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While there may not be a clear winner in the argument, understanding the benefits of each kind of card does help the choice-making a little bit simpler.
This article offers a concise overview of cash back and travel miles credit cards from various perspectives.
Cash Back vs. Travel Miles Card: The Main Differences
There are a couple of differences between travel and cash-back credit cards to consider before applying. Whether it's rewards structure, fees or flexibility, here are the main points to take into account:
- Reward Value
Both cash back and travel cards will earn you a specific amount of money as you make purchases with the cards, which is how you will earn your reward. Nevertheless, the prize varies based on the card kind.
With a cashback card, the reward is easy to guess because, as the name suggests, you earn cash as you spend. The earnings typically range from 2 to 5%, depending on the issuer or provider. Some cashback cards could be less or more than this.
So, a 5% cash back card will earn you 5 dollars when you make a purchase worth $100. Conversely, travel cards earn points or miles; unlike the cashback card, a little calculation is required to determine how much the points or miles are worth.
- Flexibility
With a cash back card, the money earned can be put toward anything, such as shopping, house, and other payments, or even setting aside money for a trip. Travel cards, however, are limited to airfare and additional travel-related costs.
Yes, travel cards can be used for anything more than that, but using them for travel is the only way to get the best value. As a result, when you don't have a travel itinerary, your trade-in points for hotel costs or your miles for ticket booking could be wasted.
- Perks
Aside from the value of the points, travel cards also afford their users certain upgrades beyond the card's value.
Travel cards also offer bonuses, including waiving the card's annual fee for the first year of usage. These perks and rewards are few with cashback cards.
- Research/calculation
If you are not one for calculation, then the travel card may have you regretting why you ignored your mathematics teacher. Some basic calculations are required to estimate how much the points or miles are worth and their value after redemption.
If a flight costs 50,000 miles, for example, using a calculator to find out how much this is and the cost if you were to pay with cash gives a good idea of whether it is a good deal.
- Value
Cash-back cards earn a fixed percentage. The points or miles earned by travel card users, and their value, depending on other factors.
The value of the points or miles, for example, depends on how it is redeemed. If redeemed for travel-related expenses, it gives the greatest value.
- Annual fee
The annual fee is a striking difference between travel and cashback cards. Travel cards are associated with this than cash back cards.
There is, however, no need to worry as the perks of the card pay for this.
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Cash Back Credit Cards: Pros and Cons
Pros | Cons |
|---|---|
Easy Cashback Estimation
| Encourage Spending |
Get Cash | Low Value |
No Annual Fee | |
Everyday Expenses | |
Credit Education |
- Easy Cashback Estimation
Although the earning rate of cash-back credit cards differs depending on the provider or issuer, this does not complicate the estimation of how much you earn per purchase.
For a 2% card, for example, a purchase worth $500 will earn $10
- Get Cash
Depending on your preference, the cash can be deposited into your bank account or sent as a check. Either way, you can choose to spend this on whatever you please.
- No Annual Fee
Many cashback cards don't require an annual fee. However, the best cash back cards usually do.
- Everyday Expenses
Cash back cards are suitable for everyday spending such as purchases made at the shopping mall, amongst others.
- Credit Education
You can get informative emails and alerts. There are also many different articles about credit on the Upgrade website.
- Encourage Spending
Cash back credit cards earn very little per purchase. This causes some users to make massive purchases, including what they do not need, to get more cash back.
- Low Value
In terms of value, if you use your points or miles you can get benefits that are worth much more than the amount you can get if you have a cashback card.
Travel Miles Credit Cards: Pros and Cons
Pros | Cons |
|---|---|
Exclusive Travel Perks | Limitations |
Transfer Your Miles | Usually Reqiure Annual Fee |
High Value Benefits
|
Not for Everyday Spending |
- Exclusive Travel Perks
Travel card users enjoy certain perks. For example, many hotel cards offer hotel room upgrading, while airline miles cards offer flying in first class with premium services.
When redeemed for travel-related expenses such as hotel lodging, miles and points offer more lucrative perks. Booking for Expensive last-minute flights, holidays, and weekend flights is a little easier for the travel card user than paying with cash.
- Transfer Your Miles
Miles and points are transferable for some types of travel cards.
This means you can pay for hotels or flights, and other services using the miles or points earned on your card with the business partners of the card provider
- High Value Benefits
Upgrades, lounge access, free nights on the best hotels, and flights are just part of the benefits you can get. They are worth hundreds of dollars, much more than you can get with cash back cards.
