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Cash back vs. points: Which is better?

Travel rewards cards can offer a much better value, even for casual travelers

Summary

Cash back and points cards each have their own advantages. Cash back cards give you simple, flexible cash rewards that you can use any way you please. Points and miles cards, on the other hand, offer the chance to get extra value out of your rewards by redeeming them for travel.

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It’s easy to become overwhelmed with the sheer number of rewards credit cards available today, and that’s especially true if you’re flexible on the type of card you wind up with. Picking a hotel credit card is simple if you always stay with the same hotel brand, for example. But, what if you’re flexible on where you travel and when? Or, what if you’re not sure if you should go with a travel card at all, or if you’re better off sticking with cash back rewards?

Cash back and points or miles cards each have their own advantages. Cash back cards give you simple, flexible cash rewards that you can use any way you please. Points and miles cards, on the other hand, offer the chance to get extra value out of your rewards by redeeming them for travel. Not to mention, travel rewards cards often include valuable perks such as airport lounge access and travel insurance.

If you’re trying to decide between a cash back credit card or a card that earns flexible points or miles, here are some of the details you should consider.

Cash back credit cards

Cash back credit cards let you earn a percentage of rewards based on your spending, usually with a flat rate or a tiered rewards program. While all-cash rewards credit cards let you redeem points or miles for cash back or statement credits, some also let you cash in rewards for gift cards, merchandise, travel and other options.

Some of the top cash back cards include: 

 Earning rateAnnual feeRedemption options
Citi® Double Cash Card

Citi® Double Cash Card

Earn 2% back for each dollar you spend – 1% when you make a purchase and another 1% when you pay it off$0Statement credits, check in the mail or direct deposit
Chase Freedom Unlimited®

Chase Freedom Unlimited®

  • Earn 5% back on Lyft rides through March 2022 and on travel through Chase Ultimate Rewards
  • Earn 3% cash back at restaurants and on drugstore purchases
  • Earn 1.5% back on all other purchases
$0Statement credits, gift cards, merchandise, travel and more

Pros of cash back cards:

  • No annual fee – Most cash back credit cards don’t charge an annual fee.
  • Simple rewards – You can redeem your rewards as statement credits, a check or a direct deposit without having to understand the ins and outs of a rewards program.
  • Flexibility – Cash back rewards offer the ultimate flexibility since you can use your cash however you wish instead of being restricted to the options on an issuer’s rewards program portal.

Cons of cash back cards:

  • No travel perks – Cash back credit cards are typically very light on perks, particularly when it comes to travel protections and benefits.
  • Limited ability to maximize your rewards – Cash back credit cards don’t let you transfer points or miles to airline or hotel partners, where you can often get outsized value.
  • Earning caps – Some cash back cards come with earning caps that drastically limit how much you can earn in rewards each year.
  • Smaller sign-up bonuses – Both cash back and travel cards frequently offer a bonus for opening a card and meeting a spending threshold. Unfortunately, with cash back cards, bonuses tend to be much smaller.

How much money do you have to spend to make a cash back card worthwhile?

If you opt for a cash-back credit card that doesn’t charge an annual fee, then making your card worthwhile is rather easy. Simply use your card for any purchases you want to make and you’ll earn rewards on your spending. Provided you pay your balance in full each month and avoid paying interest, you should end up ahead in terms of the rewards you earn.

But, the waters do get murkier if you sign up for a cash back credit card that charges an annual fee. Take the Capital One® Savor® Cash Rewards Credit Card*, for example. This card charges a $95 annual fee, but you get the chance to earn 4% cash back on dining and entertainment, 2% back at grocery stores and 1% back on other purchases. You can also earn an initial bonus of $300 when you spend $3,000 on your new card within three months of account opening.

Considering the $300 new cardmember bonus you can earn in the first three months, it’s easy to see how this card is well worth it the first year. But, what about each year after that?

If you use it for regular spending and bills, you could easily end up “ahead” in terms of the rewards you earn. For example, let’s say you spend $500 per month on dining and entertainment and $1,104 per month on food at grocery stores, which is the average for a family of four with two kids ages 6 to 8 and 9 to 11 according to the United States Department of Agriculture (USDA). Let’s say you also spend another $1,000 per month on regular spending and bills.

In this case, you would pay the $95 annual fee and earn the following in rewards (approximately) during one year:

  • $240 in rewards on dining and entertainment
  • $265 in rewards on groceries
  • $120 in rewards on regular spending
  • Total rewards in a year: $625

This is just an example, so you’ll have to look at your average spending, run the numbers and see how much you could earn in rewards. If you find it’s less than you want after accounting for fees, it might be smarter to look at cash-back credit cards with no annual fee.

Travel rewards credit cards

Travel rewards credit cards offer points or miles rather than cash back on your spending. Most travel cards come with a variety of redemption options, including cash back or statement credits, gift cards and merchandise. However, you’ll usually get the best value by using points to book travel directly through a portal or for transfers to airline and hotel partners.

