Updated: July 26, 2024
Updated: July 26, 2024
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Choosing between a cash back card and a miles card is picking between hundreds of dollars in cash a little at a time or a free vacation. Cash back offers simple savings, while miles unlock travel adventures that may be worth more than your cash back if you’re willing to work for it.
Wondering which card will serve you best? We break down everything you need to know about cash back vs. miles credit cards so you can find the best card based on your spending habits and financial goals.
Whether you should get a credit card with miles or cash back depends on how often you travel. Cards with miles offer the best value when you redeem your miles for travel-specific rewards, and they also come with travel perks.
Meanwhile, cash back cards offer straightforward savings on purchases and generally lack travel benefits. If you’re choosing between miles and cash back, weigh the rewards you can potentially earn against factors such as annual fees and redemption flexibility.
Feature | Cash Back | Miles |
|---|---|---|
Rewards redemption | Can be used like cash | Travel-centric for highest value |
Perks | Few additional perks | Usually with travel perks |
Annual fee | Usually no annual fee | Usually with annual fee, ranging from $95 to over $500 |
Opt for a cash back credit card if you value simplicity and consistent returns on your purchases. Cash back cards allow you to earn a percentage from the amount you spend, which can range from 1.5% to 6%, depending on your card.
The Wells Fargo Active Cash Card offers an unlimited 2% cash rewards on all purchases, making it a strong choice for consumers who don't want to track spending categories. If your spending is concentrated in specific categories, you can get cards like the Blue Cash Everyday Card from American Express, which provides 3% cash back at U.S. supermarkets and gas stations.
Cash back rewards are as good as cash and are redeemable as a statement credit, checks, gift cards and more. Generally, cash back cards don’t charge annual fees. If you don’t travel often and are focused on saving money, you’ll find cash back cards to be more rewarding.
Select a miles credit card if travel is a significant part of your lifestyle or you're looking to save on future trips. Miles cards often offer substantial rewards for travel-related expenses, and the miles you earn have higher value if redeemed for flights, hotels and other travel costs.
The Capital One Venture X Rewards Credit Card provides up to 10x miles on hotels and rental cars and 5x miles on flights. It also comes with perks like airport lounge access and travel insurance, adding value beyond the rewards themselves.
Remember, miles cards typically come with annual fees and complicated rewards redemption processes. You may need to spend a substantial amount of money to earn enough miles to offset the annual fee. You may also have to study the issuer's rewards system to get the most value from your miles.
When you're unsure which type of card to choose, a flexible points card offers the best of both worlds. It earns points that can be used like cash and you may be able to receive even higher value by transferring to airline and hotel partners. -- Lee Huffman, credit card expert at BaldThoughts.com
Understanding the differences between cash back and miles can make it easier to find the best card for your spending and travel habits. Cash back cards let you earn a fixed percentage of the amount you spend. Cards with miles work in the same manner when it comes to earning miles, but the value of your miles is not as straightforward.
Flexibility of Redemption
Cash back cards offer straightforward redemption options, such as statement credits, bank deposits or checks, making them a versatile choice for many consumers. In contrast, redeeming miles can be more complex.
Although you can usually redeem miles as statement credit, doing that will result in a smaller value compared to if you redeem them for travel purchases. So if you have a miles card, your redemption options are limited to travel-specific rewards.
Value of Rewards
The cash back you earn is as good as cold cash in your wallet. If you bought an item worth $1,000 using a card with 1.5% cash back, you get $15 as cash back. Most card issuers let you transfer your cash back into a bank account or use it as statement credit.
In contrast, the rewards you get from miles cards can have fluctuating value. If you’ve accumulated 100,000 miles, that may equate to $1,000 in travel (or 1 cent per mile). But you can only get that amount if you redeem through your issuer’s travel portal or transfer your miles to a third-party rewards provider. If you redeem as a statement credit, you may get less than 1 cent per mile.
The value of your miles also changes based on the dates you wish to fly and the route. Flights from popular airports and flights during the weekend or holidays typically require more miles. While you may need 60,000 miles to fly between any two cities on a Tuesday, that may increase to 80,000 miles for a Saturday.
If you’re getting a miles card, you can typically choose between co-branded and non-co-branded cards.
A co-branded credit card with miles is linked to a particular airline and might come with limitations on how you may use your miles. For example, if you have the Delta SkyMiles Platinum American Express Card, the miles you earn accumulate in your Delta SkyMiles membership account. You'll need to redeem your miles through the Delta SkyMiles program, which allows you to book flights on Delta and its partner airlines.
Meanwhile, a non-co-branded card gives you more freedom in how you may use your miles. This can be advantageous if you prefer not to commit to a single brand. The Capital One Venture Rewards Credit Card lets you transfer your miles to different airline and hotel loyalty programs, book travel through Capital One Travel and use your miles to pay for eligible travel purchases.
Choosing between cash back and miles credit cards comes down to how you spend and what you value in rewards.
Families who prioritize budgeting and savings may find cash back cards more beneficial, as they offer straightforward value and can easily offset everyday expenses. For frequent travelers, miles cards can unlock significant travel perks and savings, especially when strategically used for booking flights and hotels.
If you’re a young professional with varied expenses, you may opt for cash back cards to earn rewards on your spending. However, if you’re a yuppie who frequently travels as a part of your lifestyle, a miles card with a good reward rate and low annual fee could be advantageous.
Always consider your card’s net benefit after accounting for annual fees. Remember, the best card for you is one that aligns with your spending patterns and financial objectives.
If you’ve already decided what to pick between cash back vs. miles, we’ve listed the Best Cash Back Cards and the Best Miles Cards to help you find a card that provides the best value based on your needs and lifestyle.
We respond to some frequently asked questions about cash back and miles cards to help you make an informed decision.
Most popular U.S.-based airline loyalty programs do not give you the option of converting your miles to cash. These include Delta SkyMiles, United MileagePlus, American Airlines AAdvantage and Southwest Rapid Rewards.
The dollar value of a mile depends on factors such as the card you have, the route you wish to fly, which class of seat you are booking, when you wish to fly and whether you're using your miles to book a seat or get an upgrade.
If you're a frequent flyer, getting a credit card with airline miles might be better. However, if you don't travel often enough to capitalize on what an airline card has to offer, a 1.5% cash back card might be the one to get. Frequent travelers often benefit more from an airline credit card with enhanced rewards on flight purchases, a quicker path to elite status and travel benefits like free checked bags and priority boarding.
No matter whether you have a credit card with cash back or miles, you can expect it to come with a higher interest rate than cards with no rewards. However, this is not a concern if you pay your balances in full each month because only outstanding balances accrue interest.
About Doug Milnes, CFA
Doug Milnes is a CFA charter holder with over 10 years of experience in corporate finance and the Head of Credit Cards at MoneyGeek. Formerly, he performed valuations for Duff and Phelps and financial planning and analysis for various companies. His analysis has been cited by U.S. News and World Report, The Hill, the Los Angeles Times, The New York Times and many other outlets.
Milnes holds a master’s degree in data science from Northwestern University. He geeks out on helping people feel on top of their credit card use, from managing debt to optimizing rewards.
