Cash Back vs Miles Credit Cards – Which Has Better Perks?
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Picking the right type of credit card is easier said than done. You might find them all useful, but are they worth it? Two of the most common credit cards available today are cash-back and miles credit cards.
Irrespective of what you choose, the rewards will depend on the type of customer you are. If you are a frequent traveler, you can benefit from the airline perks, and if you rarely travel and do not want to do the legwork to use the rewards, you can opt for the straightforward cash-back cards. It is advisable to choose some type of rewards card so that the money is working for you and you can earn while you spend. Both the cards have their benefits and drawbacks, so you need to compare them well and choose one that fits your requirements.
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What are cash-back credit cards?
As the name suggests, cash-back credit cards work by returning a part of your card purchases to you in cash. The cash-back percentage will depend on the card, service provider, and purchases. For example, if the card offers 2% cash back on all your purchases, you will receive 2% back of the price of anything you purchase. It is a flat-rate reward program. The rewards come in dollars and not in bonus miles or points. Using the card to make most of your purchases can add up and result in earnings, allowing you to earn as you spend. They have modest sign-up bonuses, and card issuers often charge foreign transaction fees.
The rewards you earn with cash-back cards are high in value, pretty straightforward, and can be easily redeemed. They are usually in cash, which means you know exactly how much you are earning and what it is worth. However, the rewards cannot be maximized since the cash-back value will always remain constant. This is why cash-back credit cards appeal to those who do not want to make any effort or spend more for rewards. The cash-back redemption process is easy and simple.
You can either deposit it into your account, ask for a check by mail or get a statement credit to cover the past purchases. Some cards require a minimum cash-back balance before you can redeem, but this amount is usually low. Since redeeming the rewards does not take much effort, this is an ideal option for those who want something low-maintenance. That said, many cash-back cards also come with a 0% interest promotion for the first year, which can help make larger purchases.
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Cash-back credit cards pros and cons
Pros
- The rewards can be easily redeemed.
- Straightforward cash rewards.
- Enjoy greater long-term value.
- Low annual fees
Cons
- Rewards are not flexible.
- Limited additional perks
- Lower sign-up bonuses than other travel rewards cards.
Who are cash-back credit cards best for?
- Your spending is predictable. If you know that you will spend a certain amount each month, you can also predict the amount of cash back you will earn, allowing you to plan your finances accordingly. This means you do not need to spend wildly to earn cash back.
- You cannot be bothered about redeeming points. Cashback credit cards are ideal for those who do not want to spend hours wondering where and how to redeem points. As long as you know your spending habits, you just need to pick the right card.
- You like simple and straightforward rewards. With a cashback card, there are no complex rewards. You simply receive a percentage of your spending and have a few options for where to spend them. The rewards are simple and easy to redeem. It helps to consider if you will earn enough cash back to justify the fees.
What are miles credit cards?
Miles credit cards also travel rewards credit cards and help you earn a specific amount of miles with each purchase you make using the card. You can use the miles for free flights, hotel nights, or upgrades. When it comes to miles, their value remains inconsistent and is based on the program or the method you choose to redeem them. Some miles programs offer many alternatives to increase the value of the points.
If you are a frequent flier, miles credit cards are a great choice as you can benefit from the hotel nights and free flights, but they also come with other travel perks that are included in these cards. Most miles credit cards charge annual fees, which often increase with the number of benefits and perks offered by the card. You can find three miles cards – hotel credit cards, airline credit cards, and travel rewards cards. Only you can decide which type of miles card is best for you since it also depends on the type of traveler you are. Let’s take a look at each type of credit card in detail.
Hotel credit cards
Hotel credit cards are the cards that are co-branded with a certain hotel chain, like Marriott Bonvoy Brilliant® American Express® Card ,The World of Hyatt Credit Card, or Chase Sapphire Preferred® Card. The card allows you to earn bonus points with each stay at one of their properties, and they also offer perks like late checkout, elite status, free breakfast, priority upgrades, free night awards, and on-property hotel credit. Most hotel credit cards charge a fee for the perks; the fees usually increase for cards with higher benefits and perks. You must also remember that the hotel credit card has a points value system that is often inflated. So the points are not as valuable as airline miles. The card is only suitable for those who prefer to stay in the same hotel chain.
Airline credit cards
Airline credit cards are co-branded with a certain airline, like JetBlue Plus Card or Delta SkyMiles® Gold American Express Card. They offer benefits specific to the airline, including airport lounge access, priority boarding, free checked bags, and priority upgrades. The cards also come with many welcome offers and high earning rates on airline purchases. Some airlines are also a part of airline alliances where you can transfer the miles earned on one airline to any of the other airlines in the alliance or another hotel rewards program, which can make the card much more beneficial. The card comes at an annual fee, but the only downside is that you will have to commit to a certain airline you always fly with. If you fly with any airline that offers the best rates and routes, the airline credit card could be limiting.
Travel credit cards
The general travel credit cards are the most valuable category of miles cards since they do not lock you into a specific hotel chain or a single airline and offer flexibility in terms of travel. They can be used for various travel programs to maximize their value. Like any other card, even the general travel credit cards will not be ideal for infrequent travelers or those who enjoy fuss-free rewards. You will have to do a little legwork to redeem the rewards.
