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Cashback Credit Cards vs Rewards Credit Cards

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Pauline Hatch      

Rewards credit cards – where you earn points on your spending that you can redeem for free stuff – are some of the most popular cards out there. But, if you want instant rewards, you can check out cashback offers. Here’s how to compare the two, and which one might give you the biggest advantage.

What is a cashback credit card?

Working in much the same way as a rewards credit card, a cashback credit card simply earns cashback on card purchases instead of rewards points. This can make it a simpler option for cardholders who don’t have time for traditional rewards, as cashback is automatically tallied up at the end of each statement period, and then credited to the cardholder’s account.

Most cashback credit cards allow cardholders to do as they like with the cashback they receive. That may involve paying off the card’s annual fee or covering certain card purchases, or it could mean transferring the cashback to an everyday account, where it can be used for pretty much anything.

How do cashback credit cards work?

While the premise behind cashback credit cards is simple, it’s good to understand how they work so they can work for you.

First up, annual fees. In Australia, all cashback credit cards charge an annual fee. If you want to get value from your card, you need to make sure your return in cashback is more than you are paying out in annual fees. Which is why cashback credit cards tend to suit bigger spenders.

Next, interest. Again, we’re talking value. If you want value from your card, you cannot be paying out interest on your balance. Which is why cashback credit cards only suit cardholders who pay off their balance each and every month.

Now, caps. Cashback credit cards often have a cap on the amount of cashback cardholders can earn. Before you apply, think about how much you will be spending on your card, to then find a card that offers the maximum cashback within that spending threshold.

Lastly, types of cashback credit cards. Within the cashback credit card category, there are different types to choose from. Let’s take a look.

Cashback as Rewards

With these cards, cashback is offered in place of a rewards program. So, instead of earning rewards points, these cards earn cashback.

Example: With the ING Orange One Rewards Platinum Card, you could earn 1% back on all eligible spend, up to $30 each month, giving you a maximum cashback potential of $360 per year.

Cashback within Rewards

While we may have discussed cashback credit cards as an alternative to traditional rewards cards, they can be one-in-the-same. With this type of card, you earn rewards points on your card spending, which can then be redeemed for cashback rewards, usually in the form of gift cards.

Example: With the NAB Rewards Platinum Card, you could earn 1 point per $1 on your card. Once you have earned enough points, you could redeem them for a gift card, say 9,620 points for a $50 Coles gift card.

Cashback as a Feature

Some cards offer cashback on the side, where cashback is a selling point but not the main event. Essentially, these cards can offer extra value to cardholders who may not be looking for cashback as their number one feature.

Example: Back in November, American Express launched its Shop Small campaign. Designed to encourage card users to spend at small businesses, it offered $10 cashback on purchases over $20 made at participating small businesses during November, up to a maximum of $50 cashback total.

Citi provides another example of cashback being offered as a feature. Every Monday in November, all Citi cardholders in NSW who tapped their card to pay for travel instead of using their Opal card received $5 cashback.

Cashback as an Intro Offer

Another way to enjoy cashback is through an intro offer. With these cards, you earn cashback on purchases made during the card’s introductory period.

Example: With the ANZ Frequent Flyer Black Card, you could get $255 cashback after a $3,000 spend in the first three months of having the card.

*All deals are correct as of time of writing.

Why choose a cashback credit card?

Why should you opt for a cashback credit card over all other types of credit card? Let’s look at the various advantages a cashback credit card can offer.

Cashback cards can put money back in your pocket: If you’re using your card anyway, why not get something back? With a cashback credit card, you get money back on the spending you do day-to-day.

Cashback cards can provide a simple way to earn rewards: You don’t have to think about how many points you will earn on this purchase or that purchase, and you don’t need to worry about which reward will offer the most value. You get cash back on your purchases, as simple as that.

Cashback cards can make annual fees pay for themselves: Where cashback is offered as a feature, it can help cover the cost of your annual fee, allowing you to enjoy the other features on the card at low or no cost.

Cashback cards can boost a card’s value: When used as an introductory offer, cashback can provide a nice little boost in value as you get started with the card.

What about the downsides then? As with any other type of card, cashback credit cards can have disadvantages as well as advantages. Which means they don’t always work well for every cardholder.

Cashback cards can have higher annual fees: In order to earn cashback, you will usually pay out a higher annual fee than you would on say, a no frills credit card. It’s up to you to work out whether paying that annual fee is worth it in terms of the cashback your card earns.

Cashback cards can have higher interest: With a typically higher interest rate than more basic options, cashback cards would be a costly choice for cardholders who carry a balance. As any cashback earned would likely be cancelled out by the interest charged, this type of card only suits cardholders who pay their balance in full each month.

Cashback cards may limit cashback earned: Card providers typically limit the amount of cashback cardholders can earn each month. If you want to make your card work for you despite these limits, try to choose a card that offers the highest cashback amount for your spend.

