Cash-back credit cards appeal to consumers looking for an easy way to save while spending on essentials like groceries and gas, but financial experts say the details matter when choosing the right card.
Cash-back cards work simply: consumers spend as usual and receive a small percentage back as cash. This eliminates confusion from other rewards programs.
“You don’t have to think about it and the money just starts to build up in your savings account,” said Ryan Zilker, a financial expert with Sound Credit Union.
“It’s really ideal for those who value simplicity in their banking and they want just those tangible financial benefits,” Zilker said.
However, not all cash-back cards provide equal savings. Experts recommend conducting an honest budget assessment before selecting a card.
“So first of all, have a real conversation with yourself and your partner, your spouse and or family and figure out, are we going to pay this off every month or might we carry a balance from month to month,” Zilker advised.
High interest rates can quickly eliminate savings if cardholders don’t pay their balance in full each month.
“I’d really encourage anybody who’s shopping, look at the interest rates on the card. Look at balance transfer fees,” Zilker said.
Consumers should also check for annual fees, as some cards waive fees initially but then charge around $95 annually.
When choosing between travel rewards and cash-back cards, consider the end result.
“Oftentimes when you look at rewards programs, yes, they’re great at reducing future purchases, but they still encourage a future purchase, whereas a cashback card, it’s all about savings,” Zilker explained.
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