3 Little-Known Drawbacks of Cash Back Credit Cards

Cash back credit cards are a popular choice. The most popular, in fact. Over half (56%) of Americans have at least one cash back card, according to a credit card study by The Motley Fool Ascent. That's more than any other type of credit card.

It makes sense, because there's a lot to like about cash back cards. You can save money with them, and they're as easy to use as it gets. But they also have a few drawbacks that aren't discussed often. If you're thinking of opening a new credit card, it helps to know about these issues so you can make the right choice.

1. They often have limits on bonus categories

Many cash back cards have bonus categories where they earn more than their regular rate. Bonus rates usually range from 2% to 6%, depending on the card. Here are a few examples of bonus categories some cards offer:

• Gas and groceries
• Dining and restaurants
• Online shopping

The problem is that there's often a limit on bonus categories. For example, a card may earn bonus cash back on groceries, but only on up to $6,000 in spending per year. After that, it only earns its regular rate. Other common limits include $500 per month, or $1,500 to $2,500 per quarter.

If you're interested in a card with bonus categories, check if it has any limits on the bonus cash back you can earn. Make sure the limits work for you. If they're too low, you may want to go with a card that earns an unlimited 2% back on purchases instead.

2. They don't have as many extra benefits as travel credit cards

Cash back cards are much cheaper than travel credit cards, on average. Many of them are no annual fee cards. And even cash back cards with an annual fee normally cost less than $100 per year.

That's good if you don't want to pay much, or anything, for a credit card. But it also means that cash back cards usually don't have as many extra benefits, such as:

• Access to airport lounges
• A spending credit for a Global Entry/TSA PreCheck membership
• A free night certificate at a hotel chain (a popular perk on hotel credit cards)

Those are all features you can find with popular travel credit cards. If you don't travel that much, then you won't need them. On the other hand, if you like to travel, you're probably better off getting a travel card instead of a cash back card.

3. Some of them have redemption minimums

Not every card issuer makes it as easy as it should be to use your cash back. Some of them only let you redeem cash back if you meet a redemption minimum. Minimums generally range from $5 to $25 on cards that have them. Other credit cards don't have them and will let you redeem any amount, including as little as $0.01, at any time.

Redemption minimums are frustrating because you need to wait to use your cash back. If you ever stop using your card, and you haven't earned enough to meet the minimum, your cash back could end up sitting around unused.

This doesn't need to be a dealbreaker if you really like a card, but make sure to check if it has a redemption minimum so you know what to expect. And if you're not sure which card to choose, seeing which one makes it easiest to redeem your cash back is a good way to break the tie.

Just about every credit card has its drawbacks, so none of these are reasons to rule out cash back cards entirely. Keep them in mind as you look for a new card, so they don't catch you by surprise.