Is cashback or traditional rewards better?

If you’re tossing up between a cashback credit card and a rewards credit card, you may be wondering which one is best. Unfortunately, we don’t have a one-size-fits-all answer for you here, as there is no one-size-fits-all credit card.

Instead, you will need to look at the good bits and bad bits of both options, to then find the right fit for your needs. With that in mind, let’s compare the two options side by side.

With a rewards card, you may need to pay an additional fee to opt in to the rewards program (this can be the case with Qantas earning cards).
With a cashback card, there are no additional rewards program fees to worry about.

With a rewards card, you may need to pay additional costs when you redeem points for flights. These fees, taxes and carrier charges can amount to hundreds of dollars.
With a cashback card, these fees are not applicable.

With a rewards card, you will need to spend time finding out how the rewards program works and how to make the most of it, to then decide what you will spend your points on within the program.
With a cashback card, you simply get cashback credited to your account each month.

With a rewards card, you are limited to what you can redeem your points for. Perhaps you don’t want a holiday or a toaster.
With a cashback card, you can use your cashback however you please.

With a rewards card, your points may expire if you don’t use them.
With a cashback card, your cashback can’t expire.

With a rewards card, your points earn may be limited.
With a cashback card, your cashback earn may be limited.

With a rewards card, you may get better value on your points redemption if you opt for flights or other travel options.
With a cashback card, you may not see as much value on your card spending. This can make it harder to see true value on your card over and above your annual fee payout.

Still not sure? Time for a comparison. Let’s look at the ING Orange One Platinum Card and the Westpac Altitude Platinum Credit Card. While one earns cashback and the other earns traditional rewards, both are platinum cards with roughly the same annual fee.

With the ING Orange One Platinum Card, you will pay an annual fee of $149. In terms of cashback, you could earn 1% cashback on your spend, capped at $30 per month. With that cap, you could spend $3,000 each month to earn a maximum of $360 in cashback each year.

Subtracting the $149 annual fee, the card basically offers $211 in cashback value.

With the Westpac Altitude Platinum Credit Card, you will pay an annual fee of $150. For the purposes of comparison, your spend of $3,000 each month would equate to 3,000 Altitude Points, giving you a total of 36,000 Altitude Points in a year.

If you choose to redeem those points for a pre-paid Mastercard, you would get the equivalent of $150. Subtracting the $150 annual fee, the card offers no value.

If you choose to swap your Altitude Points for Velocity Points, you would receive 12,000 Velocity Points per year (at a rate of 1 Velocity Point = 3 Altitude Points). Within the Velocity program, 11,800 Velocity Points would take you up to 1,200 miles travelling in economy. As an example, you could travel from Sydney to Auckland (1342 miles). Virgin currently has that fare on sale starting at $270 (plus fees, taxes and carrier charges). Subtracting the $150 annual fee, this option offers $120 in value.

While the cashback option seems to be a clear winner in terms of value, it’s worth bearing in mind that bigger spenders would see no extra value from the ING Orange One Platinum Card if they spent more than $3,000 a month, but they would get more on the Westpac Altitude Platinum Credit Card.

We also did not take into consideration the Westpac Altitude Platinum Credit Card’s tiered earn rate. Using this card, you can earn 3 points per $1 on Qantas, Jetstar and Virgin direct spending, and 2 points per $1 on overseas spending.

The Westpac Altitude Platinum Credit Card also offers more in features, with a current intro offer providing 40,000 bonus Altitude Points (after a $2,000 spend in the first three months), and access to a platinum concierge.

As you can see, it all comes down to how you use the card, how much you spend, and what features you want. Want an easy answer? We don’t have one! But, we do make it easier to compare the options on

*Features and offers correct as of time of writing.

How do you compare cashback credit cards?

So, you’ve decided a cashback credit card is the right choice for you. What now? You need to compare your options. Here are some of the most important factors to keep in mind as you compare cashback credit cards.

Cashback Earn Rate: Look at how much cashback each card offers. Depending on the type of card, this may be expressed as a percentage (for example, 1% ongoing or 10% for the first three months), or as a dollar amount (for example, $10 per month ongoing or $100 per month for the first three months after meeting a certain spend).

Use this earn rate to calculate how much cashback you could potentially earn on the card.

Cashback Cap: Check for a cap on the amount of cashback you can earn. This will mostly likely be limited to a certain cashback amount per month (for example, $10 cashback), or on a certain spend per month (for example, a $1000 spend).

Calculating your estimated spend, use this amount to see if the card offers value, or if you need to choose a card with a higher cap.

Rewards Value: If you decide to earn cashback via a rewards card, pay close attention to the card’s earn rate, and what the points you earn equate to when redeemed as cashback. Points caps should also be taken into consideration.

