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Credit Card Cashback, Points Rewards or Miles?

Is it better for you to have a cash-back credit card or a travel rewards credit card? The answer you’ll hear quite often is, “it depends”.  In this article, we dive into the many avenues of reward cards and its different options. After that, you'll have clarity on the type of rewards card that’s going to be beneficial to you.

You can trust the integrity of our unbiased, independent editorial staff. We may, however, receive compensation from the issuers of some products mentioned in this article. Our opinions are our own.

Table of Content

Is it better for you to have a cash-back credit card or a travel rewards credit card? The truth is that this question is as old as reward cards themselves. The answer you’ll hear quite often is, “it depends”.  Let’s now dive into the many avenues of reward cards. You will then have clarity on the type of rewards card that’s going to be beneficial to you.

Keep in mind that you only benefit from reward cards when you pay the balance off in full each month. If you don’t, the interest you accrue will be more than the rewards you actually gain. Let’s now go over everything thing you need to know since you may be taking interest in getting a rewards credit card.

Overview of the Different Card Types

Each credit card has its own benefits, here's a short summary:

  • Miles

This type of credit card usually offers great benefits and sign up bonuses. The downside is that only people who travel a lot can truly benefit from the card. In the past 3 months, there has been an uptick of specials between 30,000 and 120,000 frequent flyer miles for new cardholders. Amazing, right?!

Based on a US News survey conducted in 2019 to determine the most desired reward for a travel credit card holder, 25.8% of the respondents did not find their preferred reward among the 6 choices provided. Despite that, cash back was the most desired reward at 18.5%. Free hotel upgrades, was the least wanted reward with 6.2% of the responses.   

Chart: Credit Card Travel Rewards Wanted by Card Holders in the U.S. 2019

An individual can make a couple of domestic round trips with those miles. The downside is that you have to pay a redemption fee of $100 per ticket when you attempt to transfer your miles into flights. Government fees and taxes also accompany this. Reward cards such as United MileagePlus Explorer and Southwest Airlines Rapid Rewards have some great benefits for those who are willing to book with a single airline.

  • Cash

A cash-back card is one of the easiest rewards cards to utilize. This type of card has the ability to give you a percentage of the money you spend using the card.

The purpose of cash-back reward cards is to reward customers as a result of using their card for everyday use. It also encourages merchants to accept smaller transactions with credit cards. Chase have cash-back cards offer up to 6 percent cash-back that has an emphasis on quarterly enrollment and up to $2,000 in combined purchases.

  • Points

This type of card reward their cardholders via points. Banks such as Chase and Citi offer points (for merchandise purchase) that’s more than what’ you’d receive in cash. Moreover, you can always check to see if a lender offer deals for the stores you like to purchase from.

Cash vs. Miles: Match You Spending Pattern

It’s important to pick the rewards card that meets your expectations. You can choose a card with no annual or fee or a card that has one. If you choose a card with an annual fee, make sure that the rewards offset the price.

Furthermore, you have more freedom when you choose to get a cash-back rewards card. For instance, you have the ability to spend your money on travel or anything else you may prefer.

Regarding a miles card, they have more limitations. They are only beneficial for those who live a lifestyle of travel. People who desire to travel more in the future can benefit from this card as well. Planning a trip to Spain could be the motivation that you need to start traveling. For the most part, reward miles have the same value as cash-back. 0.75% to – 2.5% is usually the range to be exact.

The good thing is that there’s always an incentive for signing up. Keep in mind that the bonuses are typically some of the incentives you’ll receive. It’s important to take advantage of them. Certain miles cards allow you to use your rewards for other travel needs such as hotel rooms or rental cars.

Credit Card Points vs Miles: What’s the Difference?

Miles and points reward cards typically operate the same way. You will earn miles or points depending on the program for your card of choice. Also, they’re redeemable for various eligible terms and services.

Take a look at this distinction: Mile rewards cards are normally in affiliation with one specific airline. Moreover, they have no set value and you can only redeem your rewards with that specific airline and its partners. As a result, you’ll have to complete additional legal matters to maximize the use of your miles card.

One thing to note is that you have the opportunity to receive gift cards and merchandise with the points you rack up. Since you now have the knowledge you need to decipher between the two, let’s look into what mile and points reward cards are truly worth.

Cash Back vs Points vs Miles: How to Compare Them?

In order to identify the different types of credit cards, you first have to know their rewards rates. The rate (which is a percentage) the reflection of a card’s worth. Moreover, this is the value the card gives back when you purchase with it.

The chart below shows the frequency in which United States consumers compared credit card rewards against the competitors in the market. According to US News, 52.2% of the participants said they compare their credit cards less than once every 3-years. And 16.5% of the respondents do it once a year. Only 6.2% said they do it once every two years.  

Chart: Frequency of Comparing Credit Card Rewards Programs in the U.S.

For instance, if you had the choice to purchase groceries with a credit card that rewards you 1.5% in comparison to one that rewards you 0.75%, I would choose the former. The rewards are apparent with a cash-back rewards card because the lenders let you know upfront what the reward will be when you use it. Regarding miles and points cards, it’s not that simple. As a result, you’ll have to calculate the rewards rate.

To determine the rewards rate, you first need to know how the miles or points are worth. You do this by figuring out how many points/miles you need to get the special reward. Next, you have to divide the dollar value of that specific reward by the number of points you need for its redemption. This will give you the value of dollars per point. Afterward, you need to multiply that specific value by the number of points you get per dollar spent and multiply that particular number by 100. The answer you see is the percentage rewards rate. Let’s take a look at an example together:

Let’s take for instance the card you have takes about 30,000 miles to book a flight from LA to Boston. In the back of your mind, you already know that the flight usually cost $300. This means that each mile approximately $300/30,000 = $0.01. If your credit card rewards you with 5 miles for every $1 you spend, your rewards come out to $0.01x5x100=5%.

