Cash Back vs. Points: Which Is Better? (2024)

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Deciding between cash back and points credit cards can feel like choosing between a steady paycheck and a surprise bonus. Cash back cards offer simple rewards that are as good as cash and easy to redeem. Meanwhile, points cards have more nuance to earn and redeem your rewards, but you can potentially get more value from them.

We break down the two card types and recommend cash back cards and points cards to help you find the best option for your wallet.

KEY TAKEAWAYS

Cash back rewards offer ease as they have the same redemption rate and can be easily converted into statement credits, checks or bank transfers.
Points cards typically offer higher rewards and substantial welcome bonuses compared to cash back cards, which can offset potential annual fees.
The value of credit card points varies based on the card’s reward program and the flexibility of its redemption methods.

Cash Back Credit Cards: Benefits and Drawbacks

Cash back credit cards offer a straightforward way to earn rewards on your purchases. They can be particularly appealing if you value simplicity and immediate benefits, but their rewards may be less valuable compared to points cards.

Cash Back Credit Cards

Pros	Cons
Rewards come as cash	May come with spending caps
Easy to earn and redeem	Limited perks
Most cards have no annual fees	May not be as fun or inspiring to collect rewards

Ease of Earning and Redeeming Cash Back

The best part about cash back cards is their simplicity — they let you earn a fixed percentage of the amount you spend as cash back. Most cards offer at least 1% cash back on all purchases, but cards like the Wells Fargo Active Cash® Card offer a flat 2% on all purchases. Some cards provide up to 6% cash back on bonus categories, but that may come with limits or restrictions.

No Annual Fees

Cash back cards typically come with no annual fees. This can be particularly beneficial for those who use their card for everyday purchases but don't spend enough to justify an annual fee. However, some cards with higher rewards rates might charge an annual fee, like the Blue Cash Preferred® Card from American Express, which costs $95 annually starting the second year but offers up to 6% cash back. In some cases, the annual fee can be offset with the benefits and higher cash back potential for bigger spenders.

Limited Rewards, Especially for High-Ticket Purchases

High-rate cash back cards offer between 3% to 6% cash back for select categories, but they usually come with a spending cap. Once you hit the cap, the cash back rate drops to the base rate. On the other hand, flat-rate cash back cards provide consistent returns, but the highest rate you can find is only 2%, regardless of the amount spent.

In some cases, points cards can often be more rewarding. Many points cards offer high rates of earning and do not impose spending caps, providing potentially greater value for your large purchases. This makes them especially appealing if you're looking to maximize rewards on big-ticket items, such as airline tickets and travel accommodations.

Select Cash Back Cards

Wells Fargo Active Cash® Card

MoneyGeek Rating

5/ of 5

Rates & Fees

Rewards Rate

Earn unlimited 2% cash rewards on purchases

APR

20.24%, 25.24%, or 29.99% variable

Annual Fee

Recommended Credit

Moneygeek.com credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.

670-850 (Good to Excellent)

The Wells Fargo Active Cash® Card is a straightforward and valuable choice for anyone seeking hassle-free rewards. With no annual fee and a generous welcome bonus, it offers consistent cash rewards on all purchases. The initial zero-interest period is an excellent advantage for purchases and balance transfers. While it might lack specialized bonus categories, the card makes up for this with perks like exclusive hotel benefits and cell phone protection. It's a solid, all-around performer in the credit card landscape.
PROS
- No annual fee
- Welcome bonus
- Unlimited cash rewards on all purchases
- 0% intro APR offer
- Rewards don't expire with an active account
CONS
- Potentially high APR
- No bonus reward categories
- Earn a $200 cash rewards bonus after spending $500 on purchases within the first three months.
- Unlimited 2% cash rewards on all purchases.
- Enjoy a 0% intro APR on purchases and qualifying balance transfers for 15 months from account opening. After that, a variable APR of 20.24%, 25.24%, or 29.99% applies.
- Balance transfers made within 120 days qualify for the intro rate and a fee of 3%. After that, a balance transfer fee of up to 5% (minimum $5) applies.
- No annual fee
- No categories to track and cash rewards do not expire as long as your account remains open.
- Enjoy a premium collection of benefits at prestigious hotel properties with Visa Signature Concierge.
- Earn up to $600 in cell phone protection against damage or theft when you pay your monthly cell phone bill with your eligible Wells Fargo card (subject to a $25 deductible).
Moneygeek.com credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Blue Cash Everyday® Card From American Express

