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Cash back vs. points and miles credit cards

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Man looking at credit card and tablet at outdoor cafe
RgStudio / Getty Images
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Rewards credit cards come in many different forms, with some offering cash back and others offering points or miles. If you’re wondering which rewards currency to go with, it helps to understand how both work.

Cash back rewards cards offer cash as a percentage back on your purchases. This can mean ease of use, immediate gratification and flexible redemption options. Cards that offer travel rewards, on the other hand, typically offer them as points and miles, which are most valuable when redeemed for travel. Points and miles, used wisely, can go a long way to helping you save for a coveted vacation.

The type of rewards credit card and rewards structure that’s best for you will ultimately depend on your spending habits and lifestyle. This guide goes over the differences between earning cash back, points and miles, as well as some of the top options to consider in each category.

Pros and cons of cash back

In summary: Cash back is the better choice for simplicity-seekers hoping to earn flexible 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 some categories than in others. For example, some popular cash back credit cards offer a flat 1.5 percent cash back for every purchase you make, but others offer bonus rewards (up to 5 percent back) in fixed or rotating categories throughout the year.

Redemption flexibility

One major benefit of cash back credit cards is their flexibility when it comes time to redeem your rewards. Depending on the cash back card you sign up for, you may be able to redeem your rewards for a check in the mail or a statement credit to your account. Some of the best cash back cards also let you cash in your rewards for gift cards, merchandise or travel rewards through your card’s portal.

Cash back credit cards tend to be a good value for consumers who rarely travel and/or prefer to see save money along the way, rather than save for a future experience. Here are some advantages and disadvantages to consider when comparing them to points and miles credit cards.

Pros:

  • Earning and redeeming cash rewards is simpler and more immediate.
  • Rewards value tends to be straightforward: A 2 percent cash back card yields $2 per $100 spent.
  • 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 any notable travel benefits.
  • Cash back credit cards may deliver inferior rewards value compared to travel credit cards.
  • You may have limited redemption options — or no options other than statement credits — depending on the card you choose.

Pros and cons of points and miles

In summary: A points or miles card is the better choice for those who travel often or wish to start earning travel rewards.

Many different types of rewards credit cards fall under the umbrella of “points and miles” cards. For example, points and miles cards include airline credit cards that let you earn frequent flyer miles in a specific frequent flyer program. But they also include flexible rewards cards that let you redeem points for travel in more than one way.

Points and miles cards may also come with important travel benefits like airport lounge access, credits for Global Entry or TSA PreCheck membership or built-in travel insurance benefits — although cards with the most benefits tend to charge high annual fees.

Redemption flexibility

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

Redemption value

Travel points tend to be worth more than cash back, and some of the best travel rewards currencies are worth up to 2 cents per point or more. However, your redemption value depends on how you redeem your travel rewards. If you cash in flexible points for a statement credit to your account, you may only get 1 cent per point in value or less. For travel redemptions, the value tends to be significantly higher.

The pros and cons of points and miles cards can vary depending on the specific card you use. However, some general rules of thumb can help guide you regarding the advantages and disadvantages of choosing a points and miles card over cash back.

Pros:

  • Travel rewards provide more value than cash back if you travel often.
  • If you like fancy travel accommodations, travel rewards can help elevate you into business class or upgraded hotel rooms when redeemed strategically.
  • Many travel credit cards come with travel benefits like airport lounge access and travel insurance.
  • Travel credit cards have higher rewards rates and higher welcome bonuses.

Cons:

Which type of rewards currency is best for you?

For the no-fuss cardholder

If you don’t travel much or care about using your rewards strategically towards lofty travel goals, you’re best suited for cash rewards. To make things easier, you may even opt for a flat-rate cash back card, so there’s no keeping up with rotating bonus categories or activating your rewards every so often. This move will benefit you due to the sheer simplicity of earning rewards. You’re still getting something back from your credit card use, even if you don’t get the most value for your rewards.

For the travel enthusiast

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 points or miles. Specifically, you’d benefit from travel cards that give you plenty of options for boosted point or miles values and travel upgrades. If you travel often every year and want access to benefits that make air travel more comfortable, then an elite travel card may be an even better fit.

The bottom line

Hopefully, we’ve helped settle the debate between cash back versus points and miles for you. In essence, you need to know what kind cardholder you are and the rewards structure that most closely matches your spending profile. Keep in mind that 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.

Written by
Holly D. Johnson
Author, Award-Winning Writer
Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more.
Edited by
Senior Editor
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Part of  Introduction to Rewards Credit Cards