Cash Back vs. Travel Rewards Credit Cards

You've ready to apply for a new credit card, but a pivotal question remains: Is the best option a cash back credit card, which offers money back on qualifying purchases, or a travel rewards credit card, which may offer airline miles or other travel rewards along with perks like checked bags or priority boarding? The answer depends on your lifestyle and personal preferences.

Tips to choose between a cash back and travel rewards credit card

Here are 6 tips that may help you select the beneficial type of credit card for you:

Analyze your spending

Reviewing your past spending can help you figure out where most of your money is going and apply for a new credit card that aligns with those habits. Are you a commuter who's constantly refilling your gas tank? Do you often put your grocery store runs on your credit card? Do you put every expense — including flights, hotel stays and dinners out — on your credit card? By choosing a credit card that maximizes your existing spending, you may find that it’s easier to earn rewards.

Consider future travel plans

Even if you usually use your credit card for everyday purchases instead of travel, your future plans may play an important role in deciding between a travel rewards and cash back credit card.  

For instance, the rewards earned with credit card points or miles could help make once-in-a-lifetime adventures, such as a destination wedding or anniversary trip more affordable. If you can imagine yourself traveling the world but aren't yet ready to start making those kinds of purchases, a cash back credit card may make more sense.

Weigh credit card fees versus benefits

If a credit card charges an annual fee, you may need to consider if the benefits can tip the scales and justify that fee. Rewards categories for a given credit card, for example, may let you earn more for certain purchases. If you spend more in those higher-earning categories, you may be able to quickly outearn the annual fee. Another card may offer a valuable benefit, such as a free checked bag when you fly, which could also offset the annual fee.  

You’ll need to do the math to decide which benefits are most valuable to you and what annual fee (if any) makes sense.

Watch for sign-up bonuses

Regardless of whether you choose a cash back card or a travel rewards card, many cards offer introductory bonuses. Often, you may earn these additional rewards when you spend a certain amount within the first several months of opening the account. Just make sure you can pay off the balance in full and on time to avoid potential fees and interest charges.  

Consider the legwork

While travel rewards and cash back credit cards can both provide useful benefits, it's important to consider the work involved in redeeming rewards.  

For example, travel rewards credit cards may have redemption blackout dates that make them hard to redeem during peak periods, such as during the holidays. In addition, if you don't choose to use your rewards for travel, you'll want to consider how best to spend them. By contrast, cash back rewards can typically be redeemed as a statement credit or direct deposit, which, for some, may feel simpler to track.  

Read the fine print

As with any credit card agreement, it's important to educate yourself on the nuances of the rewards program you're considering. Some of the factors you may want to watch out for include:  

• Which transactions, such as a balance transfer, might be ineligible for rewards
• Late fees and interest charges  
• How paying late may impact your cash back, points or miles  
• If there's a threshold to redeem rewards, such as a minimum number of points to redeem for a statement credit  

You may also wish to find out if there is a requirement for how frequently you have to redeem your rewards, as not every program lets cardholders accumulate points, cash back or miles indefinitely.  

How to choose between a cash back and a travel rewards card

Ultimately, whether a cash back or travel rewards credit card is right for you will depend on your lifestyle and preferences. Here are a few examples of when each type of credit card might make sense:  

• If you're a frequent flyer, a travel rewards card may make the most sense  
• If you tend to spend a lot in specific categories, a cash back card with bonus categories that fit your spending habits may be the right move  
• If you’re looking for easy ways to redeem your rewards across many different categories, a card that offers a flat cash back rate for all purchases might be right for you  

Other factors, like immediate travel plans, how easily you can redeem rewards and the credit card fine print (such as sign-up bonuses, fees and interest rates) may also help shape your decision.

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.