Travel Rewards or Cash Back: Which One's Right for You?

Choosing between a travel rewards card and a cash-back card comes down to where you spend your money and how you'd like to use your rewards. If you spend a lot on flights and hotels and want to use points to do the same, a travel rewards credit card will typically provide the most value. If your spending is less focused on travel and you want the option to redeem rewards for all purchases, you're probably better suited for a cash-back card. That said, there are a number of factors worth considering before you sign up for one or the other.

How to choose between the two

The best way to decide between any two credit cards (cash back, travel, etc.) is to ask yourself these questions:

Most cash-back cards offer a flat percentage back on all purchases. Some offer a tiered system where different spending categories — gas, retail, and groceries, for example — offer different percentages back. In either case, redeeming cash back is easy. Rewards are usually delivered in the form of a statement credit (or sometimes a check in the mail or deposit to your bank account), allowing cardholders to spend earnings however they'd like.

Travel cards are generally more complicated, with points that have different values depending on how and where you redeem them. Identifying the categories where the most points are earned, and where per-cent point redemption is highest, will help bring clarity to which card delivers the most value.

Earning vs. redeeming

Considering travel spending alone, a travel rewards card will usually give you the most points per dollar spent. That's to say, for every dollar spent on a flight, a travel card may earn two points, while a competing cash-back card may earn one and a half. But more points aren't necessarily better.

With travel cards, points are usually worthless when they aren't redeemed for travel. For example, if you have a travel card that earns two points per dollar spent on airfare, those points may be worth one cent each when redeemed for airfare. But if you redeem them for a statement credit — if the card allows it — points will usually be worth a lot less.

Find your card's rewards percentage

If a travel card earns two points per dollar on airfare purchases and points are worth one cent each when redeemed for Delta or United flights, for example, the card effectively earns 2% back. Assuming you frequent those airlines, that percentage may mean that card is a better choice than a cash-back card that only earns 1.5%. That said, if you prefer the freedom to use rewards however you'd like — and are willing to sacrifice .5% for it — the cash-back card may be better.

The rewards percentage is useful to compare several cards, but it usually won't provide a definitive answer on which you should pick. Compare all aspects — rewards, fees, perks — of possible credit cards to find which is best for you.

More information

Citizens Bank is committed to helping consumers bank better by providing solutions that are right for you. Our dedicated colleagues can provide a full assessment to find the right product to match your needs. To learn more, please call 1-888-333-5145, visit us online or Ask a Citizen at your nearest Citizens Bank Branch.

More Resources >