Cash back vs. travel points: How to choose credit card rewards

Rewards credit cards come in many forms. Some offer cash back while others offer travel rewards in the form of points or miles, and there can be potential benefits and downsides to all these options. If you’re wondering which type of credit card rewards to choose, it helps to understand how these different card types work.

Cash back cards offer cash rewards as a percentage back on your purchases. These cards tend to be easy to use and primarily feature cash redemptions, though you may be able to choose additional options. Cards that offer points and miles typically have more flexible redemption options, though they’re usually most valuable when redeemed for travel.

Used wisely, points and miles can go a long way to helping you save on a coveted vacation. But the type of rewards credit card and rewards structure that’s best for you depends on your spending habits, lifestyle and goals. We compare cash back versus travel rewards here and outline some of the pros and cons of different types of credit card rewards. This way, you can choose which rewards structure is best for your spending habits and goals.

Cash back vs. points and miles credit cards comparison table

Before we dive into all the different ways you can utilize cash back and points and miles credit cards, the chart below provides an overview of how these cards work.

What to know about cash back rewards cards

In general, cash back is the better choice for simplicity seekers hoping to earn uncomplicated rewards on everyday purchases.

Cash back credit cards offer a percentage of cash back on each dollar you spend, with some cards offering a higher rate in select categories like groceries or gas. Some cash back cards offer a flat 1.5 percent to 2 percent cash back for every purchase you make, while others offer higher bonus rewards — ranging from 3 percent to 5 percent back — in fixed or rotating categories.

Redemption flexibility

A major benefit of cash back cards is their flexibility when it comes to redeeming rewards. Depending on the cash back card you use, you may be able to redeem your rewards for a check in the mail, a direct deposit or a statement credit to your account. Some of the best cash back cards let you cash in your rewards for gift cards, merchandise or travel rewards through your card’s travel portal, though the value for these options is often less.

Redemption value

Cash back credit cards tend to be a good value for people who rarely travel or prefer to save money along the way, rather than build toward a future experience. Cash back rewards are generally worth 1 cent each, although this varies by program. When you’re getting 1 cent per point, a 2 percent cash back card yields $2 for every $100 you spend.

Pros and cons

Consider these advantages and disadvantages when comparing cash back cards to points and miles credit cards:

Pros

• Earning and redeeming cash rewards is simple and quick.
• Cash rewards value tends to be straightforward and can be easier to maximize.
• There are many no-annual-fee cash back cards to choose from.
• Cash back credit cards may offer hefty welcome bonuses.

Cons

• Most cash back credit cards don’t come with notable travel benefits (but you may be able to earn rewards on certain travel purchases).
• Rewards value for cash back cards can be weaker when compared to the best travel credit cards.
• You may have limited redemption options — or no redemption options other than statement credits — depending on the card you choose.

What to know about points and miles cards

A points or miles card is likely the better choice for people who travel often or want to save for an aspirational trip. Many types of rewards credit cards fall under the umbrella of “points and miles” cards. These cards include airline credit cards that let you earn frequent flyer miles in a specific frequent flyer program, and also flexible rewards cards that let you redeem points for travel in more than one way. Hotel credit cards from major hotel brands can also fall into this category.

Points and miles cards can also come with useful travel benefits like airport lounge access, travel credits, application fee credits for Global Entry or TSA PreCheck or built-in travel insurance benefits — although cards with the strongest benefits often charge high annual fees.

Redemption flexibility

Some of the best travel credit cards on the market today offer strong flexibility when it comes to redeeming your rewards. If you have a travel credit card that earns Chase Ultimate Rewards points, for example, you may be able to redeem your points for cash back, gift cards, statement credits, merchandise, travel through the Chase Ultimate Rewards portal or even 1:1 points transfers to Chase airline and hotel partners.

Redemption value

Travel rewards tend to be worth more than cash back, and some of the best travel rewards currencies can be worth 2 cents each or more depending on how you redeem your travel rewards.

