Facebook Twitter Pinterest LinkedIn Email

ADVERTISER DISCLOSURE: The Frugal Tourist is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more. Additionally, the content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired.

Choosing a rewards credit card is like choosing between two warring camps: Cashback or Travel Rewards?

Do you ever wonder what the best credit card to use is? Some consumers tend to be cashback fanatics, and others like to travel with points.

The good news – both have their incredible benefits. Cashback is fundamentally flexible and straightforward to use. You can use cash anywhere at any time.

On the other hand, points or miles may have a more excellent reward value, but it is not as versatile as cash.

Travel rewards require the consumer to wait for a future time when they can redeem travel points.

Thankfully, some credit cards nowadays enable you to exchange points for cash or travel at the same value.

However, if you need to choose between the two, it will come down to personal preference and how much legwork you’re willing to invest.

Cashback or Travel Rewards?

We have heard a lot about cashback credit cards and travel points in recent years. As cashback and travel rewards credit cards are becoming more common, learning the pros and cons is essential.

This article will discuss how cashback credit cards work, what they offer consumers regarding rewards, and why some people prefer cash back over travel-point rewards.

Conversely, I will also discuss the benefits of travel credit cards and why they can be incredibly valuable to certain types of consumers.

Hopefully, this article provides you with enough information to make an educated decision when deciding between these two types of credit cards!

Let’s look at cashback credit cards and travel rewards credit cards and see if we can tell the winner!

What are Cash Back Credit Cards?

Cash-Back Credit Cards offer either cash or a statement credit as a reward for using the card.

Sometimes, consumers can also exchange those rewards for gift cards or a check. Some credit cards even offer the ability to deposit your cash rewards to your banks directly.

Cashback credit cards with super-low introductory interest rates are also popular, making them more alluring.

In short, cash-back cards are the product of choice by those who want to keep things simple when dealing with their rewards.

How Do Cash Back Credit Cards Work?

I would like to use an example to illustrate how cashback credit cards work.

A customer who spends $1,000 per month on a cashback credit card may earn anything from 1% to 5 percent cashback, depending on the type of credit card they use.

That will ultimately result in significant savings – about $10 to $50 each month or around $120 and $600 annually.

What are Travel Rewards Credit Cards?

Travel credit cards reward the user with travel miles or points for making purchases on the card.

A client who spends $1,000 per month on a credit card might earn 1 mile per dollar or more when using travel credit cards.

It’s also not unusual for travel credit cards to give out 5 miles per dollar, depending on the merchant where the credit card is used.

For example, certain travel rewards credit cards like the Chase Sapphire Preferred® Credit Card earn three travel points per dollar at restaurants.

I got this flight for free. Thanks to my travel rewards credit card.

Two Types of Travel Rewards Credit Cards

Bank Travel Cards

Bank travel credit cards may be the perfect fit for you if you want to earn flexible miles and points that can be transferred to various travel partners or be redeemed at a travel portal to have access to multiple trip options.

For example, Chase Bank Travel Credit Cards generate Chase Ultimate Rewards Points that consumers can transfer to travel partners such as United Airlines, Hyatt, Flying Blue, etc.

Chase also has their own travel portal where you can exchange these points for car rentals, hotels, vacation rentals, and flights.

Likewise, American Express Travel Cards generate American Express Membership Rewards Points that consumers can transfer to travel partners or redeem at Amextravel.com.

Co-Branded Cards

These are the credit cards that are affiliated with a particular airline or hotel.

While consumers may use bank travel credit cards in a variety of ways, co-branded cards generally only allow you to use them for rewards within one loyalty program.

For example, if your co-branded credit card is linked with United Airlines, then all the points accumulated from spending on that credit card become United Airlines miles.

Having co-branded credit cards normally comes with added perks and benefits while you are an active cardmember.

Some of these benefits include getting complimentary loyalty membership status, free nights, lounge access, priority boarding, and baggage fee waivers.

Unfortunately, most co-branded travel credit cards charge an annual fee. Despite this, the many layers of benefits that these cards usually have may help to offset the costs efficiently. These cards also rarely impose foreign transaction fees.

Without a doubt, these benefits outweigh the yearly expenses and make the card worthwhile.

The World of Hyatt Credit Card, for example, has a $95 annual fee but includes:

Discoverist status (2 PM late check out)
A free night up to a specific category each year (value: $100+)
Five elite nights towards status

Which is Better? Cash Back Cards or Travel Credit Cards?