MoneyGeek Rating

3.7/ of 5

Rates & Fees

On Partner's Website

Rewards Rate

Earn 3% cash back at U.S. supermarkets on up to $6...

APR

19.24%–29.99% variable

Points Credit Cards: Benefits and Drawbacks

Points credit cards typically offer travel perks and potentially higher rewards, but they have a steeper learning curve than cash back cards. Understanding these pros and cons can help you decide if a points card is right for you.

Points Credit Cards

Pros	Cons
You can potentially gain more rewards from your purchases	Usually comes with annual fees
Tend to offer travel-related perks	High rewards may require quarterly activations and category restrictions
Points can usually be transferred to airline/hotel rewards programs	Points value varies

Higher Rewards

Points cards can offer potentially higher rewards on certain purchases. You can find cards that offer high rewards in certain categories, like the Capital One Venture X Rewards card, which provides 10X points on travel booked through Capital One Travel. They also come with higher welcome bonuses compared to cash back cards, which can be worth over $1,000 for some cards. These benefits can make up for the annual fees that typically go with points cards and provide great value for frequent travelers.

Travel Perks

Travel-related perks are a major draw for points cards. Many points cards offer benefits such as seat upgrades, free checked bags, priority boarding, access to airport lounges and travel insurance. These perks can enhance your travel experience, providing value beyond monetary savings.

Complicated Rules to Earn and Redeem Points

Points systems are often complex, with varying point values depending on redemption choices. Transferring points to travel partners can maximize value but requires a good understanding of the points ecosystem. For those not interested in putting in the time to learn the ins and outs, a cash back card might be a more straightforward option.

MoneyGeek’s Best Travel Cards

Capital One Venture X Rewards Credit Card

On Partner's Website

Rewards Rate

10 Miles per dollar on hotels and rental cars book...

Redeeming Cash Back vs. Points

Cash back is not the same as reward points; while the former translates into a corresponding dollar amount, the latter does not. For instance, a 2% cash back card offers $2 cash back for every $100 you spend. However, if you spend the same $100 on a card that comes with 2X points on all purchases, the value of those 200 points may vary greatly depending on which card you have and how they are redeemed.

Redeeming cash back is fairly straightforward. Most cash back cards let you use your cash back as statement credit or transfer it to your bank account. Several cash back cards also allow you to utilize your cash back to shop online and get gift cards.

On the other hand, reward points tend to offer the most value when you use them to make travel bookings through your card provider or its partners’ reward programs. For example, 10,000 Membership Rewards Points earned through the American Express® Gold Card are worth $100 when you book flights through American Express Travel. That same amount of points is worth $70 if you use them to make purchases through Amazon.com and $60 when you use them to cover your card charges.

Should You Get a Cash Back or Points Credit Card?

Deciding between cash back and points credit cards involves aligning the card's benefits with your spending patterns and lifestyle needs.

When to Choose a Cash Back Card

A cash back card makes the most sense if you value simplicity and prefer a no-fuss approach to earning rewards. Cash back cards typically offer straightforward redemption options without the need to understand points valuations or redemption processes.

Moreover, if you sign up for a cash back card with no annual fees, getting it to work in your favor is simple. You make purchases using the card and earn cash in return. Since you’re paying no annual fees, any cash back you earn is a financial win.

Getting a cash back card might also be worthwhile if you opt for one that offers high cash back rates across categories you routinely spend. For example, the Capital One SavorOne Cash Rewards card provides unlimited 3% cash back on restaurants, grocery stores, streaming and entertainment.

