Key takeaways

  • Cash back credit cards are generally the better choice if you want to earn simple rewards on your regular purchases.
  • A points or miles card may be a better option if you travel often or want to start earning travel rewards on your purchases.
  • If neither option is the perfect fit, it may be worth trying out different credit card combinations and rewards structures to find what works best for you.

Rewards credit cards come in many different forms. Some offer cash back and others offer points or miles, and there can be potential benefits and downsides to both 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 are often 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 often most valuable when redeemed for travel.

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

Pros and cons of cash back 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 sign up for, 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 consumers 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. For instance, a 2 percent cash back card can yield you $2 for every $100 you spend.

Pros and cons

Consider the advantages and disadvantages when comparing cash back cards to points and miles credit cards.

Pros

  • Earning and redeeming cash rewards is simpler and more immediate.
  • Cash rewards value tends to be straightforward and can be easier to maximize.
  • You have 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 types of 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.

Pros and cons of points and miles cards

A points or miles card may be the better choice for those who travel often or wish to start earning travel rewards. 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, but also flexible rewards cards that let you redeem points for travel in more than one way.

Points and miles cards also tend to 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 tend to 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 up to 2 cents each or more. However, your redemption value depends 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. 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

General rules of thumb can help guide you regarding the advantages and disadvantages of choosing a points or miles card over a cash back card.

Pros

Cons

  • Travel credit cards tend to have higher annual fees than cash back cards.
  • Airline credit cards and hotel credit cards often offer limited redemption options.

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.