When deciding on a card, keep in mind how you’ll use it.

Is travel a top priority? Or is having access to extra cash is something that you value more?

While I do not advocate keeping a balance on credit cards since I abhor paying high-interest rates, I am aware that others may wish to keep a balance. Therefore, this consideration must also be factored into the application process.

Whatever your preferences are, there is always a credit card on offer with a high rewards rate and alternative uses that can suit any lifestyle.

Which One Do I Choose?

A travel card is an excellent choice if you go on trips frequently and take full advantage of the travel perks. However, a cashback card is usually less expensive and comes with more versatile rewards.

While most consumers revere cash, travel rewards credit cards might compete with cashback cards since many travel credit cards can double up as cashback cards, too, making them more substantially flexible.

In fact, it has become an increasingly common practice nowadays for banks to offer consumers the option to convert their travel credit card rewards to cash.

So you do not only get the opportunity to redeem your miles for flights, hotels, or rental cars, you can also opt to withdraw the points as cash.

In contrast, consumers can only get money from cashback credit cards or a derivative of it such as gift cards, statement credits, and the like.

Therefore, while travel credit cards provide the same monetary rewards as a typical cashback card, a cashback card does not have the same flexibility unless you use the cash to pay for travel.

Indeed, cashback credit cards, at face value, may sound like the best way to go, especially if you do not like to travel at all.

But if you are an avid traveler or have plans of traveling soon, then applying for travel rewards credit cards is a more flexible option.

Nevertheless, the sky is the limit with travel rewards credit cards as any bucket-list destination suddenly becomes attainable with travel miles and points.

TRAVEL-MILES-AND-POINTS — Join Our Free Travel Miles & Points Facebook Group

When is Cash Back Credit Cards Recommended?

Cash-back cards are recommended for those who want to cash in as soon as possible after making a purchase. They are beneficial to those who see cash as king regardless of the circumstances.

They’re suitable for people who care more about their financial situation than anything else. These individuals generally prioritize investment and accumulation of wealth over travel. If you like having money in your pocket, cashback credit cards are for you.

In most cases, cashback credit cards frequently provide these incentives as a statement credit, so you save money on your end-of-billing cycle. This advantage is particularly gratifying to most individuals, which is why most people gravitate towards cashback credit cards.

Moreover, some cashback cards allow you to collect your money back immediately after each transaction rather than waiting for a later date to redeem your points if you use travel rewards credit cards.

Hence, cashback credit cards are superior in comparative terms because they allow you to get your money now rather than putting all of your eggs in an unpredictable future bucket.

A Consideration: Another Pandemic

It should go without saying that the epidemic has taught us one crucial lesson: that the travel industry is always at the mercy of an unseen microscopic foe.

The next pandemic may not be predictable, and it’s impossible to know when the next outbreak will strike. If you don’t want your credit card rewards jeopardized by airline delays or cancellations, then cashback credit cards may be the choice that is suitable for you.

Cashback credit cards are popular among consumers who believe that they are more flexible than travel rewards credit cards.

For one, consumers can essentially use cashback for travel at any time. Consumers can also set cash aside to serve other purposes such as investing the money in retirement or putting them in an emergency fund.

In reality, cashback credit card users will argue that investing in a retirement plan is far more advantageous since it compounds over time rather than earning miles or points that are inherently vulnerable to devaluation, inflation, and lockdowns as a result of viral epidemics.

When is Travel Rewards Credit Cards Recommended?

For others, points and miles are more versatile than cash. Travel reward cards allow you to earn points that you can use towards free airline tickets, hotel stays, and car rentals.

In reality, consumers can use travel miles for many things unrelated to traveling, such as statement credits, gift cards, and so on. Cash credit cards can only be withdrawn as cash.

If you spend a lot of money on travel or embark on multiple trips yearly, then the card can be worth it.

Travel Rewards May Not Be As Flexible

It is crucial to point out that consumers can use cashback at any location that accepts cash or credit card payments, but you can’t redeem travel miles until you’ve amassed a sufficient number of points.

Because airfares, hotels, and car rentals come at different prices, the number of miles required to access them will depend on demand, season, and other factors.

