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Rewards credit cards come in a variety of flavors, and two of the most popular are cash back cards and cards that earn points in the card issuer's rewards program. Both can be lucrative if you regularly use a credit card, but which is best will depend on your specific preferences.
How Cash Back Credit Cards Works
Cash back credit cards earn cash rewards on every eligible purchase. Depending on the card, you might receive a flat rate, such as 1.5% or 2% cash back on each purchase. Or, you might have a tiered rewards card that gives you bonus cash back on certain categories, such as groceries or gas.
Some people prefer cash back rewards because they're easy to understand and use. You know exactly how much you'll earn when you make a purchase, and you don't have to worry about varying values depending on how you redeem your cash back rewards. But you'll still have to decide on the best cash back card for you based on your preferences.
For instance, you might earn a higher cash back rate and get other perks with a card that charges an annual fee. But if you don't think you'll get enough value out of the card to justify the fee, you should look elsewhere. Your specific situation—how much you spend and whether you'll use the cardholder benefits—helps determine which cards are best.
You may also want to review the reward redemption requirements before applying for a cash back card.
Depending on the card, you may be able to get cash back deposited into a bank account, sent via check, withdraw it from an ATM or use it to pay down your credit card balance. However, there may be minimum redemption requirements, and your options could depend on whether you have a bank account with the card issuer.
How Points Credit Cards Work
As with cash back rewards, there are many credit cards that offer rewards points. Some don't have annual fees, but those with an annual fee may offer you more points per dollar or additional cardholder benefits. In general, credit card points programs tend to focus on travel redemptions, which is why some of the best travel credit cards are points rewards cards.
Points credit cards can be more rewarding but trickier to manage compared with cash back cards. Partially, this is because each credit card issuer's points program works a little differently. It's also because there are different redemption options and your points' value could depend on the program, which credit card you have as well as the redemption option.
For example, with Chase's Ultimate Rewards program, your points may be worth 1 cent each when you redeem them for cash back. If you have a premium Chase travel card and use your points to book travel through Chase Ultimate Rewards, however, you can get a value of 1.25 to 1.50 cents per point.
With the American Express Membership Rewards, your points may be worth up to 1 cent each when you use them to book travel, but only 0.6 cents each when redeemed for a statement credit.
Many programs also let you transfer your points to select travel partners' loyalty programs for a higher value than you'd get when redeeming them for cash back, which can be especially beneficial when booking luxury travel, such as a first-class flight.
Beyond the time and effort involved with learning about the programs and options, one downside is that there's no guarantee that the redemption options will stay the same. Your credit card issuer might end a partnership with your favorite airline or hotel chain. Or, an issuer or loyalty program could change the value of its points or miles. With cash back, $1 is always worth $1.
Cash Back vs. Points: Which Should You Choose?
There are great cash back and points credit cards available, and the best option is likely going to depend on which cards you can get and how you want to use them. Here are some general differences to consider when trying to narrow down your choices:
- A cash back rewards program will often be easier to manage than a points-based rewards program.
- The best no annual fee cards tend to be cash back cards.
- Many points-based rewards programs offer cash back as a redemption option, but your points may be worth more when you use them to book travel.
- If you're willing to spend time learning about your credit card's rewards programs, and its partner airline and hotel loyalty programs, points-based rewards could provide a greater value.
- If you're looking for convenience, a cash back program may be the way to go.
You may also want to compare specific credit cards based on different criteria, such as the intro offers or cardholder perks.
|Cash Back vs. Points|
|Straightforward to earn and redeem||Can be earned and redeemed in a variety of ways, sometimes including cash back|
|You don't have to worry about varying redemption rates or the value of rewards decreasing over time||Can offer big value, especially when booking travel or transferring points to other loyalty programs|
|You can get good rewards rates often without an annual fee||The best points cards often have an annual fee|
Find Out Which Rewards Cards You're Matched With
Both cash back and points credit card approvals may depend, in part, on your credit. You can use Experian CreditMatchTM to see which cards you're matched with based on your unique credit profile and filter the results depending on your preferences. If a few cards catch your eye, you can also create a side-by-side comparison to determine which will be best for you.
Learn More About Cash Back and Points Credit Cards
- What’s the Difference Between Cash Back, Points and Miles?
If you get a rewards credit card, you'll earn cash back, points or miles. Here's how they differ and the best ways to use what you've earned.
- What Is a Rewards Credit Card?
A rewards credit card allows you to earn cash back, points and miles on your everyday purchases. Find out how to pick the best rewards card for you.
- The Worst Ways to Redeem Credit Card Rewards
Earning rewards can be one of the greatest perks of having a credit card, though some redemption options offer far more value than others.
- Best Cash Back Credit Cards of 2022
The best cash back credit cards make it easy to rack up rewards every time you shop, with some giving accelerated rewards in certain categories.
- Best Travel Credit Cards of 2022
Looking forward to your next trip? These travel rewards credit cards can help cover the cost.
- Best Rewards Credit Cards of 2022
Whether you want cash back or points that go toward travel, these rewards cards from our partners are tops.