Comparing credit card rewards: cash back vs. points


Whether you are a beginner or you have used credit cards for a number of years, you must have come across the terms cash back rewards and point rewards. When a card issuer claims that they have bonuses and rewards for you, they mean that you can get points, cash backs, or miles every time you use the card to shop. In this article, we are going to define, compare, and help you understand how each one of them works.

What is a cash back reward?

A cash back credit card is a card that offers its reward in cash after a purchase. For example, when you make a purchase using a cash back card, you earn extra credit for a percentage of that purchase. A cash back can either be redeemed monthly or annually.

What are rewards points?

A points’ credit card adds you a point for each dollar that you spend. Some cards reward different points for different categories or stores. For example, a card may reward you 3 points for buying home appliances and 7 points for buying laundry or building equipment. Reward points are redeemable for travel, cash back, or gifts.

Cashbacks vs. Points

Value addition

When automatically applied to your credit balance, cash backs can help you stay on top of your credit card bills, thus lowering your card balance. This can help you create a good reputation and improve your credit card scores.

You can redeem points for cash to be applied in your credit card. This is commonly referred to as cashing out points. However, this is a losing game or a poor use of points because you will receive a lower value compared to other available options. The bottom line is that there is no need to redeem more points for less cash when you can just go for a solid cash back (unless you urgently need cash).

Rates and forms

Cash backs come in two forms: flat rate or variable rate. Flat rate means that you earn cash back into your account at a fixed rate usually 1% or 2%. Variable rate means that you earn cash back into your account depending on what you purchase or charge. For example, a card could assure you a 3% cash back on money spent gas or groceries and 2% on all other products.

Likewise, travel rewards are either in miles or in points. Travel miles are rigid while points can be converted to other forms such as cash back or gift cards. Miles work like airline cards for related/connected hotels/travel agencies. For example, you can earn two miles of travel for each dollar you spend at the rate of 1%, which means that if you spend $2500 dollars, you earn 500 miles.


Cash back gives you the choice to use your money the way you want or to make a purchase decision from a wide variety of options. Unlike points where you have to figure out where they are applicable and redeemable, cash back gives you real money.

Each credit card issuer gives you a wide range of options from travel to buying merchandise. You do not even have to wait for the points to accumulate. You can use them on an Uber ride around the city or pay for a meal at your favorite restaurant. When it comes to flexibility, go for a card that best suits your needs. Evidently, cash backs are better for people who enjoy bulk shopping while points are more useful to people who enjoy travel.

What else can you do with your points apart from travel?

  • You can redeem your points for purchases and shopping. A number of credit card programs will allow you to redeem points for purchase. An example of this is Amex Membership Rewards.
  • Using points to buy gifts, magazines, and food deliveries
  • Cutting down credit costs and balance by redeeming points for cash back

What else can you do with cash back rewards apart from cutting down your credit balance?

  • You can redeem your cash back for travel, miles, or buy merchandise from related stores
  • You can redeem your cash back for non cash reward such as gift cards or food delivery from restaurants that accept credit cards
  • If you plan to redeem cash back, you should do it as soon as you receive it since it might lose value due to inflation. Redeeming it immediately ensures that you maximise its value.
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