What is the difference between cash back and points?

The difference between cash back and points is that the former is the most versatile type of credit card rewards, as it can be redeemed for anything, and there’s never any doubt about how much it’s worth. Points, on the other hand, have a value set by the credit card company and tend to be worth the most when redeemed for travel. Credit card companies won’t always clearly disclose points values, and those values can change over time.

How Cash Back Rewards Work

Cash back allows you to earn a percentage of your spending back as a reward. This means that for every purchase, a certain amount is credited back to you, making it feel like you’re getting paid to shop.

You can redeem cash back in several ways, including:

• Statement credits to lower your credit card balance
• Paper checks sent to your home address
• Direct deposits into your bank account

Cash back is easy to understand, making it an ideal choice for those who prefer simple rewards without the complexities of points systems.

How Credit Card Points Work

Points can typically be redeemed for:

• Travel expenses, such as flights and hotel stays, often at a higher value
• Gift cards for popular retailers and restaurants
• Unique experiences, like concerts or exclusive events
• Merchandise, or even cash in some cases, though at a lower value

The key takeaway is that points can offer larger rewards for travel, resulting in bigger savings or more exciting experiences. However, some points can expire if not used within a certain timeframe, so users need to be strategic in how they redeem them.

It’s also important to watch out for cards advertised as offering cash back that really provide points. For example, the Chase Freedom Flex® Credit Card offers “5% cash back” in certain bonus categories. However, the card actually gives 5 Chase Ultimate Rewards points per $1 spent, which can be traded for cash back at a rate of 1 cent each.

Cash Back vs Points

Notable Cash Back Cards

Notable Points Cards

Feel free to take a look at our editors’ latest picks for the best cash back credit cards and the best points credit cards on the market to see which best fits your needs.

Well, it does make a difference. If you opt for cash back, you're getting money directly from your spends. On the contrary, if you choose a card for points or miles, you can convert them as per your requirement. If you travel a lot, miles will do better for you.

I'd say the difference is flexibility. Points can only be redeemed for specific products or services, whereas cash back is a lot more flexible and easy to use since you get to spend it however you want.