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Cash Back vs. Reward Points

Reward Points vs. Cash Back Credit Cards...Here's how to determine which reward is better for you...

Reward cards are growing in popularity. From airline miles, to gas and shopping rebates - the options seem endless! But before you choose a specific offer, first you need to determine which reward system is best for you: points or cash rebates. Is it better to earn cash or reward points? Here's the pros and cons of both types of programs so you can determine which one is best for you:

Reward Point Programs:

Points programs reward you by allowing you to earn a specific number of points (or miles) for every dollar you spend. The most common type of reward point cards are airline mile credit cards. But many other reward cards use this system too. Earn points from your everyday spending or earn additional points at specific 'partner' locations. These points then accumulate until you reach a pre-determined level where you can redeem your points for many different types of rewards such as travel, gift cards, merchandise and more.

PROS:
  • Points can be redeemed anytime (once accumulated).
  • Rewards are targeted towards your specific personal interests.
  • Receive extra bonuses and discounts at partner locations.
CONS:
  • Most points can only be redeemed for products or services.
  • Points may only be redeemable at specific locations.
  • You must accumulate a specific number of points to claim a reward.
  • Points may expire after a specific amount of time.

Cash Back Credit Cards:

Cash back programs allow you to earn cash (or rebates) based upon a percentage of your daily charges. Often it's a flat rate, but some programs operate on a a tier-based system. Earnings normally range between 1% and 5% and sometimes vary depending on where you shop. The most common type of percentage-based reward program is a cash back credit card. But many other
reward cards, such as gas rebate credit cards, operate the same way.

PROS:
  • Less limitations and easier to use than points.
  • Receive CASH instead of pre-determine products or services.
CONS:
  • Many times, rewards are only paid out once per year.
  • May not receive higher incentives on specified products or services.
  • If tier-based, rewards may be difficult to follow or understand.
  • Less targeted towards your personal interests.


The Right Card For You:

Only you can determine which type of reward card is best for your situation. Compare the features
of different types of cards to see which one will fit better into your daily life and spending habits. Consider the types of rewards you can earn with a point credit card and determine the amount you expect to accumulate with both types of offers. Then decide for yourself: cash back vs. points?

* See a complete list of reward credit cards >

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