Key insights:
- Reward points and cash back are two common ways to earn with your credit card purchases. Each works a little differently.
- Reward points cards may offer more options to redeem rewards, while cash back cards may be more straightforward.
- The right choice depends on your spending habits and how you want to use your rewards.
Let’s examine what each of these card types has to offer and how they differ.
Understanding credit card rewards points and cash back
Each type of rewards credit card has its own earning structure, redemption options and potential benefits. Reward points and cash back are two common — but distinct — types of credit card rewards currencies.
Understanding the differences may help you decide which type of card fits your spending habits and financial goals best.
Reward points credit cards
With a reward points credit card, such as the Citi Strata Elite℠ Credit Card, you earn reward points by using your card to make qualifying purchases. You’ll usually earn a certain number of reward points per dollar on each qualifying purchase.
On some rewards points credit cards, you’ll earn a flat rate on all your spending. Earning the same number of points per dollar on each purchase can be a simple, straightforward option. Other cards give you more reward points in certain categories or only reward points for specific categories. These options can reward you for the areas where you spend the most, but they may require a little more legwork to maximize your earning.
Check your credit card’s terms and conditions to see how and when you can earn and redeem your reward points. You may be able to redeem your points for things like merchandise, gift cards, or travel. You may also be able to pay with points at participating popular retailers or use the points you earn to make charitable donations.
Cash back credit cards
With a cash back credit card, you earn rewards as a percentage of the money spent on qualifying purchases with your credit card. Some cash back credit cards let you earn a flat percentage on all purchases, while others offer higher percentages in specific categories, such as travel or groceries. You might receive cash back automatically or you might have to choose to redeem it. With a Citi cash back card, like the Citi Double Cash® Card, you earn cash back as ThankYou® Points. Then, you can redeem those points for cash back as a statement credit, via direct deposit or as a paper check. With a Citi cash back card, you can also use Pay with Points at participating top retailers.
Factors to consider when choosing a cash back vs. reward points credit card
When deciding whether to apply for a credit card that offers reward points or cash back, you might find it helpful to consider:
- Your spending habits: Knowing what types of goods and services you spend the most on could help you choose a rewards structure that aligns well with your lifestyle.
- Your preferences: Is a straightforward cash back rewards system appealing to you? Or do you prefer the variety of choices that reward points credit cards offer?
- Your travel habits: If you frequently use your credit card to pay for travel-related expenses, a card offering higher amounts of reward points or cash back for travel could be appealing.
- Annual fees: Reward points and cash back credit cards can offer great benefits, but it’s important to consider whether what you’ll likely earn justifies any annual fees associated with the card.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
