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Vault’s Viewpoint

• Cash back credit cards are often best for people who want straightforward cash rewards without having to calculate the value of points or deal with travel transfer partners.
• You can often get high value from travel credit cards that earn flexible, transferable points—but only if you know how to best maximize travel partners, which takes research and time.
• You can combine strategies by getting both types of cards and maximizing them for different types of purchases.
• Travel points credit cards are often premium cards that are harder to get approved for. If your credit score is fair or good, you might want to stick with a cash back card until you can improve your credit score.

Consider These Things When Choosing Cash Back or Travel Credit Cards

It’s not just about one single factor. Here’s exactly how to choose the type of credit card—cash back vs. travel points—that will best benefit you.

Simplicity: Cash Back Cards Win With an Easy Fixed Value

Cash back cards are often an easy and straightforward choice, as they offer a fixed value.

Cash back cards usually offer either flat-rate or bonus category rewards, with the best flat-rate cards offering 1.5% or 2% cash back. If you want an easy-to-use card that doesn’t require much thought in terms of where to use it, a 2% cash back card is an excellent choice. The no-annual-fee Citi Double Cash® Card is a solid contender, as it allows you to earn 2% cash back on all purchases: 1% when you make a purchase and an additional 1% when you pay your balance.

Cash back cards with bonus categories typically reward between 1% and 5% back for specific categories, like gas, groceries or restaurant purchases. Bonus category cards may have monthly, quarterly or annual spending caps, which is something to keep in mind if you spend heavily in a particular category. For example, the Bank of America® Customized Cash Rewards Credit Card offers 3% cash back on a category of your choice and 2% back at grocery stores and wholesale clubs, with a $2,500 quarterly spending cap on combined category purchases (after which you’ll earn 1% back).

If you’re wondering how to choose a cash back credit card, it’s important to consider not only whether you’d like to earn flat-rate or bonus category rewards, but whether you’re okay with paying an annual fee in exchange for greater rewards and perks. You’ll also want to take welcome bonuses, interest rates and other common credit card features into account.

Credit Score: Cash Back for Fair to Good Credit; Travel Rewards for Good to Excellent Credit

Usually, people with good credit scores are more likely to get approved for a variety of cash back cards—such as the Discover it® Cash Back, which has no annual fee and features quarterly rotating bonus categories. However, for a premium travel credit card, such as The Platinum Card® from American Express, it’s recommended you have a good to excellent credit score. You should know that the most lucrative travel credit cards usually come with an annual fee, which can generally range from moderate ($95) to high ($550 or more).

Value: 2% Cash Back vs. 1.5X Travel Points

Travel points are usually worth around 1 cent per point if you redeem them through an issuer’s travel portal. The exceptions are cards like the Chase Sapphire Preferred® Card or the Ink Business Preferred® Credit Card, where points are worth 1.25 cents each when redeemed for travel through Chase Travel, as well as the Chase Sapphire Reserve®, where points are worth 1.5 cents when redeemed for travel through Chase’s Travel.

However, some cash back cards offer 2% cash back or even up to 5% cash back in specific categories. So in many cases, getting a cash back card that offers 2% cash back or a card where you can take advantage of higher percentages thanks to bonus categories means you’ll come out on top. Unless, of course, you know how to maximize a travel credit card’s points via transfer partner travel.

Savviness: The More You Know, the More Valuable Travel Points Are

Reaping extensive rewards with travel points takes a bit of additional time and research, but putting in the work may be worth it for savvy travelers. Travel credit cards from issuers like Chase, Amex and Citi all come with numerous transfer partners, like domestic and international airlines and hotels.

For example, Newsweek values Chase Ultimate Rewards points between 1.38 and 1.62 cents per point when redeeming toward transfer partner travel. However, you may be able to get a significantly higher value if you know the ins and outs of transferring, as certain transfer partners offer more value than others. Usually, transferring to partners that have a 3:1 or 2:1 ratio means you’re not getting the best value.

