Cashback vs. Points Reward Credit Cards

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Cashback & Rewards Credit CardsWhen it comes to reward credit cards, there are two major flavors – cash back and points rewards (there’s also miles for travel cards but we put those in the points category). It can be difficult to figure out which one is better, cash back or points, and it depends a lot on your personality and the specific card.

Like everything else, there is no clear winner for everyone because each of our purchasing behavior is different. However, if you spend the time to look carefully, you can find one that works best for you.

Earning Rewards

This morning we looked at how to analyze credit card reward programs and the first step is to look at how you earn cashback or points. Key in the equation is whether the bonus categories, where you earn more than the standard “1%” on your spending, match your key areas of spending.

That “fit” is the first step. There’s no point getting a card that offers 5% cashback on office supplies if you buy very little in office supplies. There’s no point getting one on gasoline if you hardly drive or if the maximum cashback is capped at a really low amount. Once you’ve determined that, you can decide whether you prefer cash back or points.

Pros of Cash Back

There are several reasons I like cash back (why these are always high on my list of best credit cards):

  • Cash is king. Points are great and everything but get a check or statement credit is money directly into your pocket. You can devalue cash as you can with points because a dollar is a dollar.
  • You can buy your own rewards. If you really want something you find in a reward catalog, you can always buy it with the cash back. You can probably get a better deal by going through a vendor like
  • Reward catalogs are limited. You’re stuck buying whatever the reward catalog has in stock, but you can buy almost anything if you have the cash for it.

Pros of Reward Points

There are pros to reward cards as well:

  • Special bonus offers in the catalog. Discover Card offers double cashback if you convert your points into a gift card from some of their partners. Instead of 2,000 being worth a $20 gift certificate, it’s worth $40. This effectively doubles your cashback if you shop at those vendors.
  • Points let you “treat” yourself. When you get cash back, it’s a little harder to “treat” yourself to something because you’re getting it back in the form of cash. When you get points, you can have a little fun and get a gift card or a product since it “cost” you only points.
  • Many rewards cards have special access to exclusive events. Usually reward cards come with special offers you can’t buy easily, like access to concerts and other sporting events.

My personal preference is for cash back but I can see the value in reward points. A prime example is with my American Express card, where I earn 1% cash back on everything (and 5% on certain special categories). I can convert my points into Southwest Rapid Rewards voucher at a rate that makes each point worth far more than a penny. To find the best option, it comes down to your specifics.

What’s your preference and why?

(Photo: orphanjones)

{ 23 comments, please add your thoughts now! }

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23 Responses to “Cashback vs. Points Reward Credit Cards”

  1. Rob O. says:

    Cashback, all the way! Rewards points are, IMO, much like frequent flier miles – by the time you get past all the provisos & restrictions, you’re boxed into something that’s essentially unusable or worthless.

    We have 2 cashback-earning cards. Once the Citi Dividends Mastercard is maxed out on the amount that we can receive for the year, we switch over to the AmEx. We religiously pay off the balance each month regardless of which card we’re using.

    • There are also points cards that allow you to get credits toward your balance, which basically is the same as cashback. I have also used a few points bonuses where I get gift cards at a discount, which means I get a better return rate than if it were just cash (assuming I get a gift card to a business I frequent).

  2. cdiver says:

    Cash back for me. Points are worthless to me, unless you get thousands and thousands which might go to a plane ticket or hotel room. Why not book your cash vs. the points and earn some interest.

  3. Jim,

    “Points let you “treat” yourself.”

    Isn’t the other way to say that: Getting cash avoids using the points for useless stuff you don’t need but are tempted to get because its the only option you like in the reward catalogue?

    Plus, cash buys a broader variety of treats than catalogues or gift card retailers offer.

    That said, my corporate card options don’t offer cash back, so I pick gift cards from retailers where I would spend the money anyway: Home Depot (yay!), Bed Bath & Beyond (snore), Pottery Barn (do we really have to, honey?)

    • cubiclegeoff says:

      Depending on how you deal with the cash, you’re right. If it’s a statement credit, it’s hard to remember the amount for a ‘treat’.

  4. poscogrubb says:

    Cash is king. I generally dislike shopping; adding reward-catalog shopping and gift card computations to the mix of comparison shopping is not my idea of a good time. Give me the money.

    I used to diligently earn and use JetBlue AMEX points for flights, but then I realized that usually the cash value of the tickets that I redeemed my points for made the reward worth less than 1% of my original purchases. So, not worth the trouble.

