Cash Back vs Travel Rewards: Which May Be Best For You?

Taking advantage of the ability to earn rewards for typical purchases is what some might call a “no-brainer.” Both cash back credit cards and travel rewards cards are popular for this reason. But if you’re looking for the best credit card for your needs, which one should you choose?

To help you make a well-considered choice, here’s a look at three key differences between cash back and travel rewards cards: typical annual fee ranges, flexibility and potential perks, and the types of rewards earned.

Many cash back rewards cards have no annual fee. For the ones that do, annual fees seem to max out around $95. Travel rewards cards, on the other hand, tend to have higher annual fees due to the travel-related benefits often available. For example, travel card annual fees range anywhere from $0 to around $700, with premium cards having the highest annual fees – and the most lavish perks, like complimentary airport lounge access and annual airline companion tickets.

For those who don’t plan to travel often or who simply prefer a more flexible “everyday” way to benefit from a credit card, a low or no annual fee cash back rewards card might be ideal. For example, many cash back rewards cards offer between 1.5% and 6% cash back on spending in certain spending categories. Specifics depend on the card, but common cash back rewards categories include supermarket, gas station, streaming service, and transit spending. Some cards offer rotating bonus categories. For example, you might get 5% cash back at certain locations for three months out of the year, and then 5% back at a different retailer or spending category for the next quarter, and so on.

Meanwhile, with a bevy of generous travel-specific perks, it’s easy to understand why a jetsetter or road warrior may find that a premium travel rewards card is the right fit for their wallet. For example, if I were to book an annual cross-country flight to visit friends, or choose to work a job that regularly requires travel, I wouldn’t think twice about getting a premium travel rewards credit card that offers benefits I might not otherwise consider, such as free checked bags and a statement credit to cover the cost of time-saving services like TSA Pre-Check.

With such a card, I could also accumulate travel rewards between trips by strategically using it for purchases in certain spending categories, such as transit and dining. You can usually expect travel rewards cards to offer points multipliers ranging from 2X to 5X points or more in certain spending categories, depending on the card.

That’s not to say travel cards don’t afford flexibility. For example, there are different categories of travel rewards cards: general purpose cards, airline cards, and hotel cards, all with different ranges of annual fees and benefits – meaning most travelers should find a fit for their travel preferences.

When cash back rewards accrue, they can usually be redeemed as a statement credit. In other words, that “cash” is put directly back into your account. The card member can then choose to redeem it all, redeem part of it, or let their rewards balance accrue.

Travel rewards, on the other hand, are earned in the form of points or air miles. For general purpose travel cards, points are associated with your card issuer’s rewards program and can usually be redeemed in a variety of ways, from travel to online retail purchases. Airline miles, on the other hand, are associated with the airline’s loyalty program, not the card issuer’s reward program. The same goes for hotel cards – points earned accumulate in the associated hotel’s loyalty program.

Unlike cash back cards in which a dollar in cash back represents one U.S. dollar, the actual value of points and miles can vary from one travel card’s rewards program to the next, as well as how points are redeemed. For example, some travel rewards cards let you transfer points or miles to eligible travel partners, which might result in different redemption rates than redeeming points through your card issuer’s redemption portal.

Many people benefit from having both cash back and travel rewards cards to maximize rewards-earning potential across different types of spending. For example, you might pay for groceries, streaming services, and gas with a cash back card that offers rewards in these categories. Meanwhile, you might opt to use your travel rewards card for travel purchases, as well as any other purchases that get additional points, such as dining.

In other words, strategically using different types of cards can help you earn more rewards on more expenses. Just make sure you stay on top of each card’s payment schedule to remain in good standing – and always aim to pay your balance in full to avoid interest charges.