When To Stick With Cash Back Cards

by Credit Card Wisdom on June 19, 2013

There are some well known travel writers who like to proclaim that points and miles are a big scam. Their evidence is based on the fact that many travelers cannot get the award flights that they want, at the mileage levels they were promised. And when they do, airlines impose enough surcharges and fees that the trip is hardly free.

As someone who has enjoyed over a hundred thousand dollars worth of award travel, I vehemently disagree that these programs are scams. But at the same time, I recognize that earning points and miles is not the best strategy for all reward cards users. For some credit card users, it can make more sense to earn cash back, or some type of loyalty points or miles with a fixed value.

Who should skip traditional points and miles

The ideal user of points and miles is someone who enjoys figuring out these programs, has a flexible travel schedule, and redeems premium travel awards. But this description excludes many. For example, some travelers are not very flexible and must make travel plans without the months of advance planning required to get the best award seats. Others have modest goals of shorter trips in coach class, rather than long haul flights in business or first class.

But most importantly, many credit card users lack the time and patience necessary to become immersed in the details of airline and hotel loyalty programs.  These travelers are better off earning the maximum cash back and applying it to the purchase of a ticket. They will retain flexibility and earn additional miles from their purchase.

A scenario for cash back over miles

Imagine two travelers are hoping to visit Florida this winter from their home in New York. One has spent $25,000 last year on his airline rewards card, and earned 25,000 miles. The other has used her Capital One Venture Rewards card and earned 50,000 Capital One “miles” which are worth one cent each towards any travel expense. The airline rewards card user is being set up for disappointment when he looks for a 25,000 mile award ticket over the holidays, while the Capital One Venture Rewards cardholder has essentially $500 that she can use on any airline. She bides her time and looks for a sale or a coupon that allows her to purchase a trip for well under $500, and she uses the remainder of her miles for other travel expenses such as hotels or car rentals.

By understanding what the best circumstances are to earn cash back instead of points or miles, cardholders can choose the best rewards for their individual needs.

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