The Best Personal Cashback Credit Cards

A few personal cashback credit cards are better than the rest. My top-rated personal cashback credit cards are as follows:

The Chase Freedom Flex® Credit Card

Intro Offer: Earn a $200 Bonus after you spend $500 on purchases in your first 3 months from account opening.

5% Cashback on grocery store purchases (not including Target® or Walmart® purchases) on up to $12,000 spent in the first year.

5% Cashback on up to $1,500 in combined purchases in bonus categories each quarter you activate. Enjoy new 5% categories each quarter!

5% Cashback on travel purchased through Chase Ultimate Rewards®.

3% Cash back on dining at restaurants, including takeout and eligible delivery services and on drugstore purchases

1% on all other purchases.

Learn more about the Chase Freedom Flex here

The Chase Freedom Unlimited® Credit Card

Intro Offer: Earn a $200 Bonus after you spend $500 on purchases in your first 3 months from account opening.

5% Cashback on grocery store purchases (not including Target® or Walmart® purchases) on up to $12,000 spent in the first year.

5% on travel purchased through Chase Ultimate Rewards®.

3% Cashback on dining at restaurants, including takeout and eligible delivery services and on drugstore purchases.

Unlimited 1.5% cash back on all other purchases.

Learn more about the Chase Freedom Unlimited here

When you combine the points you receive from the Chase Freedom Flex & Chase Freedom Unlimited with any of Chase’s premium cards, such as the Chase Sapphire Preferred, then you can convert those cashback rewards into travel miles and points. The related post below will walk you through the process of converting your Chase cashback points into travel miles.

Convert Cash back points to Chase travel points

The Blue Cash Everyday® Card from American Express

Intro Offer: Earn a $200 statement credit after you spend $2,000 in purchases on your new Card within the first 6 months.
3% Cash Back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%)

2% Cash Back at U.S. gas stations and at select U.S. department stores.

1% Cash Back on other purchases.

Cash back is received in the form of Reward Dollars that can be easily redeemed for statement credits.
No Annual Fee

Terms Apply
Learn more about the Blue Cash Everyday Card here

The Blue Cash Preferred® Card from American Express

Intro Offer: Earn a $300 statement credit after you spend $3,000 in purchases on your new Card within the first 6 months.

6% Cash Back on select U.S. streaming subscriptions.

3% Cash Back on transit including taxis/rideshare, parking, tolls, trains, buses, and more

3% Cash Back at U.S. gas stations

1% Cash Back on other purchases

$0 intro annual fee for the first year, then $95
Terms Apply

Learn more about the Blue Cash Preferred Card here

The Citi Custom Cash℠ Card

Intro Offer: Earn $200 in cash back after you spend $750 on purchases in the first 3 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® Points, which can be redeemed for $200 cash back.
Earns 5% cash back on purchases in your top eligible spend category each billing cycle, up to the first $500 spent, 1% cash back after that.

Earn unlimited 1% cash back on all other purchases.

No Annual Fee

Learn more about the The Citi Custom Cash℠ Card here.

The Citi® Double Cash Card

Intro Offer: 0% intro for 18 months on Balance Transfers

Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases

Learn more about the The Citi Double Cash Card here.

Discover It® Cash Back Credit Card

Earns 5% cashback on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations, and when you pay using PayPal, up to the quarterly maximum when you activate. Activation is required.

Earns unlimited 1% cashback on all other purchases – automatically.

Discover will automatically match all the cash back you’ve earned at the end of your first year. There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match. For example, if you earned $250 cash back, Discover will match that with another $250.

Redeem cashback in any amount, any time and cash rewards never expire.

No annual fee.

The Best Business Cashback Credit Cards

As a small business owner, I own several excellent small business credit cards with layers of benefits that I maximize year after year.

Some of my recommended small business cash back credit cards can also be converted to travel rewards, making them exponentially more lucrative.

My top three favorite business cashback credit cards are listed below.

The Chase Ink Business Cash Credit Card

No annual fee

Earns 5% cashback on the first $25,000 spent in combined purchases at office supply stores and on internet, cable, and phone services per cardmember year.

Earns 2% cashback on the first $25,000 spent in combined purchases at gas stations and restaurants within the cardmember year.

It earns unlimited 1% cashback on all other card purchases.

Learn more about the The Chase Business Ink Cash here.

The Chase Ink Business Unlimited Credit Card

Offers 1.5% cashback on all purchases

No annual fee.

