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I’ve spent years studying credit card rewards, and I’ll be honest — there’s no one-size-fits-all answer to the cash back vs. points question.
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Some people swear by the flexibility of cold, hard cash. Others obsess (in a good way) over maximizing points and travel perks. Truth is, both can be incredibly valuable — if you know how to use them.
So let’s break down the perks of each, who they’re best for, and my personal hack to get the best of both worlds.
Why points can offer more value (if you play it right)
Points cards and reward programs can be a little complicated. But if you’re willing to learn the ropes, that extra effort can really pay off.
Higher reward multipliers for travel and dining
Points cards often offer 3x to 5x points per dollar on popular spending categories like travel, restaurants, or streaming services. Even at a modest redemption rate of $0.01 per point, that’s equivalent to a 3%-5% return. But it gets better…
Transfer partners can offer higher redemption value
Some rewards programs let you transfer your points to airline or hotel partners. And when you do, those points can be worth a lot more depending on the program.
For example, instead of getting $0.01 per point, you might get up to $0.03 or more when booking the right trip or snagging a promotion at the right time. It takes a little research, but the payoff can be huge.
Bigger welcome offers
Travel rewards cards often roll out welcome offers worth $500 to $1,000+ if you meet a spending requirement within a stated period of time. These promos change frequently, but they can fast-track your rewards earnings in a matter of months.
For a peek at the top offers available right now, check out our list of the top travel credit cards.
Premium perks and protections
Many points cards come with extra benefits that you typically don’t see with cash back counterparts. Things like:
- Airport lounge access
- Travel or lifestyle credits
- Trip cancellation and delay coverage
If you travel even a couple of times a year, these benefits can more than make up for a card’s annual fee.
Why cash back can be better
If you like things simple and predictable, cash back might be your jam. No worrying about transfer partners or point restrictions. Just spend and earn.
You can use it however you want
Cash back is the ultimate flexible reward. You can use it to pay down your balance, boost savings, or splurge on a treat for yourself. You’re in control of what you use the cash for.
My favorite is just getting a plain statement credit. It feels like a discount on stuff I already bought.
Easy ROI on everyday expenses
Some cash back cards have specific “categories” they reward more for. Like gas, groceries, or online shopping. The cool thing is these are a part of almost everybody’s regular budget.
Flat-rate cash back cards are super handy, too. One of my cards right now gives me a flat 2% on every purchase, no matter where I shop. I never have to stress about where or when to spend — I get a 2% discount on literally everything.
Complete peace of mind
Cash back cards require zero effort. The only thing you need to do is remember to redeem your cash back once in a while. Super easy.
In fact, they’re the perfect lazy money hack. You get cash back on stuff you were gonna buy anyway, without lifting a finger or playing the points game.
Personally, I use both — why not?
Here’s my setup: I use a travel rewards card for anytime I book trips or travel, as well as restaurant purchases. It has the highest reward points for these categories.
Then I keep a simple flat-rate cash back card for everything else. This gives me a baseline 2% back on all my spending.
Using just two cards is low effort and fits right into my routine.
I’m also lucky that part of my job is reviewing credit cards and keeping tabs on new offers. So every year my wife and I apply for a couple new credit cards to snag big welcome offers.
The bottom line
Both cash back and reward points have their advantages. The right pick for you depends on your lifestyle and how involved you want to be.
You also don’t have to choose one or the other. Start with a basic cash back card that fits your lifestyle, then layer in another if you want to boost your rewards game.
A simple two-card setup can take you surprisingly far.
Check out all our favorite rewards credit cards and see which ones fit your lifestyle.
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Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.Joel O’Leary has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
