Points vs Cash Back vs Miles: Choosing a Rewards Card

Choosing a reward credit card is not as simple as it might seem. With all of the major credit card issuers offering credit cards that reward customers in the form of points, miles, or cash back, how do you know which rewards credit card is best?

Finding a Card that is Right for You

There is no "best" credit card that will be ideal for every individual credit card user. Instead, you need to find the card that offers the right combination of features and benefits, at the right price, for your individual needs. Since a credit card is a financial product, most cardholders will look for the card that offers them the most valuable rewards for their spending, taking into account any expenses such as annual fees.

Cash Back

Cash back may be the simplest type of rewards that you can earn from a credit card. Some cards will offer a fixed rate of cash back on all purchases, while others will feature bonus categories that allow cardholders to earn even more cash back. For example, the Capital One^® Quicksilver^® Card offers 1.5% cash back on all purchases, while the Blue Cash Everyday^® Card from American Express, a Credit Cards House advertiser, offers 3% cash back at supermarkets, 2% cash back at gas stations, and 1% cash back on all other purchases.

To choose between these two cards, you would have to weigh the advantages of earning 1.5% cash back on everything with the Quicksilver, against earning 2% or 3% cash back on some purchases, and 1% on others with the Blue Cash Everyday.

_{Editorial Note: The information related to the Blue Cash Everyday^® Card from American Express has been collected by Credit Cards House and has not been reviewed or provided by the issuer of this card.}

Points and Miles

On the other hand, determining the value of points and miles can be much more complicated. Points and miles are awarded by banks, airlines, and hotels in order to reward their customers. These systems are often called loyalty programs as their goal is to offer rewards for customers to keep coming back. But unlike cash back, there is no fixed value to the points or miles that you earn. Each point or mile issued by each loyalty program is like earning money in a foreign currency without a known exchange rate.

For example, most airlines charge 25,000 miles for a round-trip, domestic award flight in economy class. And while you could book a short flight with advanced notice for as little as $150, a transcontinental trip booked at the last minute over the holidays could cost well over $1,000. But with most frequent flyer programs, it's unlikely that there will be any award seats offered at peak travel periods when they are likely to sell all of their seats, making the value of your miles highly dependent on where you travel and how flexible you are able to be.

When you are able to use miles to book expensive, last minute flights or premium-class international trips, you can sometimes realize 3-5 cents in value for each mile. If you are able to do that consistently, and you earn one mile per dollar spent, then you are receiving a much better value than you would have from a cash back card that offers 1% - 2% on all purchases. Credit cards that earn points in hotel programs work similarly to airline credit cards, however, these programs generally make it easier to redeem rewards than the airlines.

Combining Multiple Cards

One popular reward credit card strategy is to hold multiple credit cards and use each where it offers the most rewards. You could use your airline credit card when purchasing a ticket that offers double miles, and use a card that offers 3% cash back at the supermarket when buying groceries. In addition, just having an airline credit card could offer you benefits such as priority boarding and a free checked bag. Finally, you might use a card that offers 1.5% or 2% cash back on all purchases when you are buying something that is not eligible for a bonus.

Bottom Line

By closely examining your spending needs, and looking at the rewards offered by various credit cards, you can choose the right cards for your individual needs.

First published May 2, 2016, last updated June 3, 2021

TWEET SHARE

Topics

ABOUT THE AUTHOR

Know Stewart is one of the leading journalists covering the credit card industry and travel rewards. His work appears at many of the top personal finance websites and is regularly syndicated by mainstream sites such as MSN Money and Yahoo! Finance.

Learn more about Know Stewart

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

Credit Cards House may earn affiliate commissions from our partners on this page. These commissions do not affect how we select, rate, or review products. To find out more, read our complete terms of use.