Is a cashback card better than a credit card that earns points? This is a website about points and miles, but it can absolutely make sense to earn cash back.
Ultimately, the decision between getting cash back or points comes down to how much value you’re getting from your point redemptions and where you’re at in your life. However, the two are not mutually exclusive.
Popular Travel Card Options
There are a number of travel credit cards that are great for earning valuable points and miles toward travel.
We prefer cards that have transferrable points. This means that the points are not exclusive to a specific hotel or airline, but instead can be redeemed for travel OR transferred to a hotel or airline partner.
- American Express Gold Card (AF: $250; 4x on dining/supermarkets; monthly dining credit; airline credit)
- American Express Platinum Card (AF: $550; 5x on airfare/hotels through amextravel.com; monthly Uber credit; airline credit; premium travel benefits)
- American Express Everyday (AF: $0; 2x on supermarkets; bonus for 20 monthly purchases)
- Chase Sapphire Preferred (AF: $95; 2x on travel/dining)
- Chase Sapphire Reserve (AF: $450; 3x on travel/dining; travel credit; premium travel benefits)
Popular Cash Back Card Options
Cash back is just how it sounds. A percentage of what is spent on the credit card goes back to the cardholder. The cardholder can use it to pay off a balance or get a check.
- American Express BlueCash Preferred (AF: $95; 6% on US supermarkets and streaming services; 3% on transit and gas)
- Bank of America Cash Rewards (AF: $0; 3% on gas or a chosen category: dining, drug stores, home improvement, online shopping, travel; 2% on grocery stores and wholesale clubs)
- Capital One SavorOne Cash Rewards (AF: $0; 3% on dining and entertainment; 2% on grocery stores)
- Capital One Quicksilver Cash Rewards Card (AF: $0; 1.5% on all spend)
- Chase Freedom Unlimited (AF: $0; 1.5% on all spend; transfer to Chase Ultimate Rewards)
- Chase Freedom (AF: $0; 5% on rotating quarterly categories; transfer to Chase Ultimate Rewards)
- Citi Double Cash (AF: $0; 2% on all purchases)
- Discover It Cash Back (AF: $0; 5% on rotating quarterly categories)
What makes sense for you?
There’s a mathematical answer to this and a more personal one.
First, the more personal reason when making the choice between cash back and travel credit cards.
If you’re not in the position to travel, there’s no reason to accrue travel points. While earning points and miles for free travel is great, if you can’t use the points and miles, they’re not valuable. Similarly, if the budget is tight, and it would help to get a small amount of cash each month, then a cash back card makes sense.
Personally, I see myself continuing to earn points and miles while my wife and I are young without kids. Once kids come along, I could see the value in switching some spending to a cashback card.
Even better, as we mentioned above, there are hybrid cards like the Chase Freedom and Chase Freedom Unlimited that allow the cardholder to earn cashback or convert to Ultimate Rewards (Chase’s travel currency).
The Math: Cash back or Points?
Now, for the mathematical reason when making the choice between the two types of cards.
Most cashback cards range in 1% to 2% range, which to dumb it down, means you’re getting between a 1 cent and 2 cents back on each dollar you spend. Many travel websites have certain values for certain types of points. I don’t believe in assigning exact values to certain points because, at the end of the day, the value is determined on how the cardholder uses the points.
Based on your award redemptions, you may – or may not – be getting the same 1-2% return. I’m going to list some of my specific redemption’s below to help show the difference
4-night stay at Hyatt Zilara Rose Hall
We used 100,000 Chase Ultimate Rewards for four nights. The cash rate was going for $429/night which would’ve been a total of $1,716. Easy math. We got 1.7 cents of value for that redemption. It’s not great, but it’s also not terrible.
5-night stay at Hyatt Ziva Puerto Vallarta
Last summer, we went to Puerto Vallarta for a summer vacation. We used Chase Ultimate Rewards to book our Hyatt stay.
We used 100,000 Chase Ultimate Rewards for five nights as the Ziva in Puerto Vallarta tops out at 20,000 points per night. The cash rate was going for $389/night which would’ve been a total of $1,945. Easy math. We got 1.9 cents of value for that redemption. It’s not great, but it’s also not terrible.
First-class flight from BNA-SEA-ORD
I had to go to a bachelor party in Nashville and a wedding in Chicago. Because it was in the summer, flights were outrageous, so I decided to use some Alaska miles to make it happen.
While the companion pass that comes with the Alaska Air Visa Signature Card is my favorite thing about Alaska, utilizing their free stopover on award tickets is my second favorite thing. For just 30,000 miles, I flew from Nashville to Chicago – with a two-week stopover in Seattle. The ticket would have cost me $849, giving me a value of 2.8 cents per mile.
First-class flight on Delta from ATL-SEA
One of my favorite all-time deals was a holiday-time flight back home from Seattle to Atlanta. Flights around the holidays are insanely expensive, but I managed to find a Delta first-class flight through Virgin Atlantic.
Virgin Atlantic, a transfer partner of American Express, happened to be running a promotion giving cardholders a 30 percent bonus when transfer Amex Membership Rewards points.
I transferred over 18,000 Membership Rewards points to Virgin Atlantic. With the bonus, I was awarded 23,400 Virgin Atlantic miles. I redeemed my flight for 22,500 miles which would’ve cost $702. So, at the end of the day, my 18,000 miles game me a value of 3.9 cents per mile.
Moving past whether you personally need points and miles to travel, if you’re getting more return from travel cards versus cashback cards, it’s worth it to have travel cards.
Looking at the four trips that I chose, the 248,000 points and miles I spent saved me $5,212 giving me an overall value of 2.1 cents per point or miles.
I’m not thrilled with getting just 2.1 cents per miles, but it’s not bad, and overall, it’s probably a bit better than my return if I used a cash back card.
At the end of the day, if you’re earning either cash back or points and miles, you’re headed in the right direction. You’re getting something from spending money. Remember, it’s important to figure out what works best for your current situation.
Knowing it can change, it might make more sense to go after cash back. Or if you’re in the position where traveling is a priority in your life, do the math to see if your redemptions are better than the cashback you could be earning.