Credit card combinations: Rewards and cash back
Quick insights
- Pairing a credit card that earns rewards points with one that earns cash back may help cardmembers to maximize their cards’ earning potential.
- If you have two cards from the same issuer, you may be able to consolidate reward earnings between accounts.
- You may want to consider potential annual fees and overlapping benefits when pairing credit cards.
In today's landscape of diverse credit card offerings, many cards earn rewards or cash back on purchases. For those looking to get the most out of their credit cards’ earning potential, a pairing of cards that provides different rewards may be a strategy to consider.
This article explores how pairing a rewards credit card with a cash back card may help increase your overall rewards as well as provide flexibility in how you redeem them.
Benefits of pairing rewards and cash back credit cards
First, let’s examine both types of credit cards:
- Rewards credit cards: Rewards cards are generally a broad credit card category. They can include cards that earn rewards points or miles on purchases. These cards often provide the ability to earn accelerated rewards on certain spending categories like travel or dining. They can also be co-branded, typically with airlines, hotels or other well-known brands.
- Cash back cards: A cash back credit card, on the other hand, allows cardmembers to earn a percentage of their spending back as cash. These cards typically have either a flat earn rate (e.g., 1.5% cash back on all purchases) or specific categories that earn cash back. Cash back rewards can generally be redeemed as a statement credit, direct deposit or check.
Both types of cards often have varying rewards rates, and rates can be higher in specific spending categories depending on the card. For example, a co-branded airline rewards credit card might provide the highest rewards rates for purchases made with the associated brand. Similarly, cash back cards may have a flat rate on most purchases but provide the ability to earn rewards at an accelerated rate in specific spending categories, sometimes on a rotating quarterly basis.
By using each card on purchases where it earns the most rewards, cardmembers may be able to earn more points, miles or cash back than they would with only one card.
Combining rewards from multiple cards
One potential advantage of having a multi-card strategy—especially with cards from the same credit card issuer—may be the ability to combine or transfer your rewards. Some credit card issuers allow you to transfer rewards between different cards or even convert cash back earnings into rewards points or miles (or vice versa).
This may mean that your rewards and redemption options are more flexible. You can potentially combine rewards for additional options, whether that’s funding travel, paying down a statement balance or getting cash back in your pocket.
Choosing a cash back credit card
Cash back credit cards offer a fairly straightforward way to earn a percentage of your spending back as a reward. Cash back credit cards typically provide a flat cash back rate on purchases but may also have spending categories that earn cash back at a higher rate.
When selecting a cash back card to complement a rewards card, you may want to consider the following features:
- Cash back rate: Consider what cash back rate your routine purchases will earn based on the card’s earning rates.
- Bonus categories: Some cards provide the ability to earn cash back at an accelerated rate at gas stations, at grocery stores, on internet service or other rotating bonus categories.
- Welcome bonus offers: Card issuers may provide a welcome bonus offer to new cardmembers. For those who are eligible for this offer, the card will typically have a minimum spending requirement new cardmembers need to meet in a specific timeframe to earn the bonus.
- Annual fee: Some cash back cards have low annual fees, but this can vary by card.
Choosing a rewards credit card
Rewards credit cards—those that typically earn points or miles—may provide more versatility beyond cash back rewards. Depending on the issuer, rewards may be redeemed for travel, merchandise, gift cards, statement credits or cash back. Some cards may also allow cardmembers to transfer their rewards to partner brands, like hotels and airlines.
When choosing a rewards card to pair with a cash back card, you may want to consider the following:
- Earn rates: Cards that provide accelerated points on categories where you spend frequently—such as dining, entertainment, specific retail, streaming services or travel—may provide the most value (depending on your spending habits).
- Redemption options: Rewards cards can have multiple ways to redeem points, so consider the card’s redemption options for the rewards you earn.
- Transfer partners: Some cards may allow you to transfer points to airline and hotel loyalty programs, which may sometimes provide more value for your rewards.
- Cardmember perks: Depending on the card, perks can include purchase protections, extended warranties, concierge services or even travel-related benefits like airport lounge access or travel statement credits.
- Annual fees: Rewards cards with higher earning rates and a suite of cardmember benefits often have annual fees.
Considerations of having multiple credit cards
While a multi-card strategy of combining rewards and cash back may help you earn more credit card rewards, there are some considerations for managing more than one credit card. Here are a few:
- Annual fees: Many rewards and even some cash back credit cards have an annual fee, so consider if the fees are comparable to the value you get from the cards.
- Managing payments: Juggling multiple credit cards may mean keeping track of different billing cycles, payment due dates and minimum payment amounts.
- Overlapping benefits: If two cards provide similar benefits, you could end up paying annual fees for redundant perks.
- Credit impact: New credit card applications typically result in a hard inquiry on your credit report, which can temporarily affect your credit score. Additionally, some issuers may deny applications if you've opened too many accounts within a certain time period.
In summary
Employing a credit card strategy of pairing rewards and cash back cards may help increase the value you get from your credit card purchases and everyday spending. This approach may help you earn accelerated rewards rates across multiple spending categories—more so than you would with one card.
When considering this card pairing, having a card with a high earning rate on everyday spending as well as a card that earns accelerated rewards in specific spending categories may help you to maximize available rewards. It may also be helpful to consider a card’s annual fee, redemption options and overall rewards program before applying.
