Rewards credit cards come in many different forms, with some offering flexible rewards and others offering straightforward cash back or statement credits.
Travel rewards credit cards are also a popular option considering they let consumers earn different types of points that are good for travel or even airline miles they can use with their favorite frequent flyer program.
The type of rewards credit card that’s best for you will ultimately depend on how much you spend, how often you travel and whether you want some flexibility in how you redeem your rewards. This guide goes over the differences between different card types, as well as some of the top options to consider in each category.
In summary: Cash back is the better choice for simplicity-seekers looking for hoping to earn flexible rewards on everyday purchases.
Cash back credit cards offer a percentage of cash back for each dollar you spend, with some cards in this category offering more points in some categories than in others. For example, some popular cash back credit cards offer a flat 1.5 percent in 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.
One major benefit of cash back credit cards is the flexibility they offer 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 cash back cards even let you cash in your rewards for gift cards, merchandise and travel rewards through their respective portal.
Most cash back credit cards dole out rewards based on a percentage of your spending. As an example, a card that lets you earn 2 percent back on all your purchases would net you $2 in rewards for every $100 you spend.
Pros and cons of cash back cards
Cash back credit cards tend to be a good value for consumers who rarely travel or don’t spend a lot on their credit cards each month. Here are some of the major advantages and disadvantages to consider when comparing them to points and miles credit cards.
- Most cash back credit cards don’t charge an annual fee (although some do)
- You may have a handful of redemption options depending on the card you choose
- Many cash back credit cards offer generous welcome bonuses
- Some cash back credit cards come with consumer protections like extended warranties and purchase protection against damage or theft
- Most cash back credit cards don’t come with any notable travel benefits
- Cash back credit cards tend to offer inferior rewards value when compared to travel credit cards
- You may have limited redemption options—or no options other than statement credits—depending on the card you choose
Cash back credit cards to consider
While any cash back credit card can help you rack up rewards on your spending, some cards can be more fruitful than others. Here are a few of the top cash back credit cards you should consider this year.
Chase Freedom Flex℠
The Chase Freedom Flex℠ doesn’t charge an annual fee, yet you can earn an initial cash bonus of $200 when you spend $500 on your card within three months of account opening. You’ll also earn 5 percent back on up to $1,500 spent in quarterly bonus categories when you activate (then 1 percent), 5 percent on travel booked through Chase Ultimate Rewards, 5 percent on Lyft rides (through March 2022), 3 percent on dining and drugstore purchases and at least 1 percent other purchases. You can redeem your rewards for cash back, statement credits, gift cards, travel and more.
Wells Fargo Active Cash℠ Card
The Wells Fargo Active Cash Card lets cardholders earn a flat 2 percent cash rewards on purchases, which is the cream of the crop, in terms of flat-rate cash back cards with no annual fee. This card also comes with a welcome bonus of $200 in bonus cash when you spend at least $1,000 during the first three months of opening your account.
Blue Cash Preferred® Card from American Express
The Blue Cash Preferred lets cardholders earn a 6 percent back on U.S. supermarket purchases (on up to $6,000 per year, then 1 percent) and on select U.S. streaming subscriptions. Cardholders also earn 3 percent back on transit and on U.S. gas station purchases, plus 1 percent on everything else. It does come with a $95 annual fee ($0 introductory annual fee for the first year), but you only have to spend $1,584 at U.S. supermarkets to recoup that cost—about $132 per month if you broke it down over the course of a year. Many people triple or quadruple that amount in grocery spending each month.
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 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 travel insurance—although cards with the most benefits tend to charge high annual fees.
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.
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 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.
Pros and cons of points and miles cards
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 when it comes to the advantages and disadvantages that come with choosing a points and miles card over cash back.
- Travel rewards can provide more value than cash back if you travel often
- Many travel credit cards come with travel benefits like airport lounge access and travel insurance
- Travel credit cards often have higher rewards rates and better bonuses
- Travel credit cards usually have higher annual fees than cash back credit cards (but not always)
- Airline credit cards and hotel credit cards often have limited redemption options
Point- and mile-earning credit cards to consider
If you’re thinking about getting a points-and-miles card, there are options to consider across the spectrum. Here are some top cards you may want to add to your list:
Chase Sapphire Preferred® Card
The Chase Sapphire Preferred® Card starts you off with 60,000 bonus points (worth $750 in travel when you redeem through Chase Ultimate Rewards) when you spend $4,000 on your card within three months of account opening.
You’ll also earn new benefits such as a $50 annual Ultimate Rewards Hotel Credit, 5X points on travel purchased through Chase Ultimate Rewards®, 3X points on dining and 2X points on all other travel purchases. As well as 5X points on Lyft rides through March 2022.
A $95 annual fee applies, and you can redeem your rewards for cash back, statement credits, merchandise, travel through the Chase travel portal or 1:1 transfers to Chase Ultimate Rewards airline and hotel partners.
Capital One Venture Rewards Credit Card
When you sign up for the Capital One Venture Rewards Credit Card, you can earn 60,000 miles once you spend $3,000 on purchases within 3 months from account opening, equal to $600 in travel. You’ll also rack up 2X miles for each dollar you spend, and you’ll get a fee credit for Global Entry or TSA PreCheck membership. A $95 annual fee applies, and you can redeem your rewards to cover travel purchases or transfer your miles to Capital One airline or hotel partners.
Citi Premier® Card
The Citi Premier® Card starts you off with 80,000 points when you spend $4,000 on your card within three months of account opening. You will also earn 3X points on restaurant, supermarket, gas station, hotel and air travel purchases, plus 1X points on all other purchases. You can also earn $100 off a single hotel stay of $500 or more once a calendar year. A $95 annual fee applies, and you can redeem your rewards for statement credits, gift cards, payments to your student loans or a mortgage, travel through the Citi travel portal, transfers to Citi ThankYou airline partners and more.
Which type of rewards is best for you?
How do you choose between cash back versus points? At the end of the day, all you can do is decide on the type of rewards you want to earn the most.
If you travel often every year and want access to benefits that make air travel more comfortable, then a premier travel credit card may be a better fit. Then again, a cash back credit card could easily be a better choice if you don’t spend a lot on your credit card and you’re happy earning rewards good for cash back or statement credits to your account.
Take the time to compare all your options before you decide, and keep in mind that it’s common for consumers to pair a few different credit cards to get the benefits they most want.
Bonus: How to transfer points to miles
Many of the top travel credit cards let you turn your points into rewards points with a different program. This is based on the transfer partners each of the main flexible rewards programs offers.
While all Chase Ultimate Rewards points transfer to airline and hotel partners at a 1:1 ratio, keep in mind that transfer ratios can vary with other credit card rewards programs. Either way, here are the main rewards programs to take note of and the transfer partners each one gives you access to:
|American Express Membership Rewards||Chase Ultimate Rewards||Citi ThankYou Rewards||Capital One Venture|
The bottom line
Cash back credit cards have a lot to offer consumers, but so do credit cards that let you rack up points and miles.
Before you make a decision on a card, compare all the top options in terms of rewards rates, bonus offers and consumer benefits. With enough research, you should wind up with a credit card that comes with a rewards program and features that make the most sense for your spending habits.