Points vs Cash Back vs Miles: What Is the Difference?
Making heads or tails of credit card rewards—cash back, points, and miles—does not have to be challenging. Provided that you know where your money often goes (in terms of expenses), with a few tips from this article, you will definitely find the best credit cards with the right rewards for you. Read on to identify them, noting their respective pros and cons. Now is the time to get the most important information you need to start earning bonuses on your payments.
The Right Way to Choose Between Cash Back, Points, and Miles
To make the right choice of a rewards credit card for your financial happiness, you need to know the difference between cash back, miles, and points. Meanwhile, it is worth mentioning that not every credit card comes with such rewards. Nevertheless, it might interest you to learn about 0% APR credit cards, low-interest credit cards, virtual credit cards, small business credit cards, and those that are easy to get with poor credit.
Understanding cash back rewards
Cash-back credit cards offer rewards to their users in the form of a percentage of money spent that is later returned to them. The “cash back” is usually in respect of purchases that they have made from one or more merchants or stores partnering with the credit card issuer, bank, neobank, or fintech company.
For example, if you use a credit card that offers 2% cash back on your purchases at a specific grocery store for a week and spend €300 in total, your account will be credited with €6 at the end of the period. However, while a cash-back reward is always a percentage refund of the cost, it does not often work in the way described. Returned funds are not always automatically credited to your account. Therefore, you should read the terms and conditions of your credit card to know how your cash-back reward works and how to redeem it.
Understanding points and miles rewards
Payment cards that come with rewards in the form of points and miles are typically travel credit cards. They exist in various types, including those for hotels and airlines. So, instead of getting cash back for your expenses made with the card, you earn points and miles, which can be redeemed for your next trip.
With a travel credit card, you may earn miles or points based on the cost of your flight or how far you travel. But that depends on the rules of the airline. Regardless, you should expect to earn a certain number of points or miles for each dollar spent or mile flown. For example, to earn 50,000 American Airlines miles, you should expect to have spent about US$750. But if your credit card rewards you with points, then about 50,000 points can be worth US$535, which you may spend on travel or shopping.
Cash back vs points vs miles credit cards: which should you choose?
The type of rewards credit card to choose depends on your lifestyle and spending habits. It begins with having a good understanding of your cash flow. You need to know not just the amount you spend regularly but also the items you spend it on. A simple and reliable way to keep track of your income and expenses is to use any of the best tools for cash flow management or get a personal budgeting app.
If you do not travel often but shop frequently, we recommend that you apply for a credit card that comes with cash back. In that way, you can get flexible redemption options alongside instant gratification as you see a percentage of your shopping costs come back to your account. But if you are a frequent traveller, for example, a digital nomad, then you should get a travel credit card that comes with points or miles as rewards.
Best Cash Back Rewards Credit Cards
We have been telling you about credit cards that give rewards such as cashback, miles, and points for your expenses, but we have not given you a name or brand to try yet. Without further ado, below are our top picks for the best credit cards for cash-back rewards. They are excellent choices for consumers who shop frequently.
1. Capital One SavorOne Cash Rewards Credit Card
It is no mistake to say that the current leader in the business of providing a variety of high-quality credit cards is Capital One. This neobank issues credit cards with rewards for almost all kinds of expenses to meet the payment needs of millions of people.
In terms of cash-back rewards, one of the best credit cards to use is the SavorOne Cash Rewards Credit Card from Capital One. If you have an excellent credit score, you can apply for this card and start enjoying unlimited rewards, which range from 3% cash back to a one-time US$200 cash bonus.
Key features:
- Unlimited rewards, which include 3% cash back on selected everyday expenses that cover grocery stores, popular streaming services, entertainment, and dining.
- Earn unlimited 1% cash back on every other purchase.
- New card members earn a US$200 cash bonus when they spend US$500 on purchases within three months of opening their accounts.
- Offers a 0% introductory purchase APR for 15 months.
- 10% cash back on Uber and Uber Eats purchases.
- Automatic travel accident insurance for fares purchased using a credit card.
- Access to Capital One Shopping coupon codes.
- Cardholders can use PayPal to redeem their rewards.
- Rewards can be used to pay for purchases on Amazon.com.
- Prompt account notifications via text, email, and phone.