For example, if you cash in flexible points for a statement credit to your account, you may only get 1 cent per point in value. But if you transfer your points to a high-value travel partner, your points could be boosted to 2 cents each or more. You may also get more than 1 cent per point in value if you redeem your points for travel through your issuer portal.

Pros and cons

Here are some general advantages and disadvantages of choosing a points or miles card over a cash back card:

Pros

• Travel rewards provide more value than cash back if you travel often.
• Perks like priority boarding, free checked baggage, airport lounge access or free nights at hotels help you travel in style.
• Many travel cards come with travel insurance and no foreign transaction fees.
• Travel cards generally have higher rewards rates and higher welcome bonuses

Cons

• Travel credit cards tend to have higher annual fees than cash back cards.
• Points and miles credit cards typically require more effort than cash back cards when it comes to tracking your rewards and making sure you’re getting the best value out of them.
• Airline credit cards and hotel credit cards often offer limited redemption options.

Cash back vs. points and miles credit card examples

If you’re reading over the pros and cons of either type of card and wondering which is best for you, consider the following scenarios. 

In the first example, imagine you want to earn cash back rewards for each dollar you spend, then redeem the rewards for statement credits to your account. You decide to sign up for an American Express credit card as a result, but you can’t decide which one.

If you signed up for a points and miles credit card like the Platinum Card® from American Express or the American Express® Gold Card, these points would only be worth 0.6 cents each if redeemed for statement credits to your account.

In the meantime, paying with points at checkout would get you a slightly better value of 0.7 cents per point.

Instead of going with a points and miles credit card, however, you could sign up for a true cash back credit card from Amex and get 1 cent per point in value for statement credits. That’s how it would go if you chose the Blue Cash Preferred^® Card from American Express, which would allow you to also earn a generous welcome bonus while enjoying exceptional rewards in a range of everyday categories along the way.

If you wanted to redeem your rewards for travel instead of cash back, however, you would probably want to opt for a points or miles credit card instead. If you did go with the Amex Platinum or the Amex Gold in this case, you would have the option to transfer your points to 21 different airline and hotel loyalty programs including Air France (Flying Blue), Hilton Honors, Marriott Bonvoy and Virgin Atlantic, which could net you around 2.0 cents per point, according to Bankrate valutations.

Some types of points and miles credit cards also offer more value for rewards when redeeming points for travel, including the Chase Sapphire Preferred® Card and Chase Sapphire Reserve®. These cards let you transfer points to airline and hotel partners, and they offer a travel rewards bonus of 25 percent and 50 percent, respectively, when you use points to book travel through Chase Travel^SM. This makes 60,000 points worth $750 with the Sapphire Preferred and $900 with the Sapphire Reserve. 

If you decide to use your Chase points for cash back or statement credits, on the other hand, you would get just 1 cent per point in value.

Which rewards are best for you?

When it comes to cash back versus points, it comes down to your spending habits and lifestyle. If you don’t travel much or care about using your rewards strategically toward lofty travel goals, you’re best suited for cash rewards.

You may want to opt for a flat-rate cash back card so you don’t need to keep up with rotating bonus categories or activating your rewards. No matter which type of cash back card you choose, this move will benefit you due to the sheer simplicity of earning rewards. And you’ll still get something back from your credit card spending, even if you don’t get the most value for your rewards.

If you get a rush out of turning $500 worth of credit card rewards into $750 or $1,000 worth of travel, then you’re a perfect candidate for a card that offers rewards in the form of points or miles. You’d benefit from a travel card that gives you plenty of options for boosted points or miles values and travel upgrades. If you travel throughout the year and want access to benefits to make air travel more comfortable, then an elite travel card may be an even better fit.

The bottom line

To determine whether a cash back, points or miles card is better for you, you’ll need to know what kind of cardholder you are and what type of rewards structure most closely matches your spending habits and lifestyle.

But it doesn’t necessarily come down to choosing between cash back vs. rewards. It’s not uncommon for cardholders to pair a few different credit cards to maximize their rewards, so trying out different credit card combinations and rewards structures could also be an option