Should I Choose a Cash Back or Low Interest Credit Card? Complete Guide & Calculator
How to Choose Between Cash Back and Low Interest Credit Cards
Making the right choice between a cash back credit card and a low interest credit card can save you hundreds or even thousands of dollars annually. While cash back rewards sound attractive, offering immediate returns on your purchases, a low interest credit card might actually save you more money if you occasionally carry a balance. Our calculator helps you compare both options using your real spending data to make an informed decision.
When Should You Choose a Cash Back Credit Card?
Cash back credit cards are typically best suited for consumers who:
✓ Pay their credit card balance in full each month
✓ Want to earn rewards on everyday purchases like groceries and gas
✓ Have good to excellent credit (usually 670+ FICO score)
✓ Spend enough regularly to offset any annual fees
✓ Don't mind tracking reward categories and promotions
The key advantage of cash back cards is the ability to earn money back on purchases you're already making. With rates typically ranging from 1% to 5%, strategic spending can lead to significant rewards over time. However, these benefits can be quickly eroded if you carry a balance, as cash back cards usually come with higher interest rates.
Why Consider a Low Interest Credit Card Instead?
Low interest credit cards are often the better choice for people who:
✓ Sometimes carry a balance from month to month
✓ Want to save money on interest charges
✓ Are planning a large purchase they'll pay off over time
✓ Prefer simplicity over reward programs
✓ Are working to pay down credit card debt
The primary benefit of low interest credit cards is the potential for significant savings on interest charges. While you won't earn cash back rewards, the lower APR can result in substantial savings if you carry a balance, especially on larger purchases or during times when you need to make minimum payments.
How to Calculate Your Potential Savings: Cash Back vs. Low Interest
Our calculator takes several crucial factors into account to help you make the best decision:
Monthly Spending Patterns
Enter your typical monthly credit card spending to see how it affects both rewards earned and potential interest charges. Higher spending means more cash back but also higher interest charges if you carry a balance.
Payment Habits
Input your usual monthly payment amount to see how carrying a balance impacts your total costs. Even small remaining balances can accumulate significant interest charges over time.
Cash Back Rate Comparison
Compare different cash back percentages to see how rewards accumulate. Remember that some cards offer higher rates for specific categories like dining or travel.
Interest Rate Differences
See how varying APRs affect your total costs. Even a few percentage points difference can lead to substantial savings over time.
Tips for Maximizing Credit Card Benefits
Regardless of which type of card you choose, follow these strategies to optimize your benefits:
Cash Back Card Strategies
- ✓ Pay the full balance monthly to avoid interest charges
- ✓ Track category bonuses and spending limits
- ✓ Time large purchases with bonus reward periods
- ✓ Consider combining multiple cards for maximum rewards
Low Interest Card Strategies
- ✓ Make more than minimum payments when possible
- ✓ Consider balance transfer opportunities
- ✓ Watch for promotional APR periods
- ✓ Create a debt payoff plan
Making Your Final Decision: Cash Back vs. Low Interest
Use our calculator to compare specific scenarios based on your financial situation. Consider these additional factors:
- • Your credit score and approval odds for each card type
- • Annual fees and whether the benefits outweigh the costs
- • Additional card perks like purchase protection or travel insurance
- • Your long-term financial goals and debt management strategy
Ready to Compare Your Options?
Try our calculator above to see personalized recommendations based on your spending habits and financial goals. Remember, the best credit card choice can change as your financial situation evolves, so it's worth revisiting this decision periodically.
