It can be Very tempting to take advantage of the impressive benefits that come with travel rewards credit cards But Do they really give better value than cash back cards though?
Apparently not for everyone. A cash back card may be more suitable for people with certain spending and travel habits.
Here is a more detailed look at the advantages and drawbacks of cash back and travel cards. We have answered questions that are commonly asked before deciding which card is most suited to your needs.
What are the benefits of travel reward cards?
There is no doubt that credit cards with travel rewards have some great perks to offer and are popular with good reason. You can earn a couple of miles or points for every $1 you spend, or more in some situations. For instance you can get five Membership Rewards® points on each $1 you use to book flights with American Express Travel or airlines, using the Platinum Card® from American Express.
Zero foreign transaction charges are another big benefit you can get from travel rewards cards. This fee is usually 3% on every transaction while traveling, so you can save a substantial amount on foreign transaction fees this way.
For Excellent/Good credit: The Platinum Card® From American Express
There are also other benefits offered with travel cards including access to airport lounges, checked bag for free on some flights, yearly companion fare and priority boarding.
People are most attracted by the significant sign-up bonuses offered on travel rewards cards. For example, if you make purchases worth $4,000 during the initial 3 months after getting your Chase Sapphire Preferred® Card you will earn 60,000 extra points. Redeeming these using Chase Ultimate Rewards® while traveling can cover as much as $750 worth of expenses. It’s not rare for such large bonuses to be offered with travel rewards cards.
This comes with a time limitation, however, and you have to spend the minimum required to avail this bonus. It’s not a good idea to overspend just to take advantage of this perk, because that leaves you with the risk of being unable to make a timely payment to clear your monthly debt.
Are cash back cards as good too?
A 1-2 percent cash back offer can be availed on purchases made through some good cash back cards, and the percentage can be higher on some cards for certain items such as groceries and gas.
Sign-up bonuses are also offered on this card type for a limited time when you use it to make purchases, however the offer is less compared to the same incentive on travel rewards cards. If there is no possibility of your spending the required amount within the duration necessary to qualify for it, it may be preferable for you to get a cash back card.
Cash back incentives typically do not sound as attractive as the ones on travel cards, but travel cards are more beneficial for frequent travelers. Those who hardly travel abroad may be better off with cash back cards.
How can you choose a card that is right for you?
Below are a few questions that can help you clear up any confusion you may have about which card type is better for you. You should get a travel card if you answer yes to the majority of these questions. A cash back card may have more value for you if this is not the case.
- Do you travel often?
Cash back cards are the better option for those who do not travel very often. Travel rewards mostly accumulate through the spending you do abroad, so those who mostly remain local won’t get as many rewards due to the lack of opportunities to earn points.
- Do you travel internationally?
One of the biggest benefit of travel cards is the zero foreign transaction fee which can help you save considerably in the long run. This is obviously better than paying a 3% transaction fee on everything if you hold a cash back card during international trips.
- Do you plan to use your rewards mainly to pay for travel?
You may prefer a cash back card if you would rather make the occasional splurge with the extra cash instead of redeeming your saved up miles or points for an airline ticket or hotel room abroad.
- Are you able to meet the minimum spend to earn your card’s bonus?
The substantial sign-up bonus is often the biggest incentive to get a travel rewards card. The catch is, will you actually be spending that much money in the first few months of opening your account? If your budget does not allow spending large amounts that may be difficult to pay off for you, it may not be worth getting a travel rewards card.
- Do you have the patience to go deep on your card’s details to get the most value from it?
The steps needed to actually earn redeemable miles and points with your travel rewards card can be quite tricky as you need to follow specific requirements and processes in order to qualify.
Bottom line
Travel rewards cards will benefit you if: you’re a frequent traveler, you go on international trips, and you can enjoy the sign-up bonus on major spending without later having trouble paying off your balances. These are more rewarding in the short run.
Cash back cards are generally more beneficial in the long run for most other people, and the best part is that the process of earning rewards and utilizing them is simpler so you can get more value from this type of card.
Below are some great travel rewards and cash back card options for you:
Travel Rewards Cards
For Excellent/Good credit: Capital One® Venture® Rewards Credit Card
The Capital One® Venture® Rewards Credit Card is one of the best travel cards in the industry with a one-time bonus of 50,000 miles once you spend $3,000 within 3 months from account opening. You can fly any airline, stay at any hotel with no blackout dates. You can also earn 2X miles on every purchase plus 10X miles on thousands of hotels through January 2020. Visit hotels.com/venture for more info.
For Excellent/Good credit: American Express® Gold Card
The American Express® Gold Card is another great travel card option while earning 35,000 bonus points on less spend of $2,000 within the first 3 months. You can earn 4x points at U.S. restaurants and U.S. supermarkets, up to $25,000 per year then defaults to 1X.
Cash Back Cards
For Excellent/Good credit: Capital One® Savor® Cash Rewards Credit Card
The Capital One® Savor® Cash Rewards Credit Card is one of best cash back cards in the industry with a very generous one-time $300 cash bonus after you spend $3,000 within the first 3 months of account opening. You can also earn an amazing unlimited 4% cash back on restaurants and entertainment with 2% at supermarkets and 1% on all other spending.
For Excellent/Good credit: Capital One® Quicksilver® Cash Rewards Credit Card
The Capital