Cash Back vs Points or Miles: Choosing Credit Card Rewards

There are three primary types of rewards that consumers often consider when it comes to credit card rewards: miles, points, and cash back. Each has its own set of advantages and disadvantages, and the choice between them largely depends on your individual lifestyle and spending habits. In this article, we’ll dive into the key differences of cash back vs points or miles: Choosing your type of rewards to help you make an informed decision.

Types of Credit Card Rewards

How Loyalty Points or Miles Work

Loyalty miles & points (no different, just terminology) are a reward currency typically associated with airlines and hotels, and any associated credit cards. These rewards are best suited for brand loyalists, or aspiring or frequent travelers with specific goals in mind. If this is you, you should also consider transferable points for added flexibility.

Earning Points and Miles

Each airline and hotel has a loyalty rewards program (i.e. Delta SkyMiles, Marriott Bonvoy) for which you can sign-up for free. Once you have an account, it will act as a bank of miles or points you’ve earned with that brand. There are several ways to add miles or points to your balance.

Airline & hotel reservations

It’s best to choose a few airlines and/or hotels you will travel with most to consolidate miles and points earning. When you book through the brand, include your rewards program number each time in the reservation. Rewards will be earned based on the distance you travel or number of nights you stay.

Tip! Flights or stays booked with rewards will not earn rewards, only paid flights and stays.

Brand credit card spending

Most airlines and hotels have formed partnerships with card issuers and launched points and miles cards. These cards will earn rewards for that airline or hotel on your spending. While this isn’t the most flexible way to earn rewards, if you are loyal to a specific brand you’ll earn those miles or points faster.

Tip! Get outsized rewards for transactions you make directly with that airline or hotel.

Redeeming Points and Miles

Brand loyalty miles & points can be redeemed for flights, hotel stays, upgrades, incidentals, add-ons, and other travel-related expenses. Each loyalty program for the airlines and hotels is unique, so if you are gravitating toward any it’s recommended to dig deeper on the features and benefits of each.

What are airline and hotel rewards worth?

Airlines	Value (in cents)*	Hotels	Value (in cents)*
Alaska MileagePlan	1.4	Choice Privileges	0.6
American AAdvantage	1.4	Hilton Honors	0.5
Delta SkyMiles	1.2	IHG One Rewards	0.6
JetBlue TrueBlue	1.3	Marriott Bonvoy	0.8
Southwest Rapid Rewards	1.4	World of Hyatt	1.9
United MileagePlus	1.3	Wyndham Rewards	1.0

*Approximate average value

Are loyalty Points or Miles for you?

Advantages

Ideal for avid travelers who are loyal to select airlines or hotel, and have a rewards account.
Ability to build status with the brand to unlock added benefits and incentives.
Potential for significant savings on airfare costs like free checked baggage and in-flight credits or hotel upgrades and add-ons.

Disadvantages

Limited utility if you don’t travel frequently with a specific airline or hotel.
The brand may not always be available where you want to go or stay.
Some airlines and hotels have blackout dates, restrictions, or miles that expire.

Best airline miles Credit Cards

Delta SkyMiles® Gold American Express

rank: 3.5

Get free checked bags, priority boarding, and discounted in-flight purchases.
Apply now

Alaska Airlines Visa®

rank: 3.5

Get Alaska’s famous companion fare, free checked bags, and priority boarding.
Apply now

Best hotel points Credit Cards

World of Hyatt

rank: 4.5

Best-in-class point redemption values, yearly free night award, and Discoverist status.
Apply now

Marriott Bonvoy Boundless®

rank: 4.0

Up to 5 free nights welcome bonus, elite night credits, and Silver Elite status.
Apply now

Terms apply. Offers subject to change. Refer to card issuer for full details.

How Transferable Points Work

Transferable points are the most versatile rewards offered by both travel cards and general rewards credit cards. They can be redeemed many different ways, but have outsized value when transferred to partner airline or hotel loyalty programs. Unlike miles or points you earn directly with an airline or hotel, transferable points or miles are flexible enough that you can fly with any partner airline, and stay with any partner hotel.

Earning transferable points

These points are usually earned through spending with premium credit cards that offer them, such as Chase Ultimate Rewards and American Express Membership Rewards. Many of these cards will have tiered earning rates on select categories or a straightforward rate on all purchases. You may even earn an elevated rate by making purchases through their travel portal (where you can book travel at prices similar to aggregator sites).

Tip! If you hold a premium card that earns transferable points, you can combine rewards from another eligible card with the same issuer, for a larger bank of transferable points.

Redeeming transferable points

These highly coveted points can be used for travel bookings, gift cards, merchandise, or even cash back. It’s a super flexible rewards currency with plenty of opportunities to cash in, both with transferable partners and direct redemptions.

Loyalty programs

Points can be transferred directly online from your credit card account to any partner that you’ve connected to that account. You can choose the number of points you need to transfer, and once submitted many transfers happen instantly.

Tip! Research your flight or hotel room first (viewing by miles or points cost) to find out how many points are required. Only transfer what you need!

Direct redemption

You can also redeem points in the credit cards rewards portal for travel, gift cards, statement credit, shop with points, and more depending on the issuer. While these redemptions will rarely capture the value that a partner transfer does, it’s an option you have.

