When comparing rewards credit cards, you’ll often find yourself choosing between credit card points vs. cash back. Both types of credit cards have pros and cons which make them better for different types of customers.
In general, points will be worth more than cash back when they are redeemed for travel. But if you don’t travel frequently, you may get more value from cash back that can be spent on anything you choose.
Learn the benefits of each type of credit card, key differences you need to know and how to choose the best option for your spending.
Aren’t sure what to look for in a credit card? Here’s how to choose the right credit card for you.
Pros and cons of rewards credit cards
Credit card points have many advantages, but they aren’t the best choice for every type of spender. However, credit cards that earn points or miles tend to offer the best value for frequent travelers, whether you’re booking directly or using an online travel agency (OTA) like Expedia One Key Rewards.
The best rewards credit cards typically offer higher rewards in areas where you spend the most, plus offer flexible redemption options and generous welcome bonuses.
Pros
- Multiple redemption options. Credit card points often have several ways to redeem your earnings, including cash back, gift cards, travel and more.
- Points can be transferred for higher value. Flexible points can be transferred to airline and hotel loyalty partners for even higher-value redemptions, like first class flights and five-star hotels. For example, Chase has over a dozen airline and hotel partners you can transfer your rewards to.
- Exclusive benefits for cardholders. Many cards that earn flexible points include other benefits at no extra charge. These complimentary benefits might include elite status, annual credits, airport lounge access, cellphone protection and more.
- Larger welcome bonuses. Cards with flexible points tend to offer large welcome bonuses — some with values of $500 or more.
Thinking about snagging a lucrative welcome bonus on a rewards card? Here’s how to find the Chase Sapphire Preferred Card’s 80k to 100k bonus points offer
Cons
- Complicated redemption schemes. It can be challenging to redeem credit card rewards if you’re not familiar with the programs.
- Inconsistent values. Values vary by program and how they are redeemed, making it harder to know the best option. Some points are worth more than others, depending on which card(s) you have.
- Higher annual fees. Credit cards that earn the most points often have higher annual fees, making it harder to justify the benefits.
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Chase Sapphire Preferred® Card
Pros and cons of cash-back cards
Cash-back credit cards offer the ultimate flexibility because cash can be used for anything. With bonus categories of up to 5%, cash-back credit cards can save a lot of money on your everyday expenses.
Pros
- No restrictions on how rewards are used. The cash-back rewards can be used for anything once the money is in your bank account.
- Lower annual fees. Cash-back credit cards often have no annual fees.
- Straightforward redemption options. Cash-back rewards are typically redeemed as statement credits, deposits to your bank account or a mailed check.
- Rewards have a fixed value. Rewards from cash-back credit cards are actual cash back or points that are typically worth 1 cent each.
Cons
- Cannot redeem for outsized value. With a fixed value, cardholders cannot redeem for a higher value.
- Limited perks included. Cash-back credit cards generally have limited benefits, but may include extras like purchase protection or extended warranty coverage.
- Smaller or non-existent bonuses. Most cash-back credit cards either do not offer a welcome bonus or the bonuses tend to be worth less than $500.
Key differences
This chart compares and contrasts credit card points cards vs. cash-back credit cards so you can determine which type is best for you.
| CREDIT CARD POINTS CARDS | CASH-BACK CREDIT CARDS | |
|---|---|---|
Redemption options
| Cash back, travel, gift cards, online shopping and transfer to loyalty programs
| Statement credit, bank deposit and mailed check
|
Annual fees
| $0 to $695
| Usually $0
|
Earn rates and value of rewards
| Between 1 and 5 points per dollar spent. Value depends on the redemption option; average value of a point can be as high as 2 cents
| Between 1% and 5% of each dollar spent. Value is straightforward: 1% of a dollar is 1 cent
|
Common additional benefits
| Elite status, airport lounge access, travel protections and annual credits and more
| Purchase protection and extended warranty
|
When do points offer more value than cash back?
Credit card points have flexible values, which vary based on how they are used. Depending on the program, the value can be higher or lower than using a cash-back credit card.
Typically, the best redemption options for credit card points are booking travel through the card issuer or transferring to airline and hotel partners.
| AMERICAN EXPRESS | CAPITAL ONE | CHASE | |
|---|---|---|---|
Cash back
| 0.6 cents
| 0.5 cents
| 1 cent
|
Gift cards
| .5 to 1 cent
| 0.8 to 1.06 cents
| 1.0 to 1.1 cents
|
Travel
| .5 to 1 cent
| 1 cent
| 1 to 1.5 cents
|
Transfer to loyalty programs
| Varies
| Varies
| Varies
|
Average value
| 0.6 to 1 cent
| 0.5 to 1 cent
| 1 to 1.5 cents
|
When does cash back offer more value than points?
Cash-back rewards offer the most value when you want straight cash back to use as you see fit. Small business owners can also use cash-back credit cards to earn rewards on monthly expenses to boost their bottom line.
Some cards earn higher rewards based on your relationship with the bank. The Bank of America Preferred Rewards program offers up to 75% more rewards based on your qualifying banking and investment balances. These programs can provide an extra boost to your cash-back credit card rewards.
Credit card points typically have limited redemption options with varying values. In some cases, point redemption options are worth less than one cent per point. By comparison, cash-back rewards typically have a stable value regardless of how they are redeemed or spent.
How to choose the best option for your spending
Choosing the best credit card for your spending depends on where you spend and how you plan on redeeming rewards. Cash-back credit cards offer the ultimate flexibility because the cash can be spent any way you like. Credit card points can offer higher value, but you typically have to redeem for travel to get the most value for your rewards.
The question comes down to whether or not you travel enough to be able to make the most out of a credit card that earns points. If you aren’t sure, know that most cash-back credit cards don’t have annual fees, which makes them an easy choice. Before paying an annual fee for a points credit card, determine if its perks and rewards are worth the cost.
Frequently asked questions (FAQs)
The value of credit card points varies greatly depending on how they are used. Many rewards programs value points at one cent each when booking travel, getting cash back or buying gift cards. Transferable points have the highest value since they can receive outsized value when booking premium flights and hotels. Some redemptions are worth less than a cent per point, like exchanging Membership Rewards for a statement credit, which is worth just 0.6 cents per point. Generally speaking you should aim to get at least a penny per point when redeeming your rewards.
Points earned from credit cards usually don’t expire while the account is open and in good standing. To be safe, consider having a small recurring transaction charge to your card each month to keep your account active. You should also read the fine print of your credit card agreement as some cards do earn points that expire after a set amount of time –– even if your account is in good standing.
Cash-back rewards typically do not expire as long as your account is active and in good standing. However, some rewards expire on a set date after they’ve been earned.
When comparing points vs. cash back, the value of the points depends on which program they’re earned and how you redeem them. Earning 2x points means you’ll earn 2 points for every $1 spent, but the value of those points may be worth less than a cent each. When redeeming for cash back, most points are valued at 1 cent or less. Transferring points to airline and hotel partners usually offers the highest value, which would make them worth more than a cash-back redemption.