    The best situation is when someone else (i.e. Mom) uses their points to give you a round-trip vacation to home.

    • Cash definitely is king and it’s tough to find a card out there where points are better than money. The one thing that I don’t like with points is that they make them seem worth more than they actually are. You will see cards with “10,000 free points” that make it sound much better than “$100 dollars”.

  5. I always go for cash. Your needs can always change rendering certain points useless. Cash can always be converted to something useful.


  6. daenyll says:

    cash back is definitely the way to go, especially in the stage of life where you have debt that needs repaid. I’d much rather get a credit on a card that I use for essentials and keep MY money in the bank/investments where it makes me money that I can put towards a goal rather than go to something that I really don’t need or could find cheaper if I shopped elsewhere. And cash back is much more transparent than any point rewards. If I know I get 1% cash back I don’t have to keep double checking the “value” of my points in real spending potential.

  7. Big Spender says:

    Got to go for the cash. If you look at the rewards catalogs closely (Marriott Rewards is one I always peruse) you’ll see that the values are always inflated, forcing you to burn many more points than the cash equivalent of buying the items in stores. Even gift cards lead you to get things you don’t really need.

    Take the cash rewards and use the cheddar to pay off bills.

    • Not if those gift cards are to places that you normally shop/eat. I try to get gift cards for some of my favorite restaurants. We then sometimes get to eat for “free”. I know the cash would have been just as good, but a lot of the time, the gift cards are actually at a discount (sometimes earning another 1% or so).

  8. I am with you – I am personally a huge fan of cash back cards as opposed to points cards. There are certainly some very decent points cards and if I were someone that flew a lot then I might use an airline points card but since I rarely travel then cash back all the way for me!

  9. cubiclegeoff says:

    I prefer cash back. The only time I consider a points card is if I get free miles for applying, which I will consider, keep the miles, then cancel the card (not great for the credit score, but rarely a dent worth caring about).

    I just take all the cash we get and put it in a separate savings account that is used for travel and such. That way we get the travel without dealing with point restrictions. Also, if I want miles for my purchases, I try to shop online (or use restaurants in the dining program) through the mileage program so I get cash back on the card plus mileage, the best of both worlds.

    • Shirley says:

      I use Discover and used to go for the points when they offered a $40 certificate for $20 worth of points at Staples. I was buying a lot of computer peripherals at that time and it worked out great because the balance of the purchases also then went on my Staples Reward total for more $ off and on Discover too!

      When Staples dropped the $40 to $25 I started applying cashback credits to my bill. It was fun while it lasted. 😉

  10. otipoby says:

    Several years ago, I decided to go with a Miles card that was offering 1.2 miles / $. After several name changes, the rate went to the normal 1 mile / $. Also, it took forever to save enough for a vacation for the family. That locked me into this card for a long time. Since then, I have moved to the Citi Freedom and love the cashback. I get more (with the monthly categories) and more often.

  11. zapeta says:

    I’m also in the camp that prefers cash back. I really just prefer not to hassle with figuring out what value I’m getting for my points. Its much easier just to take the cash.

  12. Shirley says:

    Points would only have me going and buying something else. I like the cash back!

  13. eric says:

    Cash is straightforward but points can be more valuable if you’re willing to research it. I use a combo of both.

  14. Neil says:

    Hi, I don’t know if this would be the best place to ask this but I was wondering if anyone had suggestions for credit cards with good sign-up bonuses and/or good cashback/reward programs? In particular, I am about to get married in a few months and my fiance and I are about to make some fairly large (for our standards) purchases over the next 2-3 months (roughly $15,000 worth). We really don’t care about the interest rates (because we have all the money we need in the bank and plan to pay off the card right away) so basically we would just be using the card strickly for reward/cash back purposes. Also, we have no preference for travel vs. cashback vs. other rewards, just whatever would be the best deal in the end. Thanks in advance for any suggestions.

  15. Michael says:

    Charles Schwab 2% cash back rewards and cashed into my account every month (no minimum).

  16. saveall says:

    I am not sure about points that I can earn by using cash back credit card. Does cash back credit cards do not give point? or i can get points amount I spend except amount of cash back I get?
    How can I check my credit points?

  17. saveall says:

    I am not sure about points that I can earn by using cash back credit card. Does cash back credit cards do not give point? or i can get points amount I spend except amount of cash back I get?
    How can I check my credit points?

    And How can I calculate credit points and are there specific website that I can see my credit points?

  18. CEO says:


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