything they can offer around cash-back rewards. 

Do cash-back rewards entice you to choose a credit card and start spending? I’d say yes, but do I think it’s a little more than a gimmick to get you to spend more? Not always, as the individual with the credit card is at risk, not the card itself, which means paying off the balance every month would make cash-back cards ‘extremely advantageous,’ says one commenter. 

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