Cash Back Vs Points - Why's it matter?


2 minute read

Understanding the benefits of credit cards and how to optimize them can be confusing...That's why Card Curator is here to help! In this post, we'll explain the basic differences between the types of rewards you can get from your credit cards: cash back versus points and miles. We'll help you figure out exactly why earning points and miles is the way to go. 

What is Cash Back?

Cash back is a fixed monetary return that you get when you spend your credit card. It offers a percentage back on spending as an incentive for you to use your credit card. Some cards offer cash back in varying percentages on purchase categories (like groceries or entertainment) while others offer a more universal benefit (i.e. 2% cash back on everything).

For example, Amex Blue Cash Preferred Card offers 6% cash back on groceries, 6% on streaming services, 3% on transit, and 3% on gas. It is important to note that some cards have strings attached to these benefits. With this card, cash back on groceries is capped at $6,000 per year and streaming is limited to certain providers. Not every card is capped on spending. Some cards, like Citi Double Cash, offer unlimited cash back.

What are Points?

Points are a bit more complicated than cash back. Points are earned through spending and can be redeemed for payment, but may be limited and have values that change. These values are often worth more than cash back, but require more finesse to use. Cards usually offer different points multipliers for different categories of spending. 

For example, Chase Sapphire Preferred offers 2x points on dining and groceries (including associated fees like delivery). Points have a valuation (usually somewhere between one to two cents) and can be put towards future payments on specific categories like travel or hotels — this is different from cash back, which can be used on anything. The cash value on points, because they can be worth far over one cent per point and spending multipliers can be as high as 10x, makes returns much higher than cash back. Just like cash back, these benefits can be capped at certain spending amounts.

Why's It Matter?

The difference between cash back and points matters because of the universality of cash back and the specificity and variation with points. Knowing the value of your points and spending them when they are worth more than your dollar can stretch your rewards further.
Bottom line: get a points card if you're looking for value and a cash back card for ease of use and versatility.

Written by Steven Munsie

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