Tip! Booking travel with points through the travel rewards card portal is only worth considering if they have a point bonus. You will usually spend less points transferring to the partner directly.

What are transferable points worth?

Reward Programs	Value (in cents)*
American Express Membership Rewards	1.8
Bilt Rewards	1.8
Capital One Miles	1.6
Chase Ultimate Rewards	1.8
Citi ThankYou Points	1.6

*Approximate average value when transferred

Are transferable points for you?

Advantages

Versatile rewards work with any of your existing loyalty programs to apply when and where you need them for travel.
Points don’t expire as long as your account remains open and in good standing.
It’s possible to redeem for non-travel-related rewards or statement credit.

Disadvantages

Most points can only be transferred to an individual rewards account with the same name, not multiple accounts (i.e. spouse).
Nearly all non-travel redemptions convert to be significantly less value.

Best transferable points / travel rewards credit cards

Chase Sapphire Preferred

rank: 4.5

Excellent balance of annual fee affordability and valuable travel rewards and travel protection.
Apply now

American Express Gold Card

rank: 4.5

Impressive rewards on essentials like dining and groceries, plus dining and transit credits.
Apply now

Capital One Venture Rewards

rank: 3.5

Simplicity and flexibility with a straightforward 2x earning structure, plus travel benefits.
Apply now

BILT Mastercard

rank: 4.0

The only card to earn points on monthly rent, plus elevated transfer bonuses on rent day.
Apply now

Terms apply. Offers subject to change. Refer to card issuer for full details.

How Cash Back Works

So, what is cashback? Its rewards are the most straightforward option, usually a cash amount as a statement credit, appealing to those who prefer simplicity and more immediate savings. These rewards are best suited for those who don’t travel often, or value direct and tangible savings above all else.

Earning cash back

Each rewards card will earn a percentage of cash back rewards for each dollar spent, either through tiered rates on select categories or a straightforward rate on all purchases. For instance, if you get a 5% cash back rate on groceries, that would be $0.05 for every dollar you spend, or $5 for every $100.

Tip! Some banks may also elevate your cash back rate if you hold other accounts or minimum balances with them (i.e. Bank of America).

Redeeming cash back

In most cases, cash back will be applied directly to your credit card statement. Some banks will also allow you to redeem your rewards as deposits into your bank account, the ability to offset specific purchases, or redemption for gift cards. In more specific cases, if you hold a premium card with the same bank that earns transferable points, you may be able to convert your cash back into transferable points to use with travel partners.

Is cash back for you?

Advantages

Simplicity and transparency in earning and redeeming rewards.
Ideal for those who want to see direct savings on their everyday expenses.
No need to navigate complicated reward charts or make transfers.

Disadvantages

Doesn’t offer the same high-value returns as miles or points for frequent travelers.
Usually limited to cash savings, lacking the versatility of transferable points.

Best cash back Credit Cards

American Express Blue Cash Preferred

rank: 3.5

Top earner. Up to 6% cash back on grocery, streaming, transit, and gas.
Apply now

Citi Custom Cash

rank: 3.0

Get 5% cash back on your top eligible spending category each month.
Apply now

Citi Double Cash

rank: 3.0

Unlimited 2% cash back, plus ability to convert to ThankYou points with a premium Citi card.
Apply now

Wells Fargo Active Cash

rank: 3.0

Simple everyday earner. Unlimited 2% cash back, plus cell phone protection.
Apply now

Terms apply. Offers subject to change. Refer to card issuer for full details.

Cash Back vs Points or Miles: Which is right for you?

So there you have it. We’ve looked at the comparison of cash back vs points or miles so that you can understand the difference and decide what works for your individual preferences and spending habits. Here are some tips to help you decide:

Brand loyalists:
If you frequently travel with specific airlines and hotels, earning loyalty miles & points directly with a brand may offer the best value for flights and hotel stays, especially if you hold their credit card. Plus, you’ll earn elite status quicker to enjoy additional benefits like priority service, upgrades, and credits.

Versatility seekers:
If you want versatility, consider transferable points. They allow you to apply your rewards as needed, on a case by case basis, so you have the freedom to roam. Not only that, travel credit cards and programs allow you to transfer the exact amount of points needed for a trip to an eligible partner, and not get stuck with fractional balances at a specific brand.

Immediate savers:
Cash back is perfect for those who prioritize immediate savings and straightforward rewards that are usually reflected as statement credits. With some cards, you can still convert your cash back to transferable points if you hold an eligible premium card from the same issuer, giving you added options.

Combo approach:
Perhaps the best option for many, using a combined approach of all the above can maximize rewards and provide the ultimate versatility. For example, you may use a loyalty card for travel with a specific brand, and optimize a transferable points card and a cash back card based on best reward rate for everyday expenses

Be sure to assess your financial goals and how you plan to use your rewards card before selecting the right credit card for you. Whichever you choose, remember that responsible credit card use should always be a top priority to maximize your benefits while avoiding debt. Put simply, if you are spending more than you can afford or paying monthly interest or fees on your card account, you are negating any gain from rewards earned.

Now, go build your rewards strategy and make the most of money you’re spending anyhow.

These are our recommendations but it isn’t financial advice. We may receive a commission if you click through any of the links in this article.

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