The question of cash or travel, should you choose a cash back or miles and points credit cards is a frequently asked question.
Ralph, one of my readers, contacted me asking
Also, can you please help me understand when cash back or points/miles are better? Thank you!
Because he had several other great questions, I’m separating each question into a different blog post. For today’s post, cash or travel: choosing a rewards card, we’ll look at how to decide if you should get a cash or travel rewards card.
Cash or Travel: Choosing a Rewards Card
Cash or travel? It sounds like an easy question, right? One of those “it’s one or the other” questions. But it’s not that simple.
Whether you choose a cash back card or a travel rewards card that gives you miles or points depends on your goals. Both your travel goals and your financial goals.
These goals can change each year or throughout the year.
Cash Back Cards
Who doesn’t love cash?
Most cash back cards offer 1% to 2% on all purchases. Some offer up to 6% back.
Sounds amazing, right? But those high cash back offers have fixed limits on how much you can earn. And they’re restricted to certain things.
You can get 6% cash back when you use the Blue Cash Preferred® Card from American Express to buy groceries at US supermarkets. But, you’re limited to 6% on $6,000 per year cash back on groceries and then it reverts to 1%.
The majority of cash back cards like the Capital One Quicksilver Cash Rewards Credit Card don’t charge annual fees.
Cash back cards are great for someone who wants easy. You spend money, you get cash back. Simple.
There are no redemption or award charts to figure out. You’re not bound by blackout dates or sold-out hotels.
When airlines and hotels raise their award prices, you’re not affected. Because you’re paying cash and not redeeming miles or points that are now no longer as valuable.
Unlike miles and points that expire, if there’s no activity on your accounts, cash is forever.
You can use your cash back on what you want vs what’s available. Save it for retirement. Invest it. It’s your choice.
Search for cash back cards.
Travel Rewards Cards
Travel rewards cards give you the biggest bang for your buck.
You’ve seen the offers, “100,000 points sign-up bonus,” “50,000 miles bonus,” and “Free Companion Pass.”
These cards give you the world. You can get free hotel nights, free flights, priority board, free checked bags, free TSA-PreCheck, free airport lounge access, and more!
Perks vary depending on whether it’s a co-branded airline or hotel credit cards like the Citi AAdvantage Executive World Elite Mastercard or a bank-branded (general) travel card like the Bank of America Premium Rewards Credit Card.
Cards like The Platinum Card® from American Express and the Chase Sapphire Preferred® Card earn transferrable points. These points are the most valuable because you can transfer them to participating airlines or hotels.
You get a 5,000 point bonus when you transfer 20,000 Starwood points to some airlines. So 20,000 Starwood points transferred to American Airlines becomes 25,000 American Airlines miles, which gets you a round-trip ticket to Hawaii.
But all that free stuff comes at a price. Annual fees on travel rewards cards range from $65 to $550.
Travel rewards cards are good for people who don’t want to waste time.
The signup bonuses are huge. You can quickly redeem those miles and points for free flights or free hotels. Instead of waiting months to earn enough miles and points for free travel, you can travel now.
Travel rewards cards can get you into Business or First Class seats for less than if you paid cash.
Instead of paying $14,000 for a First Class flight on Lufthansa you’ll pay $40 and 110,000 miles. A $3,300 business class ticket to Australia only costs $5.60 and 67,500 miles.
When you have miles and points you can book last minute tickets for pennies. This comes in handy if you have an emergency or have to attend a funeral.
A last-minute round-trip ticket in coach within the US can cost up to $1,500. But when you use miles, it only costs $11.20 and 25,000 miles.
You should get a travel rewards card because you’ll save time and money. You’ll avoid long lines at the airport and have more pleasant travel experiences.
Look for travel rewards cards.
Some travel rewards cards give you an option of cash back and points. I’ll call these hybrid cards.
You can choose cash back in the form of a statement credit. Or you can choose to use the points.
The great thing about hybrid cards is their flexibility. You aren’t locked into your choice.
You can pick cash back one month. The next month you can use your points or miles to book an airline ticket. It’s up to you.
And like cash back cards they are easy to use.
Hybrid cards give you points or miles when you pay with your card. With some cards, you earn more points when you use your card on certain types of purchases.
For example, the Capital One Venture Rewards Credit Card and Capital One VentureOne Rewards Credit Card cards had a promotion where you earned 10x miles per dollar when you use these cards to pay for your hotel. This ended in January 2020.
So if your hotel costs $100 a night you’ll earn 1,000 miles per night. You can either redeem those miles for a free flight. Or you can use those miles as a statement credit to pay your hotel bill.
Search for hybrid cards.
Choosing between a cash back or travel rewards card can be a hard decision. But it can be easier once you know your goals.
If you want a simple way to earn rewards from your spending without having to worry about award charts, blackout dates, and devaluations, consider a cash back card.
Cash back cards like the Capital One Quicksilver Cash Rewards Credit Card are easy to use and don’t charge annual fees. Cards like the Blue Cash Preferred Card from American Express earn up to 6% on groceries at US supermarkets.
Got your eye on those big wide seats and hotel suites? Don’t want to wait months and months before you earn enough miles and points to earn a free trip?
Want to have the best of both worlds? Earn cash back and miles and points? Hybrid travel rewards cards like the Capital One Venture and Capital One Venture One cards give you flexibility. Choose from cash or points or mix and match.
How about you? Do you prefer cash or travel?
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