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Cash back or points: Which credit card rewards are better?

Yahoo Personal Finance · (Getty Images)
Ben Walker (CEPF, CFEI?) · Senior Writer, Credit Cards
Updated 8 min read

Rewards credit cards are a great way to get the most out of your spending habits by earning valuable cash back, points, or miles.

Cash-back credit cards tend to be easier to use due to straightforward rewards programs with simple earning and redemption rates. However, you might prefer a travel rewards card for its redemption options, such as flights and hotel stays. Many travel credit cards also have increased perks and benefits, including travel insurance or airport lounge access.

The best credit card rewards aren’t a matter of cash-back vs. points — what you earn largely comes down to your spending habits, lifestyle, and personal preference.

What are cash-back credit cards?

Cash-back credit cards are rewards cards that earn cash back on eligible purchases. For example, a cash-back card with a 2% rewards rate will earn 2% back on your purchases. That might seem small, but it can add up over time.

The average American household spent over $20,000 on food and transportation in 2022, according to the Bureau of Labor Statistics. If you spent $20,000 in a year on a 2% cash-back card, you would earn $400 in cash-back rewards.

How can you redeem cash back?

It depends on the card and credit card company, but standard cash-back redemption options include:

  • Statement credits

  • Deposits into bank accounts

  • Covering past purchases

  • Mailed checks

  • Gift cards

Some cards, such as the Chase Freedom Unlimited?, include travel bookings as a redemption option. That means you can use cash-back rewards for travel-related redemptions, like flights and hotel stays.

Pros and cons of cash-back cards

Pros

  • Cash rewards: You can earn valuable cash back for making eligible purchases with your cash-back card. In addition, cash-back rewards programs are often easier to use and understand than travel rewards programs.

  • Welcome bonuses: It’s common for cash-back cards to provide a welcome offer or sign-up bonus to new cardholders. You typically have to meet a spending requirement to earn the bonus.

  • Low annual fees: Many cash-back cards have low (under $100) or no annual fees, keeping your yearly card membership costs down.

  • 0% intro APR offers: Cash-back cards have some of the best 0% intro APR offers on purchases and balance transfers.

Cons

  • Foreign transaction fees: Most cash-back cards charge foreign transaction fees, making them poor choices for international travel.

  • Limited redemptions: Travel redemption options are more uncommon on cash-back cards.

  • Fewer perks and benefits: You typically won’t find as robust travel benefits on cash-back cards, including travel insurance, airport lounge access, and annual travel credits.

When to choose a cash-back card

We recommend cash-back credit cards if you prefer earning cash rewards on your purchases, want a low annual fee, and want to take advantage of a 0% intro APR offer.

These cards aren’t great for frequent travelers because of foreign transaction fees and limited travel redemption options.

Up Next

Recommended cash-back credit cards

  • Annual fee
    $0
  • Welcome offer
    Earn $200 cash back after spending $500 on purchases in the first 3 months
  • Introductory APR
    0% intro APR on purchases and balance transfers for 15 months, then variable 19.99% - 29.99% APR
  • Rewards rate
    • 8% cash back on Capital One Entertainment purchases
    • 5% cash back on hotels and rental cars booked through Capital One Travel
    • 3% cash back on dining, entertainment, popular streaming services, and at grocery stores (excluding superstores like Walmart and Target)
    • 1% cash back on all other purchases

Why we like it: The Capital One SavorOne is an excellent card for earning cash back in many everyday categories, including grocery stores, dining, and entertainment. If your typical spending habits align with these categories, this could be the perfect addition to your wallet.

Read our full Capital One SavorOne Cash Rewards review

  • Annual fee
    $0
  • Welcome offer
    Earn $200 cash back after spending $1,500 on purchases in the first 6 months (bonus offer will be fulfilled as 20,000 ThankYou? Points, which can be redeemed for $200 cash back)
  • Introductory APR
    0% intro APR on balance transfers for the first 18 months (19.24% - 29.24% variable APR after that)
  • Rewards rate
    • 5% cash back on hotel, car rentals and attractions booked on the Citi Travel? portal through 12/31/24
    • 2% cash back on every purchase with unlimited 1% cash back when you buy
    • Earn an additional 1% as you pay for your purchases (to earn cash back, pay at least the minimum due on time)

Why we like it: If you want a simple cash-back card, look no further than the Citi Double Cash. This card has a straightforward rewards rate that works on all eligible purchases. It could be all you need if you don’t want to juggle multiple cards.

Read our full Citi Double Cash review

  • Annual fee
    $0
  • Welcome offer
    Earn a $200 statement credit after spending $2,000 within the first 6 months
  • Introductory Purchases APR
    0% on purchases for 15 months
  • Ongoing Purchases APR
    18.74%-29.74% Variable
  • Introductory Balance Transfer APR
    0% on balance transfers for 15 months
  • Ongoing Balance Transfer APR
    18.74%-29.74% Variable
  • Rewards rate
    • 3% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%)
    • 3% cash back on U.S. online retail purchases (on up to $6,000 per year in purchases, then 1%)
    • 3% cash back at U.S. gas stations (on up to $6,000 per year in purchases, then 1%)
    • 1% cash back on all other purchases
    • Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit or on Amazon.com at checkout

Why we like it: The Amex Blue Cash Everyday makes sense if you want a simple cash-back card for everyday shopping. We especially like that online shoppers can earn elevated rewards on Amazon.com, Walmart.com, and other online retailers.

Read our full Amex Blue Cash Everyday review

What are points and miles credit cards?

Points and miles credit cards earn travel rewards on eligible purchases. These cards often provide various redemption options, but their rewards are designed for travel bookings, such as flights and hotel stays.

