WalletHub, Financial Company
@WalletHub
Choosing between cash back rewards and travel rewards ultimately comes down to your spending preferences, the perks that specific cards offer, and how you plan to redeem rewards earnings. In general, people looking for flexible redemption options and rewards with clear values that can’t be changed by the card’s issuer should choose cash back rewards. But frequent travelers who enjoy perks such as free flights, airport lounge access, and hotel room upgrades have the chance to earn more total value from travel rewards.
With travel rewards credit cards, the number of points or miles you’ll need to redeem for a free flight or hotel night, for instance, varies from issuer to issuer and card to card. Points/miles can also lose their value any time the card’s issuer decides to raise the number needed to get a certain dollar amount in redemption value. Cash back rewards, on the other hand, are easy to understand and will retain their value because they’re already expressed in terms of dollars and cents.
All told, cash back rewards are the better way to go for most people. However, there are a number of variables to consider on both sides. Not everyone always needs to choose between cash back and travel rewards, either. Having both a cash back credit card and a travel rewards card in your wallet can make sense in some situations.
Cash Back vs. Travel Rewards Credit Cards
Category |
Cash Back |
Travel Rewards |
Winner |
Average Initial Bonus |
$205.48 |
24,860 points/miles |
Travel |
Biggest Bonus |
Around $300 |
$500+ |
Travel |
Average Earn Rate |
1.08% cash back |
1.18 point/mile per $1 spent |
Cash Back |
Flexibility |
More redemption options |
More value on travel purchases |
Cash Back |
Annual fee |
Typically $0-$95 |
Generally higher fees, from $0-$400+ |
Cash Back |
Foreign Transaction Fee |
Up to 3% |
Mostly 0% |
Travel |
Overall Value |
Rewards never lose value |
Rewards may be devalued |
Cash Back |
Recommended credit score |
Offers for all credit scores |
Offers for all credit scores |
Draw |
When choosing between cash back and travel rewards, it’s important to be realistic in how you’re going to use the card. And whichever type of rewards you pick, make sure to pay your bill in full each month, or else you could end up spending more in fees and interest than the rewards are worth.
Bottom Line: Cash Back vs. Travel Rewards
- You should get a cash back credit card if you want to earn everyday rewards and enjoy straightforward, flexible redemption options.
- You should get a travel rewards credit card if you travel multiple times per year and are confident you’ll earn enough in rewards to cover the cost of the annual fee – without overspending.
- You should have both if you can manage more than one account responsibly and want the best collection of earning rates for your biggest spending categories. Just make sure you pay your balances in full each month.
As long as you use your credit cards responsibly, you have the potential to reap lucrative rewards on your everyday purchases. Just be sure to actually put those rewards to use. Rewards that go unredeemed defeat the purpose getting the card in the first place.
Paul Kessler, CFP
@bikercarder
Cash back vs. travel rewards will be a win for cash back credit cards in most cases. For one thing, cash back tends to be more flexible. You can spend cash rewards on anything. But redeeming points and miles for something other than travel often means sacrificing a lot of value. Plus, many travel rewards cards require you to book flights, airfare, etc., through the credit card company’s travel portal. So you miss out on the lower prices potentially available on other sites.
So, all else being equal, cash back rewards are the better option. But in the real world there are always exceptions.
When travel rewards might beat cash back:
Extra value for travel: Some credit cards give you more value for the rewards you earn when you redeem them for travel. For instance, Chase Sapphire Preferred and Chase Sapphire Reserve give you 1.25 cents and 1.5 cents per point, respectively, when you book travel through the Chase website. And Capital One Venture gives you twice as much value when you redeem for a travel statement credit vs. other redemption options.
Attractive perks: Travel rewards cards often come with benefits such as travel insurance, airline fee credits and airport lounge access. For people who travel a lot, the extra convenience and monetary value these perks give may be worth sacrificing some redemption flexibility.
No foreign transaction fees: If you spend a lot of money abroad, or online at merchants located in other countries, foreign transaction fees can add up quickly. Since travel rewards cards rarely charge them, having one can save you money.
Generally, cash back vs. travel rewards is a win for cash. But luckily, it isn’t necessarily a choice you have to make. You can always use a cash back card for your everyday spending and keep a travel card in your wallet for trips. Just watch out for annual fees.
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