Should You Open a Cash Back Card in 2024?

Cash back cards are popular -- 68% of Americans have them, according to credit card research by The Motley Fool Ascent. They're not right for everyone, but they're right for a lot of people. If you've been considering a cash back card this year, here are the signs that it's a good move.

You're looking for simple, easy-to-use credit card rewards

The great thing about cash back cards is how easy they are to use. Some credit cards have complicated rewards programs, where you could spend hours just learning how to use your points.

Cash back, on the other hand, is as simple as it gets. You earn cash back when you use your card on purchases. Many of the best cash back cards have bonus categories where they earn 3% to 6% back, and a base rate of 1% on non-bonus spending. Some cards also earn a flat 2% on all types of purchases.

When you want to redeem your cash back, you can use it to lower your credit card bill. For example, if you have a $500 bill and $50 cash back, you can use your cash back and lower the bill to $450. Or you can deposit it into your bank account. Some card issuers also let you set up automatic cash back redemptions, so you don't need to do it yourself.

You want to increase your savings or investments

If your goal is to save or invest more in 2024, a cash back card could help you. Since you can send cash back to your bank account, you can use it however you like. For example, you could use your cash back to:

• Increase your emergency fund
• Add to your savings account
• Contribute to your individual retirement account (IRA)
• Invest through your brokerage account

Let's say you spend $40,000 on your credit card per year (about $3,333 per month). If you earn 2% cash back on that, that's an extra $800. And it doesn't require any work on your part, outside of paying with a cash back card.

You don't travel that much

Your other option for credit card rewards is travel credit cards. With these cards, you earn rewards that are redeemable for travel purchases. For example, you could use travel rewards to pay for airfare or a hotel stay.

The right type of card depends on your lifestyle and what you're looking for. If you travel at least two or three times a year, then a travel card could be the best choice. It will help you save money on your trips, and many of these cards also offer perks that improve your travel experience. For example, several cards can get you into airport lounges.

If you rarely travel, then you should go with a cash back card. A cash back card is also better if you don't want to spend time learning how to use travel rewards. While travel points can be valuable, they have a learning curve that cash back doesn't.

You don't want to pay an expensive annual fee

Another reason cash back cards are excellent for saving money is they don't cost much, if anything. Many of them are no annual fee credit cards. There are also some cash back cards with an annual fee, but fee amounts are usually under $100. Those cards also typically have better benefits and higher cash back rates, which can make the annual fee worth it.

Travel cards, on the other hand, tend to be more expensive. Some of the most popular ones cost over $300 per year, and annual fees can be as high as $695. Some travel cards don't have annual fees, but those have limited benefits, so they're generally not worth it. If you want to keep fees to a minimum, a cash back card is the clear choice.

Overall, you can't go wrong with a cash back card. As long as you pay your credit card bill in full every month and don't overspend just to rack up rewards, you'll come out ahead from the cash back you earn. If any of the descriptions above fit you, then it's worth checking out cash back cards and picking one that matches your spending habits.