Credit Cards

What’s Better Cash Back or Miles

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 5 minute read

You may optimize your benefits by choosing the finest credit card strategy. It is possible to get free money and other benefits by making prudent use of a credit card. Additionally, you have a variety of credit cards to pick from, many of which include rewards systems that allow you to tailor your incentives to your specific spending habits.

Do you want to go to Hawaii for free? A sign-up bonus from a travel credit card might help you achieve your goal. Spending money on food doesn’t have to be expensive. Cashback credit cards are an excellent idea since you can earn more money than you can eat.

Even though travel reward credit cards often provide more substantial sign-up bonuses and a bigger return on your everyday spending, this doesn’t always indicate that travel reward credit cards are a better option for your overall financial situation. A cashback credit card may be a better option if you’d rather save money than get a free flight. Cashback credit cards make redeeming rewards easier.

Why people like cashback credit cards

It is common for a cashback credit card to give you a percentage of the money you spend back, often between $0.01 and $0.05. In addition, you’ll typically have the option of receiving your money in a variety of ways. You may, for example, choose a statement credit, a gift card, or a cheque in the mail.

The redemption limits for cashback cards are often low, and the rewards you earn are frequently quite liquid, making it easy to withdraw cash when you need it. The Capital One Quicksilver Cash Benefits Credit Card is one example of a card with rewards that are both flexible and easily accessible. Points never expire as long as you keep your account active and there is no minimum threshold for redemption. You may obtain cash, use your rewards against a recent purchase, or buy gift cards to your favorite businesses.

Sign-up incentives for cashback cards typically fall between $100 and $200. As an example, if you open a Bank of America® Customized Cash Rewards credit card within the first 90 days of account opening, you’ll receive a $200 bonus, and you’ll get 3 percent cash back on the category of your choice; 2 percent cash back at grocery stores and wholesale clubs (on the first $2,500 spent each quarter in the 2 percent and 3 percent categories combined); and 1 percent cash back on all other purchases.

The Blue Cash Preferred® Card from American Express is one of the few reward credit cards that does not charge an annual fee. However, you’ll earn 6% cash back at U.S. supermarkets (for the first $6,000 per year, after that 1X) and on U.S. video-streaming services, 3% at petrol stations, and on qualified public transportation in the U.S., and 1% on all other transactions.

Amex Blue Cash Everyday® Card gives 3% cashback at U.S. supermarkets up to $6,000 a year, 2% cash back at U.S. petrol stations and select U.S. department stores, and 1% cashback on all other purchases for an annual fee of $0. Families that make enough purchases to cover the yearly fee on the Blue Cash Preferred credit card may find it a better value.

Those looking to save money on their monthly bills might benefit greatly from using a cashback rewards credit card. Customers who don’t travel much and want the freedom to utilize their points in other ways would benefit greatly from these programs.

For those who don’t want to put in the time and effort to optimize their miles, a cashback card may be the best option for them to redeem their benefits. However, if you’re a regular traveler looking to maximize the value of your rewards dollars, you should look into a travel rewards credit card.

Benefits

Every dollar you spend on your travel rewards card will earn you at least one point (or mile). Typically, you may only use airline credit cards to redeem points for flights on the particular airline’s frequent flyer program. As a result, if you’ve developed a strong relationship with a specific airline and want to take advantage of the benefits that come with its branded rewards card, doing your research on these cards is a smart move.

You may redeem rewards for cash back, trip purchases through the issuer’s travel site, or even transfer them to airline loyalty programs with other travel cards. Using a premium credit card, like the Chase Sapphire Reserve, means that your points are worth 50% more when you redeem them for travel purchases through the Ultimate Rewards travel portal than they would be if you were to redeem them for cashback.

In addition, the Chase Sapphire Reserve, like many other travel rewards credit cards, gives a generous sign-up bonus of 50,000 bonus points after making $4,000 in purchases in the first three months. All of this value, however, comes at a cost of $550 each year.

However, even without annual fees, travel rewards credit cards often have better sign-up incentives than cashback credit cards. The Capital One VentureOne Rewards Credit Card, for instance: After spending $500 in the first three months, you will get 20,000 extra miles. This is the equivalent of several hundred dollars in cash, and it may be used for travel expenses as well.

Between $0 to $500 a year, annual fees on travel reward credit cards are widely available. Generally speaking, the more expensive your credit card, the higher your benefits and privileges.

Although it may seem obvious, those who want to travel on a regular basis should look into the best rewards credit cards for travel. For those who travel frequently and may benefit from additional amenities, such as access to airport lounges or TSA PreCheck credits, premium credit cards are ideal.

People who are willing to put in the effort to get the most out of their travel rewards cards are better suited for this type of credit card.

How do you select between cashback and miles?

Cashback credit cards and travel reward cards both have advantages and disadvantages, so it’s vital to weigh the pros and cons of each before making a final decision. What do you need to do before this?

  • Do you know how often I’ll be traveling? Consider a travel rewards credit card if you travel frequently.
  • Who knows where I’ll end up. International travelers might consider a travel rewards credit card since points can go further on more expensive flights. Additionally, if you regularly go overseas, you may save even more money by using a travel card that does not charge international transaction fees.
  • No, I don’t have a favorite airline. You may cut down your credit card possibilities by deciding whether you’ll stick with one airline or look around for each journey.
  • The question is, “Want more for my money, or do I want to save more?” Consider a cashback credit card if you want to use your rewards as a way to save money. Travel rewards cards are a great way to obtain freebies and discounts on future travels.
  • Do I have time to keep track of and redeem my points? A cashback card may be the ideal option if you’re searching for an easy and clear way to redeem your points. Consider a travel rewards credit card if you’re ready to put in the work to optimize the value of your points.

You’re in for a treat if you’re new to credit card rewards, regardless of which card you select. When deciding on a credit card, keep in mind to conduct your homework and think about your specific requirements.

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