Credit card rewards can be quite rewarding, for lack of a better term. They can also be thoroughly confusing! With so many different cards, each offering different reward structures and redemption options, it can be a maze to navigate for newcomers. There are typically three types of rewards programs: cashback, points, and airline miles/hotel points. This guide will compare cashback vs points vs miles to help you determine which is the right type of rewards for you.
Cashback vs Points vs Miles Compared
To understand if cashback or miles are the superior option, let’s first learn about each of these reward structures.
Best for: Simplicity. Those who prefer cash over travel rewards and don’t want a complicated rewards structure.
Typical rewards rate: 1% to 2% cashback on every purchase
Best cards: The best no-annual fee cards for everyday spend
Cashback is the simplest form of credit card rewards, and the most common. Using a cashback rewards credit card can save you money on every purchase you make.
- The simplest and easiest to redeem – who doesn’t like cash?
- Typical cards earn 1-2% cashback on all purchases
- Cashback can be redeemed as a statement credit, which lowers the amount you need to pay
- You can also transfer cashback to your bank account
- In some cases, cashback can also be redeemed for gift cards and similar rewards
Best for: Flexibility. Those who want to have multiple solid uses for their rewards points.
Typical rewards rate: 1 to 3 points per $1 spent.
Best cards: Best AMEX credit cards, best Chase credit cards, best Citi credit cards
Points are usually offered by specific banks for their credit card customers. Examples include American Express Membership Rewards, Chase Ultimate Rewards and Citi ThankYou points. These points can typically be redeemed for travel, gift cards, cashback and more, offering significant flexibility.
- Offers the most redemption options of any type of rewards
- Cards usually earn 1 to 3 points per dollar spent, although it varies on the program
- Points can be redeemed for travel, gift cards, gifts, cashback, or transferred to airline partners
- Redemption options vary significantly based on the program
- Redemptions for cashback are usually possible, but typically don’t offer the best value
Airline Miles & Hotel Points
Best for: Travelers with specific plans. Those who like to fly on specific airlines, or stay in specific hotel chains
Typically rewards rate: 1 mile per $1 spent is standard. Hotel points vary more in value, so 1 to 10+ points per $1 spent
Best cards: Best 10 Personal Credit Cards, best AMEX credit cards, best Chase credit cards, best Citi credit cards
Most airlines and hotel chains have partnerships with banks to offer their customers co-branded credit cards. So, you might get a United Airlines credit card that’s issued by Chase. These cards earn miles/points that are specific to a certain program. This means they’re not nearly as flexible as standard points or cashback cards, but they still offer significant value. They’re also great for people who are loyal to a certain airline or hotel chain.
- Offers redemptions only with certain airlines or hotel chains
- Sometimes transfers to other travel programs are possible, but usually at poor rates
- Each program is different, although most airline program cards earn 1 mile per $1 spent on standard purchases.
- Redemption options vary significantly depending on the program
- It can be more complicated and confusing to redeem miles & hotel points, but worthwhile in many cases
Cash Back vs Miles vs Points: Which is the Best Option?
The simple answer is that there is no “best” option. It truly depends on your goals.
Generally speaking, flexible points currencies like Ultimate Rewards and AMEX Membership Rewards are the most versatile, which to many makes them more versatile.
However, cashback cards offer a no-frills, super-simple approach, and those who don’t travel much might get better value out of straight cashback.
Finally, we have airline and hotel programs. These can be very useful, but it depends on your travel goals and preferences. If you live near a Delta hub and fly Delta often, then chances are the Delta card from American Express is a great choice for you. But if you get a card from a program you don’t use much, it might not be as useful.
Also, airline programs are typically more difficult to navigate than most other rewards programs. While in many cases they can offer the most value for your points, it can be confusing to redeem your points – and you may struggle to find award tickets for your specific travel dates.
In short – consider your goals, THEN consider which kind of rewards program makes the most sense. Also consider how much time you want to put into understanding the rewards program and redemption options. If you’re looking for simplicity, cashback is the way to go.