Travel rewards vary by card and credit card issuer, which can be confusing for travel card beginners. For example, 10,000 points on one card might offer a different value than 10,000 points on another.

However, it’s easy to determine the value of your rewards if you have a specific redemption in mind. Suppose you want to book a flight that costs $150 or 10,000 miles. If you divide $150 by 10,000, you get 0.015.

That means your miles are worth 1.5 cents per mile for that specific redemption. Anything above one cent per mile could be considered decent value, though some rewards' standard value might already be higher than that.

How can you redeem points and miles?

Standard credit card points and miles redemption options include:

  • Travel bookings

  • Transfers to travel partners

  • Covering past travel purchases

  • Statement credits

  • Mailed checks

  • Gift cards

Note that the redemption value for available redemptions varies by credit card. However, a general rule of thumb is that you’ll get the most value when redeeming points to book travel or transfer rewards to travel partners.

Pros and cons of points and miles cards

Pros

  • Travel rewards: If you’re a frequent traveler, nothing beats earning valuable points or miles on your existing purchases. Turning gas station and grocery purchases into flights and hotel stays on your next trip is incredibly rewarding.

  • Welcome bonuses: Welcome offers on the best travel credit cards tend to be more significant than cash-back card bonuses.

  • Increased perks and benefits: The best rewards credit cards provide a wide range of benefits, including travel credits, airport lounge access, travel insurance, and more. It’s also common for travel cards to waive foreign transaction fees.

  • More redemption variety: It’s common for travel cards to have many of the same redemption options as cash-back cards, such as statement credits and gift cards. In addition, you can also have multiple travel-related redemptions.

Cons

  • No 0% intro APR offers: Most travel cards don’t provide intro APR offers on purchases or balance transfers.

  • Potential for high annual fees: Premium and luxury travel cards have high annual fees, often exceeding $300 or more annually. You must determine if it’s worth paying an annual fee to use a card’s benefits and rewards.

  • More complicated rewards: Points and miles values vary depending on the rewards program and how you plan to use them. Learning can be confusing at first, but it can pay off with big savings on travel expenses.

When to choose a points and miles card

We recommend points and miles credit cards if you want to earn travel rewards to help offset significant travel expenses, such as flights and hotels. You can use these cards to make everyday purchases and the rewards you earn can help fuel your next vacation.

In addition, travel credit cards are essential for international travel since most don’t charge foreign transaction fees. They also provide travel insurance and luxury travel perks, such as airport lounge access.

Recommended points and miles credit cards

  • Annual fee
    $0
  • Welcome offer
    Earn 20,000 bonus points after spending $1,000 within the first 3 months
  • Introductory APR
    0% intro APR on purchases for the first 12 months, after which the standard APR applies
  • Rewards rate
    • 3x points on dining, travel, gas and EV stations, transit, select streaming services, and phone plans
    • 1x points on all other purchases

Why we like it: The Wells Fargo Autograph provides an exceptionally high rewards rate for a card with a $0 annual fee. Even better, its spending categories align with many everyday expenses, including dining, gas, and transit. If you want a low-stress but rewarding travel card, the Wells Fargo Autograph could be the right choice for you.

  • Annual fee
    $95
  • Welcome offer
    Earn 75,000 miles after spending $4,000 on purchases in the first 3 months
  • Purchase APR
    19.99% - 29.99% variable
  • Rewards rate
    • 5x miles on hotels, vacation rentals, and rental cars booked through Capital One Travel
    • 2x miles on all other purchases

Why we like it: The Capital One Venture Rewards makes a strong case for anyone who values simplicity. It doesn’t have confusing bonus categories and earns an elevated rate on all eligible purchases. In addition, you get added perks like access to transfer partners and receiving up to a $120 credit for TSA PreCheck or Global Entry applications.

Read our full Capital One Venture Rewards review

  • Annual fee
    $95
  • Welcome offer
    Get up to $1,050 in Chase Travel? value: Earn 60,000 bonus points after spending $4,000 in the first 3 months — worth $750 when redeemed through Chase Travel — plus up to $300 in statement credits on Chase Travel purchases within your first year
  • Ongoing Purchases APR
    21.49% - 28.49% Variable
  • Rewards rate
    • 5x points on travel purchased through Chase Travel?
    • 3x points on dining, select streaming services, and online groceries
    • 2x points on all other travel purchases
    • 1x points on all other purchases

Why we like it: The Chase Sapphire Preferred has been one of the most popular travel credit cards for years because of its low annual fee and top-notch travel benefits. That includes getting 25% more value when your points are redeemed for travel through the Chase Travel? portal. You can also transfer points to various travel partner loyalty programs, including Southwest Airlines Rapid Rewards, World of Hyatt, and Virgin Atlantic Flying Club.

Read our full Chase Sapphire Preferred review

Frequently asked questions (FAQs) about cash back and points

What is the difference between cash back and points?

With cash-back cards, you typically get exactly what the earning rate says. If a card earns 2% cash back on everything, that’s what you’ll get for making purchases. With points and miles, your rewards value might vary by redemption. For example, 10,000 points could equal $125 toward travel or $100 cash back.

What is the smartest way to use Chase points?

Booking travel through Chase Travel? is one of the best ways to use your Chase Ultimate Rewards points with certain Chase cards. For example, 60,000 points on the Chase Sapphire Preferred are worth $750 toward travel redeemed through Chase Travel, whereas those points would only be worth $600 if redeemed for cash back.

Are points more valuable than cash?

Depending on the redemption, some credit card rewards are worth over $0.01 per point, offering more value than most cash-back cards. That’s often the case when transferring points to travel partners with valuable rewards programs. For example, you can typically get more than $0.01 per point on redemptions you make with Air Canada, Southwest Airlines, and Virgin Atlantic.

This article was edited by Rebecca McCracken

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