One thing to keep in mind is that reward credit cards will sort out the points in various ways. For instance, your reward for spending a certain dollar amount at the grocery store could be 4 miles and 2 miles for dollar purchases at the movie theater. To clarify, the amount of rewards you receive is contingent upon where you do your shopping.

We use the same calculation for every credit card we look over in order to create the criteria of how we compare the credit cards.

For instance, if a cash-back credit card rewards you with 1% cash-back on travel purchases and the points credit card offers a 2% rewards rate, we will recommend the latter to those who desire to receive travel rewards.

When You Should Choose Cash Back

Now check this out: For most credit card users (and those who have the travel bug) cash-back cards are the most appealing. One of the main benefits is that you can use the rewards to help cover your rent, mortgage, or other bills. You aren’t able to do this with an airline miles card or hotel points.

On top of that, you have the opportunity to allow your cash-back to accrue over time. The downside of a miles and points card is that they can lose value over time if a company changes their rules and policies. Moreover, if you don’t use your travel rewards over a span of time, you could potentially lose those rewards.

When You Should Choose Travel Rewards

Earning and receiving travel rewards is more complex than you probably think. This type of rewards credit card caters to people who are confident in knowing their favorite airline hotel programs.

One thing to note is that a lot of people deal with frustration trying to figure out how to use their travel rewards.

When You Should Choose Points Rewards

While travelers with experience can go from point A to point B from three to five cents per point, cash-back points typically just have a 1 cent per point value.

Even though the cash-back (points rewards) value is lower, plenty of people still prefer this type of card because it’s easier to understand what they are receiving without them having to think twice about it. Travelcard users that lack experience run the risk of not using their cards effectively. As a result, they lose the value of what they accrued.


Keep in mind that you have to pay off the balance in order to benefit from any rewards program. The banks tend to subsidize the cost of your rewards. They do this by spiking up finance charges and annual fees than those no-frills cards.

When choosing a credit card, one of the things you need to consider is the free structure. In this chart compiled with data, we can see that late payment fees are the most common type of fee. This is followed by cash advance fees. At the other end of the scale, we can now see that over limit fees and annual fees are far less common. This highlights the importance of making payments on time, which can not only save on fees but help you to establish a solid credit history.

The Most Common Credit Card Fees

We recommend using cards such as these to cover reimbursed company expenses or normal household bills that you’d usually pay with cash to cover. That way, you won’t be spending the bulk of your money on service charges than what you receive in rebates.

If you are indecisive between miles, cash, and points, it’s best to look into getting a miles per dollar rewards card. You’ll be able to redeem the miles on flights for the airline you choose. When you use your card while you’re traveling rather than just going to grocery store, the rewards you’ll receive will add up substantially.


Generally speaking, the IRS categorizes the rewards from credit card cash back or miles as a non taxable form of funding. You will not owe any tax on your cash back as they are treated as a discount or rebate on your purchases.

However, if you did not have to make any purchases to qualify for your welcome bonus, your cash back reward is considered to be taxable income and will need to be declared on your return.

If you're looking for a way to save money during the holidays or get a discount on your next purchase, your rewards card might be the answer. Some credit cards provide a benefit that allows users to buy online at chosen stores and use their points to pay in full or in part for their purchases. Alternatively, you can use Gift Cards.

Because it's convenient and easy to calculate the point-to-dollar value, it's a popular way to redeem credit card rewards. Another frequent use of points is to use them to purchase airline tickets. And, whether your points are about to expire or you're switching credit cards, instead of spending them on stuff you don't need, consider donating them to a charity cause.

There are a few options for maximizing your rewards:

  • Choose the best rewards credit card for you. It's easy to get caught up in the excitement of collecting prizes. However, the more cards you play, the less likely you are to accumulate points in any of them.
  • Keep an eye out for sign-up bonuses. You can find cards that reward you with bonus miles if you spend a certain amount of money during the first few months of creating an account.
  • Trade and consolidate points. If your reward points are dispersed over numerous cards, consolidating them is a good idea.
  • Keep track of how you get points. Getting the most mileage out of your points rewards credit card entails taking advantage of every bonus opportunity that comes your way.
  • Calculate the worth of your awards. If your card gives you points, you should figure out how much each point is worth so you can calculate the best potential return.

A rewards credit card is advantageous to anyone who uses their credit card to pay for the majority of their spending. They are the ones who can take advantage of it and accrue points that may be redeemed for flights, cashback, merchandise, or gift cards, among other things.

People with greater credit card experience and who are ready to put in more effort to achieve a fair value for their points do better with point rewards.

Many consumers worry that having many credit cards may negatively affect their credit score. Having multiple credit cards, on the other hand, may help you boost your credit score. Maintaining a low debt utilization ratio will be easier with multiple cards.

For example, if you have one $1,000 credit card and a $750 average balance, your debt usage ratio is 75%. Your ratio will drop to 25% if you have three cards, each with a $1,000 limit, and the same $750 amount is divided among the cards.

In the first scenario, your credit score will be harmed as a result of the high ratio. To manage numerous cards, you'll need to manage your credit carefully. To maintain your ratio as low as possible, you'll need to keep track of payment dates and make sure you split your spending among the cards.