The immediate gratification of buying now and paying later
with a credit card is sweetened by the reward programs offered by most credit card companies. There are two ways to earn rewards: cash back credit cards give away cash or rebates; while other reward offers (such as airline, hotel and retail credit cards) provide points which are redeemable for free travel, merchandise, gift certificates, and more. Both reward types have pros and cons, but the right reward card will depend on your spending habits and personal needs and objectives.
Cash Reward Credit Cards
Cash reward credit cards are very simple: they provide a refund of 1-5% on all of the purchases you make with your credit card. Cash back accumulates as you spend and can be sent automatically, upon request, or credited to your account – at least once per year. Many issuers offer additional incentives when you shop at specific locations such as grocery stores, restaurants and gas stations. Each program is different, so research each cash reward credit card thoroughly.
- Less limits and easier to use than reward points.
- Cash rewards will not expire and are often sent automatically.
- Not limited to specific rewards – cash is very flexible.
- May have lower (overall) payout than points, particularly with cards that offer bonus points for approval and on purchases made at partner locations.
- Cash back can only be used when a payment is issued – sometimes upon request – sometimes just once per year.
- May not have the ability to earn extra bonuses.
Reward Point Credit Cards
For every dollar you spend using a reward point card, you’ll earn 1-5 points which are redeemable for a whole host of rewards. Depending on which card you choose, reward options will vary and the cash value of each point will depend on how you redeem them. Generally, the more points you build up – the more value they’ll have on big ticket items. Accumulating more points is often made easier through bonus incentives at partner locations. Here are some more factors to consider:
- Reward points may offer more value than cash back – especially when you take advantage of bonus offers and collect points for higher priced items.
- Rewards can be redeemed at any time once enough points have accumulated.
- Ability to receive bonuses and earn extra discounts at partner locations.
- In some circumstances, points can be redeemed for cash.
- Limited to rewards offered by credit card issuer.
- Need to accumulate a specific number of points to earn rewards.
- Points may expire after a specific amount of time.
The Best Reward Program
Cash back credit card or points program? It’s a matter of personal preference. If you’re loyal to a specific brand, merchant or retail store, a reward point credit card might be right for you. Points will accumulate quickly – giving you the ability to earn more over time. Frequent travelers can benefit greatly from an airline miles credit card, and loyal shoppers may find a retail credit card useful.
If you don’t frequent specific locations and you’re looking for more flexibility, a cash back credit card might be a better choice. Rather than worry about where you shop and how you’re going to redeem your rewards, choose cash back and automate your earnings.