The Credit Card Choice: Miles, Points or Cash?
Banks and credit unions offer a wealth of credit cards that generate rewards. These cards typically provide cash-back bonuses, points or miles when you use them. Some earn a higher amount of points, miles or cash back when you use your cards on certain categories of purchases, such as using your plastic to pay for filling gas for your car, buying groceries or dining out.
Cash-back cards reward you with a percentage of cash with every purchase you make. Your card might provide 1.5% cash back on every purchase. If you use your card to make $1,000 in purchases in a month, you’ll earn $15 cash. You can usually use that cash to help pay down your current card balance, spend it on rewards or have it deposited in your bank account.
Other cards earn points. You might earn three points for every dollar you charge at restaurants or two points for every dollar you spend on streaming services. You can then redeem these points for cash, gift cards, airline miles, hotel stays or online purchases.
Still other cards earn airline miles. You might earn two miles for every dollar you charge. You can then turn these miles into free national and international flights.
Which of these card types are right for you? That depends on your spending habits and your future plans.
When a miles card makes sense
Planning a big vacation? Or maybe you travel several times a year. A card that earns miles might be your best choice. By using such a card, you might earn enough free miles to book your next flight for free.
Just be sure that you choose a card that matches your spending habits. If you eat out often, select a miles card that earns extra miles at restaurants or on food-delivery services. If you spend a lot at the grocery store, choose a card that provides extra miles for those purchases.
When a points card is the best choice
Want flexibility with your credit card? One that earns points might make the most sense.
That’s because of the number of redemption options. You can turn points into cash, airline miles, hotel stays, gift cards and even charitable donations.
Selecting the right card, though, requires taking a close look at your spending habits. The goal is to maximize the points you earn each month. If you drive to work each day, you might choose a card that earns extra points for gas purchases. If you spend big on groceries each month, choose a card that rewards extra points for grocery store purchases. Juggling multiple streaming services? Some cards reward extra points when you use them to pay for your streaming subscriptions.
When a cash-back card is the best choice
If you value simplicity, a cash-back credit card might be best. Many of these cards earn a flat cash-back percentage on all purchases. This way, you won’t have to worry about using your card at certain locations to maximize your rewards: You’ll be rewarded no matter when you use your card.
These cards are also a solid choice for people who spend evenly across a wide range of categories each month.
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