Cash back vs. points: Which type of rewards card is best?

Woman wondering about the benefits of travel rewards vs. cash backImage: Woman wondering about the benefits of travel rewards vs. cash back

In a Nutshell

If you travel often, you’re likely to get more value out of a rewards card that offers points instead of cash back. But if traveling isn’t your thing, or you value simplicity and low annual fees, a cash back credit card may be a better choice for you.
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For as long as different kinds of rewards cards have been around, there’s been a debate about whether points or cash back is better. Both kinds of rewards can help you get more out of your credit card. But how do you choose between the two?

The simplicity of cash back credit cards can be appealing to many. But credit cards that offer points are tempting because they can help you land that dream vacation more quickly. Both types of cards have their share of benefits and drawbacks. Let’s take a closer look at cash back vs. points to help you decide which kind of rewards card is best for you.

Cash back credit cards: Pros and cons

Cash back credit cards are usually straightforward. As you spend money using the card, you build up a cash back balance. But the rate at which you earn and can redeem cash back will vary depending on the cash back card you choose.

Earning cash

Several cash back cards offer extra cash back for purchases made in bonus spending categories. For example, the Blue Cash Preferred® Card from American Express offers 6% cash back on up to $6,000 in purchases per calendar year at U.S. supermarkets (then 1%), 6% cash back on select streaming subscriptions, 3% cash back on U.S. gas station and transit purchases, and 1% cash back on all other purchases.

Other cash back cards offer a flat rate on all purchases made with the card. For instance, you can earn up to 2% cash back on all your purchases with the Citi Double Cash® Card (1% as you make purchases, and 1% as you pay them off). Some cash back cards offer sign-up bonuses as well, but they tend to be modest when compared with points-based cards.

Redeeming your cash

Cash back cards often offer a couple of ways to redeem your cash, such as statement credits or checks. Depending on the card, you may need to hit a cash back minimum before you’re eligible to make a redemption.

The beauty of cash is that it can be used for anything. If you have an unexpected $500 car repair pop up, you can redeem some of your cash back as a check or statement credit to help cover the expense. Points can be used in a lot of ways too, but they generally can’t offer that kind of flexibility.

Hit the ground running

Another nice thing about cash back cards is that they tend to have low or no annual fees. So it usually won’t take long to “break even” with a cash back card, depending on how you use it.

Cash back cards also tend to be easier to use. You won’t need to concern yourself with learning how to book hotels through a travel portal or transfer points to a travel partner.

For the most part, cash back is just cash back. It’s not complicated. And you won’t need to worry that you haven’t discovered the “secrets” to taking full advantage of your rewards.

Points credit cards: Pros and cons

There are two main types of points cards. First, there are general points cards that tend to have the bank or credit card issuer’s name on the card, like the American Express® Gold Card. The second type of points cards are co-branded with a particular hotel or airline, like World Of Hyatt Credit Card.

Earning points

With points cards, you’ll earn miles, points or whatever rewards terminology the card uses. Like cash back cards, points cards often offer bonus points for certain spending categories. But points cards tend to offer higher sign-up bonuses than cash back cards.

Redeeming your points

The biggest advantage of points is that they can be worth more than cash when you use them to book travel. For example, when redeemed through the World of Hyatt® loyalty program, each point is estimated to be worth up to 1.53 cents, according to Credit Karma’s estimated point valuations. That means for every 10,000 points you redeem, you could get up to $153 worth of travel. That’s a great deal.

Another thing worth pointing out is that some general points cards allow cardholders to transfer points to hotel and airline travel partners. For instance, Chase Ultimate Rewards points can be transferred to Southwest Airlines Rapid Rewards®, World of Hyatt, Marriott Bonvoy™ and many more.

Extra perks

Another advantage to points cards is that they often offer additional benefits. For instance, hotel cards may offer one or more free reward nights per year. And some airline cards may offer free checked bags, seat upgrades or other benefits. And general points cards may offer extra perks like access to airport lounges or travel credits.

Higher cost and steeper learning curve

While points cards can offer great value, they can also be expensive to carry. Some of the best points cards come with hefty annual fees. For instance, the Chase Sapphire Reserve® comes with a $550 annual fee.

With fees that high, it can take longer to “break even” on some points-based cards. And to do so, you’ll need to learn the best ways to redeem your points, which takes time and effort.

Cash back vs. points: How to choose the best option

If you travel a lot, you’ll probably want to choose a points card. Frequent travelers often take great joy in maximizing their redemptions and taking full advantage of travel-related perks.

If you’re loyal to one particular hotel or airline, you could get a lot of value out of a hotel or airline card. Otherwise, a points card that allows you to redeem with many different merchants will provide more redemption flexibility.

If you’re looking for a no-fee rewards card, you may want to choose a cash back card instead. And a cash back card could be a better choice if you don’t travel often or you just value a simple rewards structure.

But the best choice when it comes to cash back vs. points may be to find a card that offers both. Several cards that offer points will allow you to redeem them for cash.

So, yes, it’s possible to have your cake and eat it, too.

What’s next?

Ultimately, the right type of rewards card for you depends on your spending habits, budget and preferences. If you decide that a cash back card would serve you best, check out Credit Karma’s marketplace for cash back credit cards. And if a points cards sounds like a better fit, you’ll want to check out the travel cards marketplace on Credit Karma.

About the author: Clint Proctor is a freelance writer and founder of, where he writes about how students and millennials can win with money. When he’s away from his keyboard, he enjoys drinking coffee, traveling, obse… Read more.