Examples of travel rewards credit cards include:

Earning rateAnnual feeRedemption options
Chase Sapphire Preferred® Card

Chase Sapphire Preferred® Card*

Earn 5 points per dollar on Lyft rides (through March 2022), 2 points per dollar on travel and dining and 1 point per dolalr on other purchases$95Statement credits, gift cards, merchandise, travel through the Chase portal and 1:1 transfers to Chase airline and hotel partners
Capital One Venture Rewards Credit Card

Capital One Venture Rewards Credit Card

Earn 2 miles per dollar on every purchase$95Travel statement credits, gift cards, cash back statement credits and checks (at a value of 0.5 cent per mile) and transfers to airline partners

Pros of travel rewards cards:

  • Redemption bonuses – Some cards let you get more travel for “free” when you redeem points through the issuer’s portal. The Chase Sapphire Preferred Card, for example, gives you a 25% bonus when you use points to book airfare, hotels, rental cars and more through Chase Ultimate Rewards.
  • Point and mile transfer options – Many flexible travel credit cards offer a list of airline and hotel partners that you can transfer points to. You can increase the value of your points by looking for deals within the partners’ programs.
  • Travel perks – Some travel rewards credit cards come with valuable travel perks like primary auto rental coverage, airport lounge membership, trip cancellation and interruption insurance or credits for a Global Entry or TSA Precheck membership.

Cons of travel rewards cards:

  • Majority have annual fees – You’ll probably notice that most travel credit cards charge an annual fee, although the majority offer first-year sign-up bonuses that more than make up for the fee.
  • Rewards programs can be complicated – While having the option to transfer points or miles to airline and hotel partners sounds good in theory, navigating the rules of airline and hotel programs can be confusing and exhausting, which is why many people stick to cash back instead.

How often do you need to travel to make a travel card worthwhile?

If you’re someone who only travels occasionally and may not ever take advantage of airport lounge access, TSA Precheck or other premium travel benefits, you may be wondering if you should bother with a travel credit card. Shouldn’t you earn cash back instead?

While there’s no right answer for everyone, travel credit cards can easily be the best deal whether you travel often or not.

Travel credit cards tend to offer significant sign-up bonuses you can earn within the first few months. And, if the card includes the option to transfer points to airlines and hotels, you could get significantly more value out of this bonus.

For example, imagine one of your family members owns a timeshare at a resort in Cancun, Mexico. You’ll have to pay for your flights to get there, but your trip will be mostly “free” outside of what you pay for food and fun.

If you picked up the Citi Double Cash card and earned 2% back for each dollar you spend, you would need to spend at least $30,000 on your card to earn $600 in cash back you could use to cover a couple of flights.

If you signed up for the Chase Sapphire Preferred, on the other hand, you would earn an initial bonus of 80,000 points worth $1,000 when redeemed through the Chase Ultimate Rewards portal for spending just $4,000 on your card within three months of account opening. A $95 annual fee applies, but the bonus points you earn could easily be enough for two round-trip flights from many U.S. cities to Cancun through the Chase portal.

In June 2021, for example, round-trip flights from Chicago (ORD) to Cancun can be as low as 16,531 points per person through the Chase Ultimate Rewards portal.

Screenshot 1 of Chase Ultimate Rewards portal

From New York City, which is further away, the fare can be even less – starting at 15,235 Chase Ultimate Rewards points.

Screenshot 2 of Chase Ultimate Rewards portal

How to decide between cash back, points and miles

Whether you travel often or aren’t sure whether you will or not, travel credit cards can easily be the best deal. Their sign-up bonuses can be lucrative, and the ongoing rewards you earn on bonus spending can add up fast. Since you can squeeze more value out of your points or miles when you redeem them for travel rewards, a travel card could leave you significantly ahead with a lot less spending upfront.

Here are some questions to ask yourself as you decide which card to get:

  • Do you want the option to transfer points to airlines and hotels?
  • Are you willing to do the legwork required to transfer points to airlines or hotels?
  • Is earning a significant sign-up bonus high up on your agenda?
  • Do you mind paying an annual fee on a credit card?
  • How likely are you to use a card’s travel benefits and perks?

Bottom line

Answering these questions should help you decide which type of card is best for you. For the most part, a flexible travel credit card or points or miles card will leave you ahead based on the sign-up bonus alone. But plenty of other factors may be in play, so make sure to consider all the pros and cons of each option.

The reality is, cash back credit cards and travel credit cards let you earn something on your spending, and something is always better than nothing at all. Make sure you compare all the best credit cards on the market today so you wind up with the best card for your spending style and rewards goals.

*All information about the Chase Sapphire Preferred Card and the Capital One Savor Cash Rewards Credit Card has been collected independently by CreditCards.com and has not been reviewed by the issuer. 

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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