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Miles credit cards can be extremely valuable for frequent travelers, while cash back cards can be more beneficial for those looking for high value, no-fuss rewards.
Cash Back vs. Miles
|Types of rewards||Cash||Airline miles, hotel points, flexible points|
|Best for optimizers|
|Best for simplicity|
|Flexible rewards||Depends on the card ?|
|Valuable travel perks|
|Odds of an annual fee||Low||High|
Whether you should choose a cash back or miles credit card (or both) will depend on the type of consumer you are. Frequent travelers who can take advantage of airline perks like free checked bags, airport lounge access, priority boarding and more, will enjoy the benefits of miles cards. Consumers who rarely travel or for those unwilling to do too much legwork to use their rewards may prefer the more straightforward and indisputably valuable rewards that come with cash back cards.
Tip: Regardless of whether you choose a miles or cash back card, we always recommend using some type of rewards card so your money is working for you and you're always earning while you're spending.
Cash back vs. miles: Pros and cons of each
While both types of cards have their benefits and drawbacks, consumers who prefer straightforward cash rewards will prefer cash back cards, and frequent travelers will prefer earning and maximizing rewards with miles credit cards.
Cash back credit cards
Cash back credit cards work by returning a percentage of your card purchases to you in cash. For example, if your cash back card offers 1% cash back on all purchases, you'll receive 1% (at least) back of the price of everything you buy. Over time, this can really add up and result in significant earnings, allowing you to earn while you spend.
The rewards earned with cash back cards are straightforward, high value, and easy to redeem. The rewards are literally cash, so you know exactly how much you're earning and exactly what it's worth. The only downside here is that these rewards can't be maximized like miles often can be.
The value of cash back rewards always remains constant, which may be more appealing for consumers who don't want to do any work to reap the benefits of their rewards.
Redeeming your cash back is typically an easy process. You can usually redeem cash back as:
- A deposit into your bank account
- A statement credit to cover your past purchases
- A check by mail
However, it's worth noting that some cards require you to have earned a minimum amount of cash back before you can redeem it. Usually these amounts are low, however, typically set around $25.
Miles credit cards
Miles credit cards, also referred to as travel rewards credit cards, allow you to earn a certain amount of miles on every purchase you make with your card, which can then be used toward earning free flights, upgrades or free hotel nights.
While the value of miles is inconsistent and varies based on the rewards program and the method in which you choose to redeem them, some miles programs offer ways to increase the value of your points. For example, the Chase Ultimate Rewards® program allows you to transfer your miles to different hotel and airline partners who offer more value per point.
Miles credit cards are great for frequent travelers who can benefit from free flights and hotel nights, as well as other travel perks that are typically included with these types of cards. One of the downsides of miles cards, however, is that they often charge annual fees, which tend to increase with the amount of additional perks and benefits offered by the card.
There are three different types of miles cards:
- Airline credit cards,
- Hotel credit cards
- General travel rewards cards
Deciding which type of miles card is best for you will depend on the type of traveler you are and how loyal you are or aren't to particular travel chains.
Airline credit cards are cards that are co-branded with a specific airline, for example the Delta SkyMiles® Gold American Express Card. Airline cards offer benefits specific to that airline, including:
- Priority boarding
- Airport lounge access
- Free checked bags
- Priority upgrades and more
These cards also tend to offer hefty welcome offers and high earning rates on purchases made with their airline, but usually include some type of annual fee.
Many airlines are also part of airline alliances which allow you to transfer your miles earned on one airline to any of the other airlines in their alliance, which make co-branded cards extra beneficial. The only downside to airline credit cards is that you need to commit to one specific airline that you always, or almost always fly with. For travelers who prefer to fly with whichever airline offers the best itinerary, these types of cards can be limiting.
Similarly to airline credit cards, hotel credit cards are cards that are co-branded with a specific hotel chain, for example, the Hilton Honors American Express Card. These types of cards allow you to earn points every time you stay with their hotel chain, and also offer perks like:
- Elite status
- Priority upgrades
- Late checkout
- Free breakfast
- Free night awards
- On-property hotel credits and more
However, many hotel credit cards charge annual fees, which typically increase for cards offering greater perks and benefits.