Consider this situation: Iberia is a partner of both Chase and American Express that transfers at a 1:1 ratio. If you have a frequent flyer account with Iberia Airlines and know how to search for flight award availability on the Iberia website, you can use Iberia Avios to fly between the U.S. and Madrid, Spain. A sample, one-way business-class flight between Chicago and Madrid on off-peak dates is usually around $2,600, but it only costs 34,000 Iberia Avios and around $160 in taxes and fees. If you subtract $150 from $2,600, then divide $2,450 by 34,000, you’re getting 7.2 cents per point by our calculation—a huge amount over what you would get in the portal.

Plus, Chase and Amex often offer 30% transfer bonuses to Iberia—and in this case, you’d only have to move 27,000 Chase or Amex points to Iberia (to end up with more than 35,000 Avios, enough for the ticket), meaning you’d get a value of nearly 9.1 cents per point.

If you wanted to fly this route in Iberia’s economy class, sample tickets cost around $900 or 17,000 Avios + $96 on off-peak fall dates. Flying economy, you’d still get a value of 4.7 cents per point. Or, if you transferred points during a bonus period, you could transfer just 14,000, which would turn into more than 18,000, getting you a value of 5.7 cents per point.

Clearly, these types of redemptions using travel points take time, research and knowledge. These examples of calculations and values we took. You should always independently ensure you understand the transfer times and have an award ready to book—because once you transfer points, you can’t transfer them back to your credit card. These types of redemptions can make travel rewards cards extremely valuable—much more so than cash back cards if you’re a frequent traveler and understand how to find the most lucrative ways to use your points.

Tips for Maximizing Your Credit Card and Its Rewards

Once you pick a type of card, it’s important to understand the value of your rewards and how to use them.

Maximize Bonus Categories

As we already mentioned, cash back cards are straightforward in that they offer a fixed value that’s easy to understand. On the other hand, the value of travel points may vary, especially if you’re interested in transferring them to an issuer’s airline and hotel partners.

When it comes to cash back, pick a card (or combination of cash back cards) that offers you the most cash back on the purchases you frequently make. For example, if you drive long distances to work each day and do a lot of grocery shopping, you’ll get the most rewards with a cash back card that offers bonus rewards on gas purchases and at supermarkets. Consider a card like the Blue Cash Preferred® Card from American Express, where you can earn 6% cash back on up to $6,000 in U.S. supermarket purchases per year (then 1% back) and 3% back at U.S. gas stations.

Regarding travel credit cards, you’ll want to choose a card with rewards and perks that outweigh any annual fee. These cards are most valuable when you use the points you earn, so don’t let them just sit there—redeem them! Otherwise, you’re losing out on valuable rewards or cash back that you could be getting from another card.

Don’t Redeem for Cash Back on a Travel Credit Card—You’re Losing Value

Don’t redeem travel points for gift cards or cash back on a travel credit card, as it usually offers less value.

For example, if you have the Amex Platinum, which has a $695 annual fee (see rates and fees), and redeem for a statement credit, you’ll only get a value of 0.6 cents per point. On the other hand, redeeming Membership Rewards points for travel through Pay with Points with American Express Travel gives you a value of 1 cent per point on flights and 0.7 cents for most other travel purchases. If you’re in the market for cash back, you’re losing out by getting this card and paying its annual fee when you could be getting a card that offers a much higher percentage of cash back (with a corresponding higher rewards value).

Make It a Combo: Travel Points and Cash Back Combined

If you can’t decide which card to get, a combined strategy could be a great way to maximize your spending.

For example, you could slowly apply for and collect two cash back cards and one travel credit card. The first cash back card could focus on rewards categories you spend the most on, such as gas, groceries and drugstore purchases. Your travel rewards card could focus on categories related to travel and restaurant purchases. Lastly, your second cash back card could offer a flat 1.5% or 2% cash rewards on everything else you buy.