Learn more about the The Chase Business Ink Unlimited here.

When you combine the points you receive from the Chase Ink Business Cash & Chase Ink Business Unlimited with any of Chase’s premium cards, such as the Chase Sapphire Preferred, then you can convert those cashback rewards into travel miles and points. This blog post walks you through the process of converting your Chase cashback points into travel miles.

The Blue Business Plus® Credit Card From American Express

Earns 2% cashback on all eligible purchases on up to $50,000 per calendar year, then 1% cashback on all eligible purchases after spending $50,000 per calendar year.

No annual fee.

Intro Offer: Earn 15,000 Membership Rewards® Points after you spend $3,000 in eligible purchases on the Card within your first 3 months of Card Membership. Terms apply.

Learn more about the Blue Business Plus Credit Card here.

The Best Personal Travel Credit Cards

A few of my favorite travel credit cards are as follows:

The Chase Sapphire Preferred® Credit Card

Intro Offer: Earn 60,000 Chase Ultimate Rewards points after spending $4,000 within 3 months.

Points can be redeemed for cash back or travel. Learn more about the Chase Sapphire Preferred here.

Earns 3X points on dining, select streaming services, and online grocery purchases (excluding Walmart, Target, and wholesale clubs).

Earns 5X points on travel through Chase Ultimate Rewards, 2X points on other travel; 1X points on other purchases.

Cardmembers can transfer points to various transfer partners such as United, Southwest, Jetblue, Hyatt, Marriott, etc.

Annual Fee: $95

Learn more about this card The Chase Sapphire Reserve here.

The Platinum Card® from American Express

Intro Offer: Earn 100,000 Membership Rewards® Points after you spend $6,000 on purchases on the Card in your first 6 months of Card Membership.

Earns 10x points on eligible purchases on the Card at restaurants worldwide and when you Shop Small in the U.S., on up to $25,000 in combined purchases, during your first 6 months of Card Membership.

Earns bonus points when you use the card to book travel at American Express travel.

Terms Apply.

Learn more about this card The Platinum Card here.

American Express® Gold Card

Intro Offer: Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months.

Earns 4X on groceries and restaurants, making this a robust travel rewards credit card. It comes with a $250 annual fee.

Terms Apply.

Learn more about this card The Gold Card here.

Citi Premier® Card

Intro Offer: Earn 60,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening.

Earns 3x at groceries, restaurants, gas, flights, and hotels.

Annual Fee: $95

Learn more about this card the Citi Premier here.

The Best Business Travel Credit Cards

The Chase Ink Business Preferred® Credit Card

Intro Offer: Earn 100,000 Chase Ultimate Rewards Points after you spend $15,000 on purchases in the first 3 months from account opening.

Earns 3X points on the first $150,000 spent on travel and select business categories each account anniversary year plus 1X points on all other purchases.

Learn more about the Ink Business Preferred here.

American Express® Business Gold Card

Intro Offer: Earn 70,000 Membership Rewards® points after you spend $10,000 on eligible purchases with the Business Gold Card within the first 3 months of Card Membership.

Earns 4X points on the two select categories where your business spent the most each month.

Terms Apply.

Learn more about the American Express Business Gold here.

Final Thoughts

As you can see, it isn’t easy to compare these two cards because cashback credit cards and travel points have different benefits depending on how they are used.

In order to choose between cashback credit cards or travel points, you have to take a look at your spending habits and determine whether cashback or travel rewards will be most beneficial for you as a consumer.

In the end, cashback credit cards and travel rewards credit cards are both good options under different circumstances.

A travel rewards card is the best course of action if you spend a lot on travel or want some level of flexibility with your points given that some travel miles can now be converted to cash.

Conversely, if you don’t want to deal with the uncertainly of travel rewards, then cashback credit cards are the better option.

The lesson to take away is to figure out what kind of consumer you are before deciding between cashback cards or travel rewards credit cards so that you may discover the best fit for your lifestyle.

Of course, you can also combine the benefits of both worlds by using credit cards that offer rewards that convert into both cash and travel rewards.

If all this sounds overwhelming or if there’s anything in particular about these two types of cards that we haven’t covered, please let us know!

We would be happy to answer any questions or provide more information for free. We also answer questions on our Free Travel Miles and Points Facebook Group. Feel free to join us there.

EDITORIAL DISCLOSURE – Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, hotel, airline, or other entity. The content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.