- Limitations
Points can only be used to pay for hotel accommodation owned by the card provider or its partner, even in the presence of a cheaper hotel. The points become worthless in locations where the provider's hotel is absent.
This dilemma also applies to miles on the travel credit card.
- Usually Reqiure Annual Fee
Being an additional fee, most people would prefer not to pay annual fees. Travel cards have a considerably high annual fee.
This can be entirely covered if you could spend the points or miles earned on the card. The higher the annual fee, the greater the perks the user can enjoy.
- Not for Everyday Spending
This type of card is mainly relevant for travelers. If you plan to use it as a your daily card, you may want to take a lot on cash back or point rewards card.
When May it Make Sense to Choose a Travel Card?
Frequent Traveler: if you enjoy traveling or you are someone who travels a lot for work or vacation, then you will benefit more from having a travel card than a cash back credit card. Regarding traveling, mainly flights, paying using miles earned on your travel credit card is much more accessible and affordable.
Plan a long or special trip: Special occasions such as flying for a honeymoon, family vacation, or marriage anniversary deserve special treatment. Travel card users' upgrades, such as flying in first class and premium first-class services, will make such a special moment merrier.
When May it Make Sense to Choose a Cash Back Card?
You Need a card for everyday purchases: Your lifestyle and speeding habits are central to determining the type of credit card best suits you. For individuals who spend a lot monthly on groceries, such as those with many mouths to feed, the cash back card is the most ideal card in this case.
You need it simple and easy: so when you want the ease of over-complication, the cash back card is really what you want. Cash back cards have a fixed percentage which will be clearly stated. This allows you to determine precisely how much you have earned on the card following every purchase without tedious calculations.
The value of the earnings does not fluctuate or depend on other factors such as miles and points. There are no calculations, effort, or maintenance required. Additionally, the cash back card is cheaper and more affordable.
Redeem Travel Rewards vs. Redeem Cash Back
One of the significant differences between travel and cash back cards is how the rewards earned on each card can be redeemed. Redeeming the reward is much more complicated with a travel card than with a cash back card.
First, there are calculations used to determine the earning rate and the value of the redeemed points or miles. Some travel blogs provide a list of the worth of the points or miles for the various brands and companies that offer them, along with a calculator.
Redeeming cash earned on a cash back card is relatively easy. The money can be used to purchase groceries, deposited in the designated bank account, or sent in as a check. You can then catch the check and spend the money on whatever pleases you.
The process is not as simple as a travel card. Luckily, the card provider's portal or that of its partners can convert the points or miles and allow you to spend the equivalent money on flight bookings, hotels, and others. For example, you can order flights to +50 destinations with the Chase ultimate rewards portal.
Cash Back vs. Travel Miles Card Fees
Unlike regular credit cards, fees are associated with cash back and travel cards. However, the fees can be covered by the money earned by spending or purchasing items with the cards.
Cash back cards are mostly not associated with annual fees. Annual fees vary for different travel cards. Travel cards with high annual fees have the most perks to cover this. For example, the CapitalOne VentureX annual fee is $395.
How Do Travel Points/Miles Change Between Issuers?
Following a purchase with a travel card, you can earn in miles or points, depending on the type of card. 1 mile or 1 point does not have a fixed value but varies between issuers. 1 mile or 1 point may be equivalent to 1 cent, less than a cent, or more.
Therefore, 10,000 points earned with one issuer may be worth only half of the 10,000 points with another.
Here are examples of values of 1 point and 1 mile for different card issuers
- Chase ultimate reward: $2
- United airline $1.3
- Marriott convoy $0.8
- Hyatt $1.7
- Citi, thankyou points, $ 1.7
- American Express $2
- Capital one venture miles $1.4
This information is provided by the card issuer or published on some travel blogs. The list shows that 10,000 points on a chase ultimate reward card is similar to Amex membership points value, but are not the same in value as 10,000 points on a united airline travel credit card.
Should I Get Cash Back or Miles Credit Card?
It depends on your personal preferences and habits. Cash back card are great for everyday spending and for those who are looking for a no-annual-fee card. Travel miles cards are great for travelers, and business use and in case you plan a long trip
To take full advantage of the points, miles, and cash earned on these cards, the decision must be made only after careful consideration of lifestyle and spending habits.
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