Ted Rossman has seven years of experience in the credit card and personal finance industries as a member of the award-winning communications department at CreditCards.com and its sister sites The Points Guy and Bankrate.
Cash back is – by far – Americans’ favorite credit card reward. CreditCards.com recently commissioned a nationally representative survey and found 57 percent of U.S. adults have at least one rewards credit card. Cash back cards are the most popular (43 percent), well ahead of other types of rewards cards such as gas/retail (28 percent), airline/hotel (13 percent), general travel (12 percent) and business (8 percent).
To put it another way, about three-quarters of rewards card holders have at least one cash back credit card. And most of them are taking advantage of this opportunity to earn free money.
Some 52 percent of rewards cardholders have redeemed for cash back within the past year, and another 29 percent have swapped their points for gift cards, which are almost the same as cash. However, more than one in five (22 percent) haven’t redeemed any rewards at all. Thirteen percent have exchanged their points or miles for merchandise; just 9 percent traded in for a free hotel stay and merely 8 percent did so for free airfare.
That sounds shockingly low, but it’s backed up by a previous survey commissioned by our sister site The Points Guy, which revealed that only 39 percent of U.S. adults had taken any airline trips at all in the previous year. I think some of us in the industry forget how many people tend to stay close to home. That could be by choice, lack of travel funds or because they can’t get a break from work or family obligations.
All of this helps explain why cash back cards are so popular. Everyone can use extra money, and cash is incredibly flexible. There are no blackout dates, no work, school or family commitments to schedule around and no hoops to jump through. Of course, travel credit cards can be excellent options for certain people, but I completely understand why the masses prefer cash back.
Hold the fees, too
A related trend is that most rewards cardholders prefer cards with no annual fees. Nearly three out of every four rewards cardholders (72 percent) have at least one card with no annual fee. Some 25 percent have an annual fee between $1 and $75, 15 percent have an annual fee between $76 and $150, and 10 percent have an annual fee of $151 or more. This again shows that most people value simplicity and frugality from their credit cards. I completely agree – as I wrote in a previous column, annual fees scare me. By all means, if you travel a lot and dine at a lot of restaurants, annual fee cards can provide you with great perks. But that’s a certain subset of the population, not the norm.
Tip: While some cards offer extra bonuses on specific categories year-round, others increase your cash back in rotating categories – which change quarterly – if you register for them online each quarter. In some cases, such as with some Chase or Discover cards, this can quintuple your cash rewards.
A few troubling stats emerged from the research: only 41 percent of respondents said they pay their rewards cards in full every month. You shouldn’t pay 17 percent interest (the national average) just to get 1 or 2 percent in rewards. If you’re in this position, you should open a card with 0 percent APR (even if it means sacrificing rewards) or stick to debit cards and cash.
And while another 20 percent pay their rewards card bills in full most of the time, that leaves 35 percent who pay their entire statement balance no more than half of the time. Worst of all, 10 percent never make a complete payment. Don’t let this be you.
Methodology: CreditCards.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,229 adults. Fieldwork was undertaken Sept. 18-19, 2018. The survey was carried out online. The figures have been weighted and are representative of all U.S. adults (aged 18+).