With hundreds of credit cards available and a ton of great rewards and signup promotions, how can you choose between cash back credit cards and travel rewards credit cards?
I’ve written about both the top cash back credit cards and the best travel rewards credit cards, and at the end of the day I love them both! But it’s not good practice to constantly sign up for credit cards (ideally no more than one every 90 days), so you really have to pick and choose which you want to sign up for.
I was faced with this dilemma recently when I had a really great travel rewards credit card offer come up that I wanted to take advantage of, yet there were also two really solid cash back credit cards that I was hoping to get as well. If you find yourself in this situation, what should you do?
Read on to find out what I decided to do as well as some tips if you find yourself debating between the two different types of cards.
Cash Back Rewards Credit Cards or Travel Rewards Credit Cards?
There are two cash back credit cards that I would like to get as soon as possible. They are the Fidelity® Rewards Visa Signature® Card (aka “the best cash back credit card you have never heard of“) and the Amazon Prime Rewards Visa Signature Card. The Fidelity card offers a flat 2% cash back on every purchase, which is the highest cash back rate you will find out there today. The Amazon card gives 5% cash back on Amazon so I feel like I’m losing 5% if I don’t have it. Both really solid cards I would use as my go-to / default cards.
I would have signed up for one of these cards except Delta Airlines was running an offer that was expiring soon (I’d share but the offer is expired as of this post going live). Delta is based where I am, in Minneapolis-St. Paul and I’ve been keeping my eye on their card for a while now to see if their offer would increase anytime soon. Well…it did. And the offer would essentially equal two free round-trip flights for my wife and I anywhere in the United States (Vegas here we come!).
Ultimately I decided to sign up for the Delta Airlines card. The reason I went with this offer over the other two cards was simple. First, we are almost certainly going to use the flights even if we don’t have it assigned to a specific trip. Second, it takes a while to sign up for the card and get the points, so there is a sense of urgency there. And lastly the offer was going to go away while the other two credit card offers are unlikely to go away anytime soon.
Know Your Goals
I don’t think that travel rewards credit cards are always better than cash back credit cards. Trust me, I would love to have that Fidelity card for everyday purchases. And I would immediately start saving money with the 5% Amazon cash back credit card. For me it was more about the offer going away and knowing that my wife and I were almost certainly going to book flights within the next year using the points.
As we pay down debt travel has been something we haven’t had to sacrifice because of credit card rewards, so you can see why it’s easy for me to choose a travel rewards credit card over a cash back card. If we are able to fly somewhere for free it makes travel much more affordable to us and much easier to justify given the fact that the money could be used to pay down debt.
If you don’t know whether you would use the travel rewards, the choice is an easy one. Cash back credit cards are easy, straightforward, and usually you get the same cash back rate forever. Travel rewards credit cards, on the other hand, take time and effort to keep track of and use.
Knowing your goal can help you pick which type of card you should open. While I know many people love to travel, many aren’t willing to put in the time and effort to plan how they will use the card, keep track of when they open it (and when they should close it by to avoid the annual fee), or create one more login and have one more card in their wallet.
At the end of the day it comes down to goals and what you value. If you value simplicity travel rewards might not be for you. If you are willing to pout in some effort to get free flights or hotels, travel rewards credit cards likely should be your focus (warning: it can be addicting once you get started!).
Know Your Card & Have a Plan
Understanding the cards you are signing up for is key. Cash back credit cards typically have no annual fee and are really straightforward. For example some cards has quarterly “bonus” categories where you can get 5% cash back. They change each quarter so you have to stay on top of them.
Travel rewards credit cards are more complicated as you need to understand what the annual fee is and decide before you open the card if your plan is to close it before that fee kicks in a year later. You also want to understand what the points can be used for and what it translates to. For example, if you get 60,000 “points” for opening a card and spending $3,000 within the first three months, what does that translate to? Two roundtrip flights in the United States? Or two roundtrip flights abroad? How do the flights fluctuate based on time of the year and when you book them? A lot to consider.
Planning ahead is key. Make sure you understand the card you are signing up for, what the reward/promotion is, and what your plan is for redeeming the rewards. I’m all about tracking things in spreadsheets so feel free to use my free credit card rewards tracking file.
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We lean heavily towards the travel rewards cards as we feel that they tend to provide the most bang for your buck when it comes to redemption. That being said, completely agreed that so much of it comes down to your goals. If you don’t like/want to travel much then a good cash back card can be a great tool to use.
I think this is true as well. I only have a cash rewards card right now, but it seems to me that my friends who have travel rewards cards never have to pay for their flights. Like, ever.
However, with 2 toddler boys, we don’t travel much right now, so the value of the travel rewards is lower for us.
Hopefully that will change in the future!
We’ve always opted for travel rewards over cash back, except for a brief stint with Amazon’s card. In my experience, it’s been the more financially lucrative option though that is constantly changing with varying offers. And I think it’d be easy to lose track of the cash back and not put it toward a certain goal, whereas we are conscious to use our travel rewards strategically to defray vacation costs.
Makes a lot of sense. There’s also an added value in the feeling of saving money on travel. When you get free (or partially comped) flights it makes travel feel even better.
I’d pick travel cards any day of the week. Think about it: say you got 55,000 points. You could cash that in for $550. Or, you could use it in for a one-way from the US to New Zealand, which would be worth about $900. Travel rewards are the better longterm use.
I agree, the best value is in travel rewards. But if you aren’t going to use those rewards then it makes sense to stick to cash back.
It definitely depends on your goals. If you don’t plan on traveling all that much than cash back is worth more to you. I’ve been debating that myself recently since we don’t travel as much with two little ones. Although I can save my miles/points, I don’t know if they will be devalued. It does seem that travel points tend to be worth more than just taking the cash though.
I agree. If you really want maximum value, travel is where you’ll get that. But if you can’t fit it into your schedule and you don’t end up using the points all that extra effort really isn’t worth it.
We have a cash rewards card because we have 2 toddler boys and just don’t travel that much right now. You’re so right that you need to know your goals before you start signing up for cards. Some of our friends have very glamorous travel rewards cards that are tempting sometimes. But if you aren’t going to use the rewards, what’s the point. You can always use cash!
Very true! There has definitely been cards like the United card that I’ve renewed not just once, but twice because I haven’t used all the rewards within a year. It works out as I shift all our Chase Points to the United rewards program, but not having a plan for travel credit cards can be costly over time.
Honestly I choose to have only one prepaid card for my travels but is interesting to know tha tis possible to have cas back from determinated cards if you travel a lot could be a good deal but in my case I’m ok with my prepaid card so I know the exact amount I have on it and no interests:D