Credit Card Points Vs. Cash Back: How To Decide (2024)

Credit cards that earn points and miles reward you with points that are flexible and redeemable in a number of different ways. These options may include cash back, travel, gift cards, merchandise or airline and hotel transfer partners. Co-branded credit cards are similar but are associated exclusively with one airline, hotel or retailer and earn points that are typically limited to use within that brand’s established rewards program.

Programs with flexible rewards, like Chase Ultimate Rewards®, American Express Membership Rewards®, Citi ThankYou® Points, Capital One miles, and Bilt Rewards offer a path to even greater value by transferring points from their own programs to an airline or hotel program where you book directly with that program. Cardholders willing to research the sweet spots of these transfer options can often find much greater value than any cash-back program can offer.

Credit card points offer major flexibility, but aren’t for everyone. Frequent travelers will find the most value in this type of rewards program comes from the generous welcome offers and added travel protections and benefits that come with several cards offering flexible points.

Pros

• Multiple redemption options
• Better redemption value than cash-back rewards
• Some flexible points can be transferred to airline and hotel loyalty programs for additional value
• Larger welcome bonuses than cash-back cards

Cons

• Cardholders’ redemption preferences may not equate to the most value for the points
• Cash back can be a low-value redemption in some programs
• Travel redemptions may require saving up points until a certain threshold is met
• Redemptions with the highest dollar value can be the most complicated to redeem
• Cards typically have an annual fee and higher interest rates

For credit card points to make sense, the points program you earn rewards through must offer redemption options that are valuable to you. Flexible rewards typically provide the most value for those without a specific redemption in mind. And because many of them allow you to choose a cash-back option in addition to travel redemptions, it could be argued that a points and miles credit card is the best of both worlds.

Flexible points can be redeemed directly within a bank’s travel portal for airfares, hotels, cruises and car rentals. This type of redemption usually results in a middle-of-the-road redemption value, but depending on the program and credit card you hold, there is still plenty of value to be found via this method. The most value is typically found by utilizing transfer partners and transferring your flexible point currencies to partnering airline and hotel programs.

While many credit card points programs offer the ability to redeem points for gift cards or to pay with points at certain merchants, these options usually offer relatively low redemption values compared to travel or cash-back.

Cash-back credit cards can simplify redemptions, but may not provide the opportunities to get the same outsized value afforded by travel redemptions.

Pros

• Redemptions are straightforward
• Cash rewards are not limited to any one category
• Less likely to leave cash rewards unused
• Some issuers make cash-back redemptions automatic
• Lower annual fees

Cons

• May not offer as much value as a flexible points system
• Limited perks included
• Smaller welcome bonuses

Cash-back credit cards will likely be more valuable to those who find little worth in travel redemptions, especially since it is common for a points-earning card to offer cash-back options at a lower redemption rate.

Perhaps redeeming points and miles for airline flights or hotel stays doesn’t appeal to you and you don’t plan to spend enough on the card to earn points worth redeeming at your favorite retailer. In these cases, a cash-back card may be more rewarding.

Redemptions aside, an important factor to consider is where you do the majority of your spending and which credit card rewards program will offer the best return.

When you are trying to make the call on whether to invest in a specific rewards program, it’s important to understand which credit cards match your spending patterns. A great place to start is the Forbes Advisor list of best credit cards, where our experts provide in-depth reviews of each card as well as earning rates for each category of spending.

Redemption Value Variability

It is easy to understand the value of cash. A $100 cash-back reward is worth $100. In contrast, flexible point values can vary widely depending on the type of redemption or the equivalent cash prices of airfare or hotel rooms.

That variability is also the greatest benefit of flexible points in that they afford the opportunity to redeem points for outsized value. If you can redeem 30,000 Chase Ultimate Rewards for one night at the Grand Hyatt Kauai which costs an average of $1000 per night, you are getting value well beyond the $300 you could get from the equivalent redemption on a cash-back credit card.

In the table below we breakdown the estimated value of a point for each issuer’s currency based on different types of redemptions.

The Personal Value of Your Rewards

If you choose to earn points in a flexible rewards points program, you should develop a feel for what “reasonable value” means to you. This can help you decide whether to pay cash or redeem points for a reward. What matters is the value of flexible points to you, not to anyone else.

Devaluations

The biggest downside to travel rewards is the possibility that your preferred rewards currency is devalued. These devaluations can happen in many ways: A flexible points program may change the rules for transferring points to an airline. A partner with attractive redemption options may be dropped, and transfers may no longer be allowed. An airline partner may increase its award prices. Points may suddenly become worth less toward travel booked through a portal. Or a redemption option may disappear altogether.

The longer you hold onto travel rewards, the more risk you have of experiencing a drop in the value of your points. Devaluations often occur with little to no notice and are not predictable.

How Much Effort Does It Take To Redeem Your Rewards?

The effort required to redeem your rewards varies, and it’s important to consider how much effort you’re willing to put forth in order to extract the most value. Typically, redeeming for cash back can be fairly straightforward. In short, it involves spending enough to meet any minimum threshold, then making a redemption request and waiting for either a statement credit, a bank account deposit or a check to arrive in the mail.

With travel rewards, redemptions can be much more complex. Some programs, like Capital One, allow you to redeem points by reimbursing you for previous travel purchases. Others require you to use a portal to book flights, hotel stays or other travel. Undoubtedly, a reward point system will require more effort, but also more value. And with a bit of practice, the process can be relatively painless. It takes more effort because it requires getting familiar with booking and sweet spots in airline and hotel partners.

Learning the Program’s Partners

Because outsized rewards value often comes from transferring points to partners and then redeeming those transferred points for awards, getting outsized value from your points requires learning not only your credit card’s flexible points program but one or several partner programs. Learning how to use additional programs adds a layer of complexity to redeeming points that may not be attractive, especially if you only redeem points occasionally.

As an example, Avianca LifeMiles is a program that can offer fantastic value for business class awards on Star Alliance carriers, and it’s a transfer partner of both Citi ThankYou Points and American Express Membership Rewards. Learning this program can provide incredible opportunities to maximize the value of your transferable points, but anyone reading up on the program for the first time may be overwhelmed by the process of actually redeeming miles.

There is a way around learning the program rules though. Award booking services exist to help you find the most valuable redemptions using transferable miles and points. For a fee, these services can help you redeem your flexible points for complicated or hard-to-book travel awards. If you don’t want to outsource your rewards entirely, you can use several tools to assist you in booking your award tickets.

Whether you pursue cash back, flexible points or some combination of both is a decision you must make by weighing the type of rewards you value and how much effort you are willing to put toward redeeming points. Travel rewards will return the greatest monetary value, often at the expense of an annual fee and higher interest rates. While cash-back cards are typically less expensive with little to no learning curve.

As a quick reference, the table below can help when you’re making this decision:

At the end of the day, the rewards that you’ll use and enjoy will almost always be the best choice—even if it doesn’t net the highest value from each point. Whether that’s increasing your savings with cash back or taking your family on vacation you couldn’t otherwise afford, the choice is up to you.

To view rates and fees for The Platinum Card® from American Express please visit this page.