Cash Back vs. Points: Which Is Better?

Depending on your spending patterns and preferences in rewards, you might benefit more from a cash back or points card.

Cash back cards let you earn a fixed percentage of the amount you spend as cash back, and redeeming that money is typically easy. Credit cards that offer reward points also work in the same manner for accumulating points, but the points you earn don’t necessarily translate into corresponding dollar amounts — instead, they translate into rewards, like travel accommodations, airline fare and gift cards.

With a rewards card that offers points, you might benefit most when redeeming your points through the card provider’s reward program. Several cards from both categories give you other ways to redeem your cash back and rewards points.

A cash back credit card might work well for you if you’re looking for simplicity in capitalizing on your spending. A credit card with reward points, on the other hand, might work better if you’re a frequent traveler and want to use your rewards for money off airfare and hotel accommodations.

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MoneyGeek’s Takeaways

cashBack

Cash back comes in the form of a fixed percentage of the amount you spend.

rewards

The value of reward points varies based on the card you get and the redemption method.

annualFee

Most cash back cards don't charge annual fees; many points cards do.

Should You Get a Cash Back or Points Credit Card?

The cash back vs. points comparison has no clear winner because which is best for you depends on your spending habits, preferences and budget. Both come with their share of pros and cons — be sure to evaluate these carefully to choose a card based on your individual needs.

Cash Back Credit Cards

Pros

  • Low or no annual fees
  • Cash rewards
  • Ease in redeeming cash back

Cons

  • Might have caps on how much cash back you may earn
  • May come with limited perks
  • Usually have lower sign-up bonuses than cards with reward points
Credit Cards With Points

Pros

  • Typically higher sign-up bonuses than cash back cards
  • Tend to offer better travel-related perks
  • Ability to transfer points to airline/hotel reward programs

Cons

  • Might come with steep annual fees
  • Need to understand how any given rewards program works
  • The value of points may vary based on how you redeem them

Is Cash Back the Same as Points?

Cash back is not the same as reward points; while the former translates into a corresponding dollar amount, the latter does not. For instance, a 2% cash back card offers $2 cash back for every $100 you spend. However, if you spend the same $100 on a card that comes with 2x points on all purchases, the value of those 200 points may vary greatly depending on which card you have and how they are redeemed.

Redeeming cash back is fairly straightforward. Most cash back cards let you use your cash back as statement credit or transfer it to your bank account. Several cash back cards also allow you to utilize your cash back to shop online and get gift cards.

On the other hand, reward points tend to offer the most value when you use them to make travel bookings through your card provider's or its partners’ reward programs. For example, 10,000 Membership Rewards Points earned through the American Express Gold Card are worth $100 when you use them to book flights through American Express Travel. That same amount of points is worth $70 if you use them to make purchases through Amazon.com and $60 when you use them to cover your card charges.

Other ways to redeem reward points might include using them as statement credit, transferring them to airline or hotel loyalty programs, getting gift cards, shopping online or donating them to charity.

While reward cards with points tend to offer more value than cash back cards, getting one tends to be most beneficial if you’re a frequent traveler since card users typically receive this additional value by purchasing travel accommodations.

The Similarities

Depending on the card you get, you might have the opportunity to earn higher cash back or reward points through category-based spending. Both types of cards might come with caps on the maximum cash back or reward points you can accumulate. In addition, your cash back or reward points might expire if they’re not used within a predetermined period.

For instance, cash back rewards you earn through a U.S. Bank credit card stand to expire 36 months after the billing cycle in which you earn them. With the British Airways Visa Signature Card from Chase, you stand to lose your points if you don’t have any Executive Club program activity for 36 consecutive months.

Since cash back cards and cards with points usually come with higher interest rates than cards with no rewards, it's important that you pay off your balances in full each month.


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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

Is Cash Back Really Worth It?

If you sign up for a cash back card with no annual fees, getting it to work in your favor is simple. You make purchases using the card and earn cash in return. Since you’re paying no annual fees, any cash back you earn is a financial win.

However, if you plan to get a cash back card with an annual fee, you need to determine if the money you stand to earn will offset the fee’s cost. For example, while the American Express Blue Cash Preferred Card and the Savor Rewards Card from Capital One offer high cash back rates on category-based spending, both come with annual fees of $95 (waived for the first year with the Blue Cash Preferred Card).

Getting a cash back card might also be worth your while if you opt for one that offers high cash back rates across categories in which you routinely spend. For example, the Chase Freedom Unlimited credit card offers 5% cash back on travel that you purchase through Chase Ultimate Rewards and 3% cash back on dining. The Citi Custom Cash Card, on the other hand, provides 5% cash back on purchases of up to $500 in the top eligible spend category every billing cycle.

Some issuers of cash back credit cards let you set up automatic redemption by linking your bank account. This convenient system simplifies the redemption process and ensures you don’t miss out on getting your cash back.

Are Point Credit Cards Worth It?

Credit cards with points might be worth it if you use them strategically.

Most reward cards that offer a higher number of points per dollar come with annual fees. To ensure you’re getting the most value for your money, you’ll need to determine if the points you earn offset the card’s annual fees. For example, the Chase Sapphire Reserve Card comes with a $550 annual fee.

Understanding how you can make the most of your reward points requires reviewing your card’s fine print in detail because the worth of points may vary based on redemption methods. However, more often than not, reward points provide the best value when redeemed for travel through your card provider’s reward program.

Credit cards with points tend to come with better sign-up bonuses than cash back cards. Keep in mind that some of these offers require that you spend at least a predetermined amount within a given period. Depending on the card you get, you might be able to transfer the reward points you earn to a partner airline or hotel loyalty program.

If you take out a travel rewards card, you may also expect perks such as seat upgrades, free checked bags, priority boarding, access to airport lounges and travel insurance. These benefits are typically hard to find with no annual fee cash back cards.

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If you wish to keep your reward earnings simple and don’t want to pay an annual fee, getting a cash back card might work well for you. If you travel frequently, a card with reward points might be the better alternative. We’ve reviewed over 1,600 consumer credit cards so you can pick the best one for your needs with ease.

Other Questions You May Have About Cash Back Cards

Below are answers to other commonly asked questions about the cash back vs. rewards credit cards.

Next Steps

Now that you know the different factors to consider when comparing credit card points vs. cash back, be sure to take your unique needs and spending patterns into account before selecting any particular card. Once you’ve determined which type of card to get, compare your alternatives across aspects such as reward earn rates and annual fees to find the best option for you.

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Learn More About Cash Back Credit Cards

The MoneyGeek editorial team strives to remain updated on all changes in the American credit card market. You can trust our members to guide you in the right direction, whether you wish to learn about how credit cards work, build your credit or make the most of your rewards card.

About the Author


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Rajiv Baniwal has been writing about different financial topics for over 15 years. Meticulous in his research, he makes sure he provides accurate and up-to-date information. His areas of expertise include mortgages, personal loans, credit cards, insurance and international money transfers.


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