When to Choose a Points Card

You may benefit from a points card if you’re a frequent traveler. Points cards like the Chase Sapphire Preferred® often come with travel perks and higher reward potential for travel-related spending. You may also expect perks such as seat upgrades, free checked bags, priority boarding, access to airport lounges and travel insurance. These benefits are typically hard to find on cash back cards.

If you're willing to navigate the complexities of points systems, points cards can unlock significant value and travel experiences.

Choosing a Points Card With a Flexible Redemption Program

If you're considering a points card, opt for one with a flexible redemption program. This strategy ensures good value whether you redeem your points for statement credits or cash. More importantly, when transferred through partner rewards programs, these points offer even greater value.

The Capital One Venture X Rewards card lets you redeem $0.01 per point if you’re getting a statement credit or making purchases through the Capital One Travel portal. Capital One also enables you to transfer your points to over 15 airline and hotel partners, potentially giving you a higher value.

READY TO CHOOSE A CARD?

If you’ve already decided what to pick between cash back versus points, we’ve listed the best cash back cards and the best points cards to help you find a card that provides the best value based on your needs and lifestyle.

FAQ About Cash Back vs. Points

We answer some commonly asked questions about cash back and points cards to help you make an informed decision.

Is it better to redeem points for cash or travel?

Redeeming reward points for travel can provide greater value than redeeming them for cash. Always compare cash prices versus award rates because some flight or hotel redemptions offer a poor redemption value when using rewards. You may be better off waiting to redeem your points for a high-value reservation.

How do you calculate points to dollars?

Converting the value of points in dollars requires determining your chosen reward's worth. For example, you need 10,000 points to get a gift card valued at $70. You can divide the value of the reward by the points required for redemption to calculate the dollar worth of your reward points. In this case, you’d divide 70 by 10,000, which gives you 0.007. So, each reward point is worth 0.7 cents. On the other hand, if you only need 20,000 points to book an air ticket worth $350, the value of one point is 1.75 cents, which is a much better redemption value.

What’s the best way to use credit card points?

The best way to use credit card points boils down to your personal preferences. You usually stand to get the best value for your points when you make travel bookings through your card provider's reward program. Other ways to use your credit card points may include getting statement credits, transferring them to partner airline or hotel reward programs, transferring them to other cardholders, shopping online, getting gift cards and donating them to charity.

Can you convert reward points to cash?

Depending on the card you get, you may be able to convert your reward points to cash. However, the worth of your points doesn’t necessarily translate into corresponding dollar amounts, as is the case with cash back cards. For example, the value of one reward point earned through the Platinum Card from American Express when redeemed to cover your card charges is $0.006 (you'll need 10,000 points for a $60 credit). By comparison, if you redeemed 10,000 points from the Chase Freedom Unlimited card, they would be worth $100.

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About Doug Milnes, CFA

Doug Milnes is a CFA charter holder with over 10 years of experience in corporate finance and the Head of Credit Cards at MoneyGeek. Formerly, he performed valuations for Duff and Phelps and financial planning and analysis for various companies. His analysis has been cited by U.S. News and World Report, The Hill, the Los Angeles Times, The New York Times and many other outlets.

Milnes holds a master’s degree in data science from Northwestern University. He geeks out on helping people feel on top of their credit card use, from managing debt to optimizing rewards.

*Rates, fees or bonuses may vary or include specific stipulations. The content on this page is accurate as of the posting/last updated date; however, some of the offers mentioned may have expired. We recommend visiting the card issuer’s website for the most up-to-date information available.
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Cash Back vs. Points: Which Is Better? (2024)

FAQs

Is it better to get cash back or points? ›

Key takeaways. Cash back credit cards are generally the better choice if you want to earn simple rewards on your regular purchases. A points or miles card may be a better option if you travel often or want to start earning travel rewards on your purchases.

