Cash Back vs Travel Rewards Credit Cards: Which One is Better For You?

By Chika


Last Updated: November 20, 2023


There are a lot of different kinds of credit cards with rewards.

Some give you cash back, while others give you points or miles that you can use to book travel. There are, of course, pros and cons to each choice.

It can help you decide which type of credit card award to pick if you know how the different types work and how they fit with your financial goals and way of life. 

In this article, we'll take a look at both cash back and travel rewards credit cards so you can figure out which suits you better. 



What is a cash back credit card?

Cash-back credit cards are a type of credit card that rewards cardholders with a percentage of their spending as a cash rebate. 

When someone uses a cash-back credit card to buy something, they get a certain portion of the cost back in cash. These cards are meant to encourage spending and give the cardholder some kind of financial gain.

These cards are popular because they offer a straightforward way to earn rewards on everyday spending, without dealing with complex point systems or travel-related rewards. 

Rewards on cash back credit cards can accumulate over time and are usually redeemable as these, depending on the card issuer's policies.

  • statement credits
  • direct deposits to a bank account
  • checks
  • gift cards


Things to consider when choosing a cash back credit card

When choosing a travel rewards credit card, it's essential to consider factors such as:

  • annual fees
  • interest rates
  • terms and conditions 
  • If it aligns with your spending habits and financial goals


What is a travel rewards credit card?

A travel rewards credit card is made to give travelers perks and rewards that are just right for them.

People who use these cards can get rewards points or miles for every dollar they spend.

These rewards can often be cashed for:

  • flights
  • hotels
  • rental cars
  • and other travel-related costs

Travel rewards credit cards usually give extra points or miles for spending in certain areas, like when you eat out, book travel or buy petrol. 

Some cards also offer sign-up bonuses, where new cardholders can get a lot of points or miles after spending a certain amount in the first few months after starting their account.



Things to consider when choosing a travel reward credit card

When considering a travel rewards credit card, it's essential to assess factors such as:

  • annual fees
  • interest rates
  • redemption options
  • flexibility in using points or miles
  • if the card aligns with your travel preferences and spending habits

It's also crucial to manage your credit responsibly to avoid accruing debt and high-interest payments while maximizing the benefits of the rewards program.



What are the advantages of cash back rewards? 

Cash back rewards offer several advantages.

This includes: 

Simple rewards structure: It's easy to use cash back programs. It's simple to understand and use because users get cash back on a portion of what they spend.

Flexibility: Cash back can be used for anything, unlike some reward programs that can only be used at certain stores or airlines. The money you earn can be spent in any way you want.

Earning potential: Some credit cards let you earn cash back on everything you buy, so you can get the most out of your rewards across all of your buying.

Encourages responsible spending: Users are encouraged to spend less than they have to earn awards and avoid overspending or having high balances.



What are the disadvantages of cash back rewards?

However, there are also some disadvantages to consider.

These are:

Lower rewards rate: Most of the time, the value of travel rewards points or miles is higher than the cash back rate. This is especially true if you travel a lot and can get the most out of your benefits.

Potential overspending: Some users might spend more than they need to to get cash back rewards, which could cause them to go deeper into debt or have to pay more in interest, which could cancel out the benefits.

Annual fees: Some cash back cards have annual fees that make the cash back rewards you earn less valuable.

Limited redemption options: Cash back gives you options, but it might not be as motivating as using points to book expensive flights or hotel stays.

11 Questions You Need to Ask to Choose the Right Credit Card→


Advantages of travel rewards credit cards

Travel rewards credit cards offer several advantages:

Travel benefits: You get points or miles for things like flights, hotels, rental cars, and more that you do while travelling. This can help you save a lot of money on your trip.

Bonuses and perks: A lot of travel cards come with extra benefits like access to airport lounges, faster boarding, travel insurance, and personal services.

Flexible redemption options: Points or miles can often be exchanged for different travel-related costs, which gives people more options for how to use their rewards.

Value potential: It may be more valuable to use points to book first-class trips or stays at high-end hotels than to get cash back.



Disadvantages of travel rewards credit cards

However, travel rewards credit cards also come with some disadvantages:

Annual fees: A lot of travel cards have yearly fees that might cancel out the value of the rewards if the cardholder doesn't use them enough.

Redemption restrictions: Flights and hotels may not be available on certain dates. Also, points may not be redeemed on certain dates.

Complexity: Some travel rewards programs can be hard to understand for some users because they have so many ways to earn points, redeem them, and transfer them to other people.

Higher spending thresholds: For users to get huge rewards, they might have to spend more, which could lead to them spending money they don't need to or having a balance.



Is it better to use points or get cash back?

The decision between using points or opting for cash back largely depends on personal preferences and financial goals.

If you travel a lot and can get the most out of your points by using them to pay for flights, hotels, or other travel-related costs, it might be better to use points.

When points are redeemed for travel, especially high-end travel choices, they can be worth more than cash back rewards.

On the other hand, You can use cash back for anything and it has clear value. It's more adaptable and can meet a range of cash needs. Also, points systems are more difficult than cash back, which makes it easier for people who like simple rewards.

To make the best choice, think about:

  • how you spend your money
  • how you live
  • what you value more: flexibility (cash back) or possible better value for specific redemptions (points)



Final thoughts on cash back vs travel rewards

Deciding between cash back and travel rewards credit cards depends on your spending habits, lifestyle, and financial goals.

Considering these factors will help you make an informed choice between cash back and travel rewards credit cards.

Photo by Karolina Grabowska


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