2. Capital One Quicksilver Cash Rewards Credit Card
The Quicksilver Cash Rewards Credit Card from Capital One is another great card for regular shoppers with excellent credit scores. It has features similar to the SavorOne Card, but with lower levels of rewards.
Key features:
- 1.5% cash back on daily expenses.
- New card members earn a US$200 cash bonus upon spending US$500 on purchases within three months of opening their accounts.
- Offers a 0% introductory purchase APR for 15 months.
- Up to 6 months of complimentary membership of Uber One (offer valid until November 14, 2024).
- Automatic travel accident insurance for fares purchased using a credit card.
- 0% fraud liability and an in-built card lock for security.
- Cardholders can spend their rewards on gift cards or use PayPal to redeem them.
- Rewards can be used to pay for purchases on Amazon.com.
3. Nexo Card
Nexo is a powerful digital service for managing transactions in fiat money and cryptocurrencies. It provides an all-in-one tool for digital lending and financial value creation, which includes a cash back, or crypto back, rewards credit card, and crypto loan without collateral.
Key features:
- The Nexo Crypto Card allows you to earn up to 2% in crypto rewards (Bitcoin and NEXO) on every amount of money you spend shopping.
- The Nexo Crypto Card lets you spend without selling your cryptocurrency; thus, you avoid paying taxes.
- Your crypto can be used as collateral for a loan.
- Supports foreign exchange and ATM withdrawals.
4. Upgrade Card
Upgrade provides banking products, including checking and savings accounts, online personal loans, and Visa payment cards, for millions of people to achieve their financial goals. The company believes that credit should be responsible, affordable, and rewarding. Hence, it offers one of the best cash-back rewards credit cards. The Upgrade OneCard, which is one of its varieties of cards, offers unlimited bonuses on your expenses.
Key features:
- Earn 1%-3% cash back on every expenditure, with expenses on home (utilities), health, grocery, and auto (gas), attracting higher rewards.
- The Upgrade Credit Line is from US$500 to US$25,000.
- Upgrade Cards are contactless, and they support integration with Google Pay and Apple Pay wallets.
- New cardholders will receive a US$200 welcome bonus when they make three debit card transactions after opening a Rewards Checking Account.
5. Gemini Crypto Credit Card
Gemini is a regulated cryptocurrency exchange that believes that your money has a great future with it. And that is exactly what the company has been doing in the digital payments market since it was launched. No wonder many consumers like to compare Gemini to Crypto.com. Moreover, it has one of the best crypto back rewards credit cards—the Mastercard Gemini Crypto Credit Card.
The Gemini Credit Card has several attractive and innovative features for crypto enthusiasts, smart minds, and lovers of non-traditional payment solutions. Have a look at the most notable ones below.
Key features:
- 10% back in crypto on gas and electric vehicle (EV) charging expenses.
- Up to 3% back on purchases in other categories, such as groceries, dining, and entertainment.
- Rewards are available in Bitcoin, Ether, and more than 60 other cryptocurrencies.
- Instant crypto back rewards once you make your card payment.
Note: We included some of the top crypto-back rewards credit cards in our list of the best cash-back rewards credit cards. We assumed you could easily convert your cryptocurrency to cash and enjoy your bonus regardless of how it arrived. But if you do not know how to do that, read this post to learn how to convert crypto to cash.
Best Points and Miles Rewards Credit Cards
Credit card users who fly often can get travel rewards in the form of bonus points and miles and redeem them for their future expenses or flight costs. The more you spend with such cards, the more points/miles you earn. But what are examples of these cards?
The following are the best points and miles rewards credit cards to use if you want to make the most out of your airline travel expenses:
1. Capital One Venture X Rewards Credit Card
The Venture X category of Capital One rewards credit cards is one of the best in the market when we talk about getting travel bonuses. It comes with elevated rewards that help you go further and achieve even more with your travel expenses. The key features of the Capital One Venture X Rewards Credit Card range from extra tens of thousands of miles to unlimited complimentary access to over a thousand all-inclusive lounges.
Key features:
- Spend US$4,000 on purchases in three months after opening your Venture X account and earn 75,000 bonus miles.
- Starting on your first anniversary, you can earn up to 10,000 bonus miles yearly, which is worth US$100 towards travel.
- Use Capital One Travel to make your bookings and earn up to US$300 back and up to 10 times (10X) miles.
