Cash Back vs. Miles: Which Rewards Card Suits You?

Credit cards in America can offer many benefits beyond simply allowing you to spend within your credit limit. For this reason, issuers invest in rewards programs.

Among the various types of rewards programs offered by financial institutions, two stand out: cash back cards and mileage cards.

But which is the best option for you? Let’s explore the features, benefits, and limitations of each to help you decide.

How do cash back cards work?

Cash back credit cards offer a percentage of your spending back to you. Typically, the percentage ranges from 1% to 5%, depending on the spending category and the card selected.

For example, a card might provide 3% cash back on dining, 2% on groceries, and 1% on all other purchases.

The accumulated cash back can be redeemed in various ways, such as statement credits, direct deposits, or even gift cards.

This simplicity makes cash back cards a popular choice among consumers seeking straightforward and easy-to-understand benefits.

Benefits of cash back cards

1. Simplicity: Cardholders know exactly how much they’re earning with each purchase, especially with app tracking.
2. Flexibility: Cash back can be used to reduce your statement balance or cover other expenses.
3. Accessibility: Many cash back cards have low or no annual fees.

Limitations of cash back cards

1. Limited categories: Some cards offer the highest cash back percentages only in specific categories.
2. Earning caps: Many cards impose limits on the amount of cash back you can earn in certain categories.
3. Lack of travel potential: For those seeking discounts on airfare or seat upgrades, cash back cards may be less appealing.

How do mileage cards work?

Credit cards that earn miles or travel points are ideal for those who love to explore the world.

These cards allow you to earn miles that can be redeemed for airfare, hotel stays, car rentals, and other travel-related perks.

Certain cards offer mileage programs tied to specific airlines. Others let you transfer points to various loyalty programs, providing flexibility for personalized travel planning.

Benefits of mileage cards

1. Free travel: Accumulating miles can lead to free flights or significant discounts.
2. Premium experiences: Many cards offer access to airport lounges, priority boarding, and seat upgrades.
3. Partnerships: The ability to transfer points to different airlines or hotel programs increases the value of your miles.

Limitations of mileage cards

1. Complexity: Many cards have complicated rules for earning and redeeming miles, requiring you to read the fine print.
2. Limited availability: Finding award flights can be challenging, especially during peak travel seasons.
3. Additional costs: Mileage cards often have high annual fees and require minimum spending to unlock welcome bonuses.

How to choose between cash back and mileage cards

The choice between a cash back card and a mileage card largely depends on your lifestyle and financial goals.

Here are some questions to guide your decision:

1. Do you travel frequently?
   If yes, a mileage card might be a great fit. If not, a cash back card offers more practical everyday benefits.
2. What is your tolerance for fees?
   Mileage cards often have annual fees, while many cash back cards are free. Consider if the benefits outweigh the additional costs.
3. Do you prefer immediate or accumulated rewards?
   If you like seeing rewards quickly, cash back cards may be more appealing. However, if you prefer saving points for a significant future reward, mileage cards are ideal.
4. How much do you spend monthly on your card?
   For high spenders, mileage cards with lucrative sign-up bonuses and higher earning rates may provide more value. For modest spenders, a straightforward cash back card is an effective option.

Combine card types

Many people choose to combine both card types to maximize benefits.

You can use a cash back card for daily purchases and a mileage card for travel-related expenses, a strategy that lets you enjoy the best of both worlds.

Final words

Choosing between a cash back card and a mileage card comes down to personal preference and financial situation.

Evaluate your spending habits, financial goals, and priorities to make the right decision. Regardless of the card you choose, the most important thing is to pay your bills on time and avoid accumulating unnecessary debt.

Written by

Gabriel Gonçalves