Using your estimated spend, make sure the cashback you will earn is more than the card’s annual fee.

Introductory Offer Requirements: If cashback is provided as an intro offer, find out how much you need to spend to be eligible.

Make sure you can afford to spend this amount and repay it before it starts accruing interest.

Ineligible Transactions: Check the small print to find out which transactions do not offer cashback. You may find government spending, cash advances, bill payments, and gambling transactions are not eligible for cashback.

Think about how you will use the card, making sure the bulk of your spending is eligible to earn cashback.

Card Features: While some cashback cards are fairly basic, others offer lots of features. Look at the features on offer and consider whether you need them, whether you will use them, and how much value they offer.

You will usually find cards with more features charge higher annual fees, so be sure to take into consideration the value of the features on offer as well as the cashback you will earn, in order to make sure the annual fee is worth paying.

Is a cashback credit card really worth it?

While we know you are searching for credit cards in Australia, it can be interesting to see how our cards measure up against those offered elsewhere. Cashback credit cards aren’t huge here, which means there aren’t that many of them.

However, if you look to the good old US of A, you can find cashback credit cards a-plenty.

  • With the Discover it Cash Back card, you could earn 5% cash back on everyday purchases rotating each quarter (say, supermarkets one quarter, restaurants the next, petrol stations after that, and so on, up to the quarterly maximum). You will also earn unlimited 1% cash back on all other purchases, and as an intro offer, the card provider will match all the cashback you’ve earned at the end of the first year.
  • With the Bank of America Cash Rewards Card, you could earn 3% cash back in the category of your choice, 2% at supermarkets, and unlimited 1% on all other purchases. That’s on top of a $200 online cash rewards bonus after you make at least US$1,000 in purchases in the first three months.
  • With the American Express Cash Magnet Card, you get unlimited 1.5% cashback on your purchases, plus a $150 statement credit after a US$1,000 spend in the first three months.
  • With the Chase Freedom Card, you could earn 5% cashback on up to US$1,500 spent in bonus categories each quarter, plus unlimited 1% cashback on all other purchases. You also get a US$150 bonus after you spend US$500 in the first three months.
  • With that Discover it® chrome Card, you could earn 2% cashback at petrol stations and restaurants on spending up to US$1,000 each quarter, plus unlimited 1% cashback on all other purchases. As an intro offer, the card provider will match all the cashback you earned within the first year.

As you can see, the cashback earn rate is much more generous than what’s available here, plus there are no caps on the amount of cashback you can earn. But perhaps the most astounding thing is – none of these cards charge an annual fee. Using these cards, you basically earn cashback for free.

So, that begs the question, is a cashback credit card really worthwhile here in Australia?

While you may not like us for this answer, it honestly depends on you. Yes, there are cashback credit cards out there that can offer value – as long as you are the right type of cardholder, you choose the right card for you, and you understand how to maximise your cashback potential.

How do you maximise your cashback?

As we’ve already discussed what factors to look at as you compare cashback credit cards, let’s now find out more about how you can maximise your cashback potential.

Choose a card that offers the most cashback on your spending: Calculate how much you will spend on your card, find out what that equates to in cashback on each card, and subtract the annual fee from that total. You may find some cards offer more back for a smaller spend, while others work better for bigger spends.

Think about how you could spend more on your card: Consider ways you could channel more spending through your card. As long as you can afford to pay it all back before it starts accruing interest, this higher spend could give you more cashback (but be sure to take caps into account).

Avoid paying out unnecessarily: Always pay your balance in full each month to avoid paying interest. Avoid any unnecessary fees. This could include late fees or cash advance fees. If you travel overseas or shop online at international retailers frequently, it could be a good idea to choose a cashback credit card with no foreign transaction fees.

Make the most of business spending: If you have a significant business spend, look at cashback options on business cards. You may be able to earn cashback on business purchases, helping you earn that little bit more.

Keep an eye out for intro offers: Intro offers are ever-changing, so keep a close eye out for new cashback offers popping up that may be worth applying for. makes this easy, of course.

Utilise card features to get more value: On higher end cards, features offered can provide extra value. These features not only make the card more usable, they can also offset the card’s annual fee, which in turn makes the cashback you earn more valuable. For example, the American Express Explorer Card earns Membership Rewards that can be converted into cashback, it also offers $400 each year in travel credit, which can be used to offset the card’s $395 annual fee.

Ready, ready, ready? Now you have the tools you need to compare cashback credit cards – and the knowledge you need to make the most of the card you choose – it’s time to compare the options. Well, what are you waiting for?


Photo source: Pexels

Pauline Hatch

Pauline is a personal finance expert at, with 8 years in money, budgeting and property reporting under her belt. Pauline is passionate about seeing Aussies win by making their money – and their credit cards – work smarter, harder and bigger.

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