Read On ›

What is better 5x points or 5% cash back? ›

Points cards typically offer higher rewards and substantial welcome bonuses compared to cash back cards, which can offset potential annual fees. The value of credit card points varies based on the card's reward program and the flexibility of its redemption methods.

Discover More Details ›

Is it better to use points or pay cash? ›

If cost of the flight is low

This is because using your miles may not outweigh the potential benefits of saving them for a future flight with higher fares. By paying with cash for a low-cost flight, you can preserve your miles for a time when their redemption would yield greater value.

Is 2X points the same as 2 cash back? ›

Value of rewards

A 2% cash-back card means a $100 purchase effectively earns $2 back. However a $100 purchase with a 2X points or miles card isn't always equal to $2 back. It can be less or more, depending on the card and how you redeem them.

See Details ›

Is there a downside to cash back? ›

Downsides of cash back programs

Sometimes, the issuer delays or caps your rewards at a certain amount, limiting your ability to get cash quickly. Higher costs for some. Cash back cards can carry higher annual percentage rates (APR), meaning you have to pay high fees if you carry a balance. Annual fees.

Find Out More ›

Is cashback worth it? ›

There are a few drawbacks to a cash-back rewards card, including a higher-than-usual APR, having to wait to access your cash-back funds, and a cap on how much you can earn each year. Also, when it comes to travel rewards such as airline miles, sometimes the miles are worth more than the cash.

Tell Me More ›

Is Chase points better than cash back? ›

There is not much of a difference between points and cash back if you have certain rewards credit cards from Chase. With many of our cards, you earn Ultimate Rewards^® points on your purchases.

Show Me More ›

Is it better to use credit card points or save them? ›

The bottom line

If your points are worth more as cash back than they would be if you redeemed them for gift cards, why not choose cash back? Likewise, if the value of your points increase when you redeem them for travel purchases, it makes sense to save up your points for your next big trip.

Explore More ›

How do you get 5% cash back on everything? ›

If your wallet is missing all four, the Citi Custom Cash® Card is a good card to start, as it gives you more flexibility over how you earn your 5%. Then, you might want to add a card with a rotating quarterly category, like the Chase Freedom Flex®. Another option for this is the Discover it® Cash Back.

What is the smartest way to use credit card points? ›

You're better off paying for the purchase with your card, earning rewards from it, then using the rewards for something else where they will have a greater value, such as a gift card or travel booking.

Show Me More ›

Are points really worth it? ›

In most cases, rewards cards are worth it — as long as you're not carrying a balance and the annual fee is less than the value of the rewards you earn each year.

Read The Full Story ›

Is it smart to pay off credit card with points? ›

While you can certainly use your reward points as cash back or statement credit for your credit card balance, you may get more value out of your points by redeeming them toward travel arrangements.

See Details ›

Is it better to get cash back or use points? ›

If you travel often, you're likely to get more value out of a rewards card that offers points instead of cash back. But if traveling isn't your thing, or you value simplicity and low annual fees, a cash back credit card may be a better choice for you.

Get More Info Here ›

Can you convert cash back to points? ›

Yet, having both a cash back card and travel card from the issuer can help you maximize rewards with little effort. It's easy and quick to convert your cash back into miles. Doing so can help you earn free travel quicker, as well as squeeze additional value out of your cash back.

Is it better to cash out credit card points? ›

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.

Is it better to use Chase points for travel or cash back? ›

In general, points are worth more when redeemed for travel or transferred to Chase's partners. For example, if you have a Sapphire Reserve^® card and you use your points to book travel through the Chase Ultimate Rewards portal, your points are worth 1.5 cents per point instead of 1.

View Details ›

Is it cheaper to pay with points? ›

The bottom line. From a mathematical standpoint, it's often a toss-up whether you get a better value from booking travel with cash vs. points, but it's almost never the best value to book with a combo of cash + points. That said, there are a lot more factors to consider than just pure financial value.

Is it better to redeem points for cash or gift cards? ›

For most rewards and incentives programs, non-cash rewards like gift cards and prepaid cards are better options.

Learn More ›