Cashback vs. Travel Credit Cards: Which One is Right for You?

Check out the main differences and perks of each before making your choice!

Rewards credit cards come in all sorts of flavors! Some give you cash back, while others let you earn points or miles.

Each type has its own perks and downsides, so if you’re trying to figure out which one is right for you, it’s important to take a look at the main differences.

Cash Back Cards

If you’re looking for an easy way to earn rewards on your everyday spending, cash back cards are usually the way to go.

Basically, these cards give you a percentage of what you spend back in cash—usually somewhere between 1% and 5%, depending on where you’re spending.

Pros

• Simplicity: One of the best things about cash-back cards is how easy they are to understand. You don’t have to deal with complicated point systems or trying to remember how many points you have for a flight. You spend money, and a percentage comes back to you as cash. It’s super straightforward.
• Flexibility: Unlike travel rewards that can tie you down to specific airlines or hotels, cash can be used for whatever you want. The choice is all yours if you want to save up for something special, buy groceries or just want to treat yourself to a nice dinner.
• Immediate Value: These cards let you apply your rewards directly to your credit card balance pretty quickly, or you can request a check or direct deposit.

Cons

• Lower Potential Rewards: Cash-back cards are straightforward, but they might not be the best choice if you travel a lot. If you frequently fly or stay in hotels, you might find that the points or miles you earn from travel cards can lead to bigger rewards and some exclusive perks.
• Category Restrictions: Cash-back cards usually offer bonus rates for specific categories like groceries, gas, or dining out. This can be great if those categories fit your spending style, but if you don’t spend much in those bonus categories, you could miss out on higher rewards that travel or flexible rewards cards offer.
• Reward Caps: Certain cash-back cards have limits on how much you can earn in those bonus categories each quarter or year. Once you hit that cap, your earnings might drop back down to the standard rate.

Travel Rewards Credit Cards

Travel rewards credit cards are a fantastic way to earn points or miles for every dollar you spend.

You can redeem these rewards for flights, hotel stays, and all sorts of travel-related goodies. If you love to travel, these cards can be a real game-changer!

Pros

• Higher Rewards Potential: One of the biggest perks of travel rewards cards is the potential to rack up points especially for travel-related purchases. You might earn 3 to 5 points for every dollar spent on things like flights, hotels, or dining out while traveling.
• Sign-Up Bonuses: Imagine earning enough points just for signing up that you can snag a free flight or a couple of hotel nights! It’s a great way to kick-start your travel rewards journey.
• Additional Travel Perks: Travel rewards cards generally offer travel insurance, access to airport lounges, and no foreign transaction fees.

Cons

• Redemption Complexity: On the flip side, redeeming points and miles can sometimes feel like a puzzle. You might have to navigate specific airlines or travel portals to book your rewards, which can be a bit tricky.
• Limited Flexibility: The rewards you earn are primarily geared toward travel-related expenses, so if you don’t travel often, you might find yourself with points that aren’t as useful. It’s worth thinking about how often you travel and whether a travel rewards card fits your lifestyle.

Conclusion

In the end, the best choice really comes down to your lifestyle and what you’re hoping to achieve financially.

So, take a moment to think about your spending habits, how often you travel, and what kind of rewards you value most.

Written by

Everaldo Santiago