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If you like to keep your life (and your money) as simple as possible, you may only want to open, or at least carry, one good rewards credit card. When it’s time to upgrade your card, sooner or later you’re going to have to decide between a cash back rewards credit card or a travel credit card.
If both cash back and travel rewards credit cards deliver valuable benefits that quadruple your freedom and buying power, how do you choose?
Is cash back or travel rewards better when it comes to rewards credit cards?
If you think of your credit cards as tools in a tool belt, you don’t want to end up with a Phillips-head screwdriver when you need a flat-head.
While there’s a good case to be made to carry both kinds of cards, I certainly don’t blame you if you want to go the simple one-card route.
So, you want to know whether to get a cash back vs. travel rewards credit card? Here, we’ll help you decide.
Are Cash Back Rewards Worth It?
In my opinion, using a cash back credit card when you buy something is better than not earning cash back.
The caveat, of course, is that you must be disciplined enough to only buy what you can afford and always pay your credit card balance in-full at the end of the month. If you can’t do that, then no amount of rewards is worth the stress of digging yourself into credit card debt.
Credit card rewards are still a somewhat new phenomenon. Credit cards didn’t become common until the 1980s. Back then, most people still used credit cards to pay for purchases over time. While business-people used charge cards to put expenses on the company, individuals didn’t typically use a credit card unless they couldn’t pay cash. As someone just young enough to be considered a Millennial, I can clearly remember how, in the 1990s, there was still a bit of a stigma to answering the question “cash or credit?” with “credit”. (Remember, debit cards weren’t a thing yet, so if you were swiping a card, it was a credit card.)
By the turn of the millennium, however, credit card companies were scrambling to compete for the best customers. Alongside 0% APR promotions, they also began to offer customers rewards. In this days, most credit cards rewarded users with points that could be redeemed for actual items in a catalog of rewards. If the card let you redeem the points for cash at all, it wasn’t as good of a deal as, say, redeeming them for a Bose Speaker, which I did. Incidentally, there was one credit card that aggressively advertised that it rewarded customers with cold, hard cash back: Discover Card. Although Discover’s cash back offers doesn’t seem that unique today, it was at the time. The downside was that Discover wasn’t accepted in nearly as many places as Visa and Mastercard. (Today, Discover is more widely accepted than American Express, and can be used at most, if not all, places that accept credit cards at all.)
Compared to 20 years ago, consumers have an abundance of choices in credit card rewards. In my opinion, they’re absolutely worth pursuing. If you don’t, you’re basically leaving money on the table!
Profile of a Cash Back Rewards Card User
OK, so I’m going to attempt to paint a portrait of your “typical” cash-back card user. This, obviously, isn’t scientific, but it should give you an idea whether you’re more a cash back type or a travel rewards type.
As a cash back credit card customer, you value products that are simple and straightforward. You don’t want to have to remember to use a restaurant and dining credit card at diner and another at the gas pump. You just want to swipe, go, and collect your rewards.
Likewise, you don’t want to read a dozen blog posts to figure out how to redeem your rewards at the best rate. You just want to get a fair rate — the same rate as everyone else. Perhaps, you don’t even want to think about redeeming your rewards at all — you just want it to happen.
Cash back cardholders can redeem rewards as a credit on your statement, or as a direct deposit directly into your checking account. Some cards will even make this automatics when you reach a certain threshold.
Most cash back cards have a minimum rewards threshold, meaning you must wait until you accrue a certain amount; usually at least $25, to redeem your money.
But some cards, like the Capital One Quicksilver Cash Rewards Credit Card, don’t have a minimum redemption threshold. This gives you the ultimate power to allow your cash rewards to flow back into your life like water, putting consistent cash back into your pocket.
You believe you shouldn’t have to pay an annual fee to use a credit card. Or, perhaps you live a lifestyle that doesn’t justify paying a fee to get more rewards — you just don’t spend that much!
Finally, perhaps you like the idea of finding a credit card with a handsome welcome bonus, like a 0% intro APR or even cash bonuses of $150 or more when you spend a minimum amount in your first three months.
Are Travel Rewards Worth It?
Travel rewards credit cards can be absolutely worth it if you’re a frequent vacationer, run a small business requiring lots of out-of-town conferences, or have friends and family in far-off locations.
Unlike cash back credit cards, which reward any amount of spending in a predictable way, some travel rewards credit card can be more or less rewarding, depending on how you use them. Your mileage may vary.
Yes, there are flat-rate travel rewards cards like the Capital One Venture Rewards Credit Card, which allow you to accrue points or miles and use them like cash toward a travel reservation with any airline or hotel. But there are also airline credit cards which come with perks specific to that airline, and the Chase Sapphire Cards which have more complicated rules for both earning and redeeming rewards.
For consumers willing to learn the rules of each card and “play the game”, these kinds of travel rewards cards can offer richer rewards than a straight-up cash back card. Ultimately, the choice is yours.
Profile of a Travel Rewards Card User
Now, let’s outline the perfect candidate for a travel rewards credit card user to help you decide if this is the right type of credit card reward for your wallet!
As a travel rewards credit card user, you like the idea that you’re saving your credit card rewards for something special, not just crediting them back to your statement every time the balance hits $25. You have places you want to go, and you like the idea of traveling for “free” — or at least at a discount.
Perhaps you travel quite a bit already, either for business or pleasure, and are able to take advantage of certain perks typically reserved for travel rewards cards like priority boarding, airport lounge access, rental car insurance, lost baggage assistance, or credits towards TSA PreCheck or Global Entry fees.
As far as your spending goes, you have an income that supports a lifestyle that includes dining out and traveling — categories that many travel rewards cards reward at a higher rate.
As a travel rewards card user, you don’t mind carrying more than one credit card and learning to use the one that will net you the most rewards for your purchases. In fact, you kind of enjoy it!
Most importantly, you’re willing to pay an annual fee for one or more of your credit cards because you appreciate that you’re receiving a lot more in value from the rewards and benefits of the card than you’re paying in annual fees.
How to Choose Between Cash Back and Travel Rewards
There aren’t many bad rewards credit cards. Simply, it’s all about finding the right type of reward card for the things you already buy and the way you already live your life.
If you are a frequent traveler who hates eating out, it won’t make sense for you to have a cash back rewards card that earns you triple points on restaurants. Instead, you should get a card with bonus points on airfare that offers an annual airline stipend for business-class seating. Now we’re talking.
So now that you know the right things to think about when deciding between cash back vs. travel rewards credit cards, you are well-equipped to ask yourself which one is better for your lifestyle.
Good luck and happy spending.