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Credit card points, miles, and cash back—how to choose the best rewards program for your needs

Photo illustration of three credit cards wrapped in bows, each with a different color overlay.
These three common rewards programs—points, miles, and cash back—all work a little differently.
Photo illustration by Fortune; Original photos by Getty Images

Cash back cards allow cardholders to earn a percentage of cash back on every dollar you spend, usually anywhere between 1% and 5%, although some cards may go even higher for specific purchases at qualifying merchants. These rewards are typically offered in one of three ways: 

  • Flat-rate cards: This is the simplest kind of cash back system. Cash back cards that offer the same percentage rate, no matter the purchase. The Wells Fargo Active Cash® Card, for example, offers 2% cash rewards on all eligible purchases.
  • Tiered-rate cards: These cards tend to offer higher cash back rates, but only for certain categories. For example, the Blue Cash Everyday® Card from American Express gives cardholders 3% cash back at U.S. supermarkets, on up to $6,000 per year in purchases (then 1%), 3% on U.S. online retail purchases on up to $6,000 per year in purchases (then 1%), and 3% at U.S. gas stations, on up to $6,000 per year in purchases (then 1%). All other eligible purchases earn 1% cash back. This card has no annual fee. (Terms apply, see rates and fees.)
  • Rotating categories: These cards offer different bonus categories that rotate monthly or quarterly and may require the cardholder to manually activate these offers online or via mobile app. The Citi Custom CashSM Card offers 5% cash back on your top spend category per billing cycle up to $500, then 1% cash back thereafter.

So, say you spend $100 at the grocery store and your card offers 2% cash back for those kinds of purchases. You’d earn $2 cash back. That may not sound like a lot, but it adds up over time especially when you’re making frequent trips to the grocery store. 

Sometimes you can earn extra cash back during the first year of card membership. The Chase Freedom Unlimited®, for example, is offering new cardholders an additional 1.5% on all purchases up to $20,000 spent in the first year: unlimited 3% cash back on all eligible purchases, 4.5% on dining and at drugstores, and 6.5% on travel purchased through Chase Ultimate Rewards.

“These cards typically allow cardholders to redeem in the form of a statement credit, check, or transfer to a bank account. Some cards are also linked to the issuer’s rewards program and can be converted to points,” says Paramita Pal, head of U.S. bankcard product management and external acquisition at TD Bank. 

Pro: Cash can be used for any purchase. Earning cash rewards for your purchases offers a lot of flexibility and lets you decide how and where you want to spend your rewards. “Cash back rewards are often enjoyed by consumers looking for ease, simplicity, and flexibility,” says Pal. “We saw an uptick in interest in cash back cards during the pandemic, when consumer spending shifted from travel and experiences to at-home activities and purchases. The flexibility provided consumers an opportunity to earn rewards while spending across categories as their priorities changed.” 

Con: There may be a cap on how much cash back you can earn. Some cards may have limits on how much you can earn in cash back over a certain period of time. It’s important to read the fine print when comparing cards to determine how quickly you might reach that limit depending on your spending habits. 

What are credit card points?

Credit card points work similarly to cash back in that you typically earn a certain number of points per dollar on specific purchases. For example, the Platinum Card® from American Express offers 5X Membership Rewards® Points on flights booked directly with airlines or through American Express Travel, on up to $500,000 on these purchases per calendar year, 5X Rewards® Points on prepaid hotels booked with American Express Travel, and 1X points on all other purchases. The Platinum Card has a $695 annual fee. (Terms apply, see rates and fees.)

Points work differently than cash back, because you typically get the most value when you redeem them for specific purchases, like travel. 

“Miles are most frequently redeemed toward airline loyalty programs, and spending on travel related purchases can accelerate the process of earning miles. Whereas points have a wider array of redemption possibilities inclusive of hotels, dining, entertainment, fuel, online merchandisers, and more,” says John Lazzati, managing director, consumer cards at Goldman Sachs. 

Pro: Credit cards that offer rewards points could save you more than if you’d redeemed cash. Depending on your specific card, your credit card points could be worth more than $1 per point—offering you more value than if you’d been rewarded in cash. 

Con: Some rewards cards have higher annual fees. While there are some rewards cards that have no annual fee, there are many that have fees upwards of $500. 

What are miles?  

When you use a miles-based credit card you earn a certain number of miles for every dollar you spend or every dollar you spend within a certain category. Some major airlines like American Airlines and Delta have co-branded credit cards with credit card issuers like Citi and American Express. The American Airlines AAdvantage MileUp℠ Card offered by Citi rewards cardholders with 2X AAdvantage miles for each $1 spent at grocery stores, including grocery delivery services, as well as 2X AAdvantage miles for every $1 spent on eligible American Airlines purchases, and 1X AAdvantage mile for every $1 spent on other purchases. There’s no annual fee.

The Delta SkyMiles® Gold American Express Card rewards cardholders with 2X miles on Delta purchases, at U.S. supermarkets and at restaurants worldwide (including takeout and delivery in the U.S.), as well as 1X mile on all other eligible purchases. There’s $0 introductory annual fee the first year, then $99. (Terms apply, see rates and fees.)

If you want a miles card that’s not tied to a specific airline, the Capital One Venture Rewards Credit Card offers cardholders 5X miles on hotels and rental cars booked through Capital One Travel and unlimited 2X miles on all other eligible purchases. The card has a $95 annual fee.

"For those who intend to use their rewards primarily for travel, miles are a great choice as they can often be used to cover the cost of flights, hotels, car rentals, cruises, dining and status upgrades,” says Pal. 

Pro: You can be rewarded for brand loyalty. If you have a preferred airline or hotel chain that you regularly book with, a miles-based rewards system can help you save and earn perks from those specific merchants. 

Con: Maximizing the value of your miles requires you to be a frequent traveler. If you like to travel, but don’t get to do it that often, it could take you some time to rack up enough rewards to see significant savings. 

How to choose the right type of card for yourself 

When comparing credit card options, you’ll want to consider a few different factors to make sure you select the right card. 

  • Potential fees and other limitations: Shop around and read the fine print associated with each card you’re considering. Learn about what kinds of fees you may incur, if there are caps on the cash, points, or miles you can earn, or minimum amounts to redeem those rewards. 
  • Each card’s APR: Rewards credit cards tend to have higher annual percentage rates (APR) than other credit cards. If you’re the kind of cardholder who carries a balance from month to month, you’ll want to consider how having a rewards card could potentially impact your budget and credit score

Your unique spending habits: To fully maximize your rewards, you’ll need to examine your current spending habits and nail down the categories where you spend the most money. Perhaps you spend a lot of money on travel or you dine out frequently. Selecting a card that rewards that spending through cash back or redeemable points within those specific categories can help you get the most out of your card. “In the current inflationary environment, it's more important than ever for consumers to be savvy spenders, and that can include using a card that will reward them while they spend—as long as they are managing their credit responsibly,” says Pal.

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