Co-branded and non-co-branded miles credit cards
There are two types of miles credit cards: co-branded and non-co-branded. A co-branded card is linked to a specific airline and might have limitations on how you redeem the miles. If you have a Delta card, the miles you accumulate in the membership account can only be redeemed through the Delta SkyMiles program, and you can book travel flights on Delta and its partner airlines. However, a non-co-branded credit card has more freedom in how you earn and use miles. They allow you to easily transfer the miles to different loyalty programs and airlines.
Pros and cons of miles credit cards
Pros
- Flexible rewards
- Airline and travel-related perks
- Non-co-branded cards allow you to transfer the miles
- Ability to maximize value
- Enjoy additional perks and benefits
- High welcome bonuses and offers.
Cons
- High annual fees.
- Co-branded cards can be limiting and do not allow the transfer of miles to other loyalty programs.
- The value of miles will vary based on how you choose to redeem them.
Who are miles credit cards best for?
- You spend a lot on travel. Airline miles credit cards will be no good unless you are excited about traveling and like to do it in style. If you aren’t a frequent flier, the card will not help you.
- You enjoy flexibility. If you like to put in the effort to decide where and how to redeem the points, miles credit cards are a good choice. You will be able to look at the available options with partner airlines or hotels and find the best way to spend your miles.
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- 5 star service trusted by over 450,000 members
- Have processed over $11,000,000 in bill payments for members
- No deposit, no credit check, no interest
- New member promotions available
*Potential increase based on StellarFi member data. StellarFi numbers observed an average of 80 points VantageScore® 3.0 increase during a member’s lifetime. Score increase based on members with an incoming score range of 300-499 pts, who made regular on-time payments, with regular on-time payments. Results may vary.
Difference between miles credit cards and cash-back cards
A miles credit card and cash-back cards have a few prominent differences. With a cash-back card, you will earn a fixed percentage of your spending. The card works in a straightforward manner where you make a purchase and earn a percentage of the purchase back, but with a miles card, the value of the miles will be subject to change.
When it comes to redemption, cash-back card issuers allow you to transfer the cash back into the bank account or use it as a statement credit. However, redeeming reward miles is not as easy since it depends on whether the card is co-branded.
How to choose between a cash-back and miles credit card
When deciding between a cash-back credit card and a miles card, you need to consider how you intend to use the card and redeem the points. Think about the below-mentioned areas of your life.
- How frequently do you travel? If it is a few times a year, you can benefit from the travel rewards card.
- Do you prefer a particular airline? If you do, a miles card will be ideal for you, but if you like to shop around for each flight, you can consider other options.
- Where do you travel? The points earned on your card can stretch further on more expensive flights; this is when the travel rewards card is a great choice. Look for a no-foreign transaction fee card to save more money when heading abroad.
- Do you want to save or get more value? Those who look at rewards as a money-saving strategy should consider a cash-back card but if you like discounted or free trips, think of a miles card.
- Do you enjoy monitoring and redeeming the points? If you do, a miles travel rewards card is a good choice but if you seek something simple and straightforward, opt for a cash-back credit card.
FAQs
Are reward points better than cash?
Points are better than cash since you can transfer them to a travel partner and maximize their value. Cash rewards remain stagnant and cannot be transferred or do not help increase the value of your rewards.
What is the difference between miles and cash back?
With cash back, cardholders can earn a percentage of the spending in the form of cash-back rewards, whereas the miles can only be used for free flights or hotel nights with partner airlines or hotel chains.
Is it worth having a credit card for cash back?
Do not try to earn cash back if you are paying interest and fees. The cash back may not always be worth it,, but some cards offer as much as 6% cash back on some purchases, which could add up to a significant amount. If you use the best cash rewards credit card for all purchases, ensure you spend on things that offer the highest cash back.
Raise Your Credit 80 points*
- 5 star service trusted by over 450,000 members
- Have processed over $11,000,000 in bill payments for members
- No deposit, no credit check, no interest
- New member promotions available
*Potential increase based on StellarFi member data. StellarFi numbers observed an average of 80 points VantageScore® 3.0 increase during a member’s lifetime. Score increase based on members with an incoming score range of 300-499 pts, who made regular on-time payments, with regular on-time payments. Results may vary.
The bottom line
You need not limit yourself to a particular type of rewards card based on your credit score. You can also choose to own both cards if you use them responsibly. Be realistic about your spending habits and how and where you will use the card. You can find the best rewards credit cards after you take a good look at your lifestyle and preferences.
If you do not want to be bothered about the interest rate or varying balance, you can opt for a card with better redemption options and higher rewards rates. That said, if you are a frequent traveler, you can take full advantage of travel benefits, including access to airport lounges and perks on travel purchases with a miles card.
On the other hand, a cash-back card is less costly and comes with versatile rewards making it a winner for those who like a simple and straightforward redemption process.
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Writer
Vandita Jadeja is a financial writer and editorial assistant at Joywallet. She loves to read and write about money and brings 7 years of experience from the financial industry. She loves coffee, mountains and sunsets.
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