- Cell phone protection (insurance) of up to US$800 if stolen or damaged.
2. Capital One VentureOne Rewards Credit Card
If you want to earn bonus miles per every dollar spent and not have to pay an annual fee, then choose the Capital One VentureOne Rewards Credit Card. What are the key features as well as the pros and cons of this low-cost travel credit card with impressive perks? Let’s take a look at them.
Key features:
- Make purchases and bookings with the card and earn from 1.25 to 5 unlimited miles per dollar.
- Become a new cardholder and earn 20,000 extra miles upon spending US$500 in payments to merchants within the first 3 months.
- Access to Capital One Lounge.
- Travel accident insurance and fast emergency card replacement.
3. Citi Premier Card
The Citi Premier Credit Card from Citibank gives rewards in the form of points when you use it for your payments. The purpose of this card is to enable you to "make every moment and every point count," as you receive "ThankYou Points" for your expenses at restaurants, grocery stores, hotels, airlines, and gas stations.
Key features:
- Open your account and spend US$4,000 in the first three months to earn 80,000 points for a limited time. You can redeem the points for US$800 in gift cards.
- Earn 3X more on your payments at supermarkets, restaurants, gas stations, hotels, and air travel expenses.
- Receive 1X more reward on all other purchases.
- ThankYou Points can be used to shop at BestBuy.com or Amazon.com.
FAQ
Yes, cashback is worth it, especially when you can get it from a credit card that does not charge annual fees. What could be wrong with making payments at restaurants, grocery stores, gas stations, hotels, and supermarkets with a card and getting a percentage of your expenses back as cash credited to your account?
However, if you are a frequent traveller who is not a regular shopper, you may not see much value in getting a cash-back rewards credit card. Instead, you should apply for a travel credit card that comes with bonus miles and points and has no annual fee.
No, cash back is not the same as points when we speak of credit card rewards. The former is a percentage of the amount you have spent at a store that is sent back to you instantly or later, while the latter is some number that comes with a redeemable value in exchange for another item or service.
Here is an example to help you understand the differences. If you spend €400 using a credit card that has a 2% cash back reward, you will receive €8 back. On the other hand, when you earn 80,000 points as rewards on a Citi Premier Card from Citibank, it is worth US$800 in gift cards.
Yes, credit cards with points are worth having, especially if the fees are zero and other costs are low. The points you receive have an equivalent value in fiat currencies, such as dollars and euros. As a result, you can exchange them for a specific amount of gift cards or other valuables.
It all comes down to your preferences. You can use your credit card points for statement credits, transfer them to affiliated hotel or airline reward programmes, transfer them to other cardholders, use them to buy gift cards, or use them for charitable donations.
When compared to cash redemptions, using your credit card reward points for travel is often more valuable. The reason is that you will probably receive more for your points in travel than cash back. But ensure that you know the monetary value for each point. For example, it could be about 1.5 cents.
Yes, you may be able to convert your credit card points to cash, depending on the features and terms and conditions of the card. However, keep in mind that, unlike with cash-back cards, the value of your points does not always translate into equivalent currency amounts.
You must know how much your preferred reward is worth in euros to convert points to euros. Consider the scenario when 10,000 points are required to purchase a gift card with a 50 EUR value. Calculating the value of your reward points in euros requires dividing the award's value by the number of points needed for redemption. In this instance, you would divide 50 by 10,000 to get the result of 0.005. As a result, each reward point is worth 0.5 euros. In contrast, the value of one point is 1.75 euros, which is a significantly greater redemption value, if you just need 20,000 points to reserve an airline ticket worth 350 EUR.
Conclusion
Each type of rewards credit card—cash back, points, and miles—has its own purpose. You can use the cash rewards you receive from cash-back cards in any way you see fit. On the other hand, point and mile cards allow you to maximise the value of your rewards by using them to book flights. Not to mention that rewards cards for travel frequently come with worthwhile extras like travel insurance and access to airport lounges.
Therefore, a cash-back credit card is probably the best option if you do not travel often and want straightforward rewards on your everyday expenses. But for individuals who enjoy travelling, a travel credit card that awards points or bonus miles rather than cashback is usually the best option. Besides, you can redeem the bonus points for gift cards, other prizes, various services, or use the extra miles for future flights.
