Credit Cards: Cash Back vs. Low Rate
Which is best for you?
For those who can pay off their statement balance in full each month, a cash back or rewards credit card makes sense. Most of these cards pay a small percentage back to the cardholder, usually between 1% and 3% of each purchase, and that can add up. Now, for those of us who use our credit cards for larger purchases and prefer to pay our balance down over time, having a lower interest rate could save more money in the long run. Let’s explore how.
Don’t sleep on your interest rate!
Credit card companies with generous rewards programs typically charge higher interest rates and annual fees. According to Investopedia, the average credit card rate in 2024 was 24.62% APR.* While RiverLand cards aren’t flashy, our Platinum Mastercard® has an interest rate of only 9.90% APR.** That’s less than half the national average! Do you know your credit card’s interest rate?
“Cash Back” doesn’t always add up.
Let’s say you have a $5,000 credit card balance after some heavy holiday shopping. If you used a credit card with 2% cash back, you would earn $100. However, to avoid paying more than $100 in interest, you need to pay the balance off in one month. For this comparison example, you choose to make affordable monthly payments of $350 and take time paying the balance down. The chart below shows how you could save $536 by using RiverLand’s low-rate credit card instead.
| Credit Card Used | Total of Credit Card Purchases | Cash Back from Purchases | Interest Rate (APR) | Chosen Monthly Payment | Time to Pay Off | Total Interest Paid | Total Amount Paid (minus cash back) | Saved with RiverLand |
|---|---|---|---|---|---|---|---|---|
| Average Credit Card with 2% Cash Back | $5,000 | $100 | 24.62% | $350 | 18 months | $978 | $5,878 | |
| RiverLand Platinum Credit Card | $5,000 | $0 | 9.90% | $350 | 16 months | $342 | $5,342 |
$536 |
Make the decision that’s best for you!
The best credit card for you depends on your spending habits and amount of debt. When used responsibly, having more than one credit card with different advantages can be a great way to enjoy rewards and save money.
Ready for a Low-Rate Credit Card?
APR = Annual Percentage Rate. *Average credit card rate of 24.62% APR is based on median advertised rates across several hundred popular card offers tracked by Investopedia as of November 2024. **This rate is available for a limited time to qualifying borrowers. Restrictions and limitations apply. Call for details. For terms and conditions, see our Credit Line Account Agreement. Mastercard is a registered trademark of Mastercard International Incorporated.