Another thing to note with hotel credit cards is that their points value is typically inflated, so hotel points aren't usually as valuable as airline miles. Hotel cards are most beneficial for consumers who frequently stay with the same hotel chain, but can be limiting for those who aren't particularly brand-loyal.
It can be argued that general travel rewards cards are the most valuable category of miles card, because they don't lock you into a single airline or hotel chain, and can be flexibly transferred to various travel rewards programs which can maximize their value. For example, the Chase Sapphire Preferred® Card is a favorite of many travelers because it charges a moderate annual fee, comes with a variety of travel benefits, and allows cardholders to transfer their points to many of the Chase Ultimate Rewards® hotel and airline partners at a 1:1 ratio.
The only downside to general travel rewards cards is that you have to do a bit of legwork to redeem your rewards and discern their value, which may not be ideal for infrequent travelers or consumers who prefer less fussy rewards.
Cash back vs. miles credit cards: Which one should you get?
Ultimately, deciding between a cash back and miles credit card will depend on your preferences and travel habits:
- For frequent travelers who tend to stick with the same airline or hotel chain, a co-branded miles card will be the most beneficial option.
- For regular travelers who still want to earn miles but don't want to be tied down to a specific brand, a general travel rewards card can be a great choice.
- If you're not a frequent traveler but still want to earn rewards on your spending, a cash back credit card can be a perfect fit for your needs.
It's worth noting that depending on your credit, you don't need to limit yourself to a single type of rewards card. It can be extremely beneficial to own both a cash back and miles card at the same time as long as you use them responsibly.
Best for simple rewards: Cash back
For consumers looking to simply earn a percentage back on all their spending, a cash back card is the way to go. You won't have to worry about figuring out how to maximize the value of your rewards; you know you're earning in cash, so the value of your earnings is straightforward.
Some cash back cards offer bonus spending categories, so if you want to get the most bang for your buck, make sure you use your card for all the spending you do in those higher earning categories.
Best for optimizers: Travel rewards
Unlike cash back rewards, airline miles have the advantage of being optimizable. If you have a travel rewards card and are willing to put in a bit of effort, you can stretch out the value of a single mile. Optimizers will plan itineraries that give them the best returns for the miles they have.
For example, if you spend time looking at flights on different days and times, you can book an award ticket with United so that you get $0.02 for each mile. The average value of a United mile, however, typically hovers around $0.012.
Flexible travel rewards cards are one of the best options for maximizing point value because you have the ability to transfer your points to a variety of loyalty programs. For example, the Chase Ultimate Rewards® program includes transfer partners like JetBlue, United, and Southwest, among others. We've found an average value of 2 cents per point transferred to an Ultimate Rewards travel partner, which is double what Ultimate Rewards points are worth when not transferred to a travel partner.
In the following example, you can see how transferring points with a miles card like the Chase Sapphire Preferred® Card can yield greater value than a simpler cash back card, like the Citi® Double Cash Card – 18 month BT offer.
Sample rewards earned in the first year
|Earning rate||The Chase Sapphire Preferred® Card earns 5x on travel purchased through Chase Ultimate Rewards®, 3x on dining and 2x on all other travel purchases||Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases.|
|Sign-up bonus||Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 when you redeem through Chase Ultimate Rewards®.||No bonus|
|First year value||$1,554||$400|
Our valuations are based on an assumption of $20,000 annual spend, with $3,000 spent on travel through Chase Ultimate Rewards®, $2,000 spent on all other travel, $5,000 spent on dining, and $10,000 on everything else. We value Chase Ultimate Rewards® points at 2 cents each.
What's the difference between cash back and miles?
Cash back allows cardholders to earn a percentage of their spending back in cash rewards, while miles can be used towards free flights and hotel nights with various airlines and hotel chains. Cash back rewards offer unchanging value while the value of miles will depend on the particular loyalty program and method of redemption.
Why are points better than cash?
Points can be better than cash if you're able to maximize their value by transferring them to a travel partner that offers more cents per point. Cash value is stagnant and doesn't offer the option to increase the value of your rewards.
Is cash back really worth it?
If you regularly use your cash back credit card and make sure to use it for the spending categories that offer the highest percentage of cash back, cash back can definitely be worth it. It allows you to earn a percentage back on every dollar you spend, which in time can yield significant results.
Terms apply to American Express benefits and offers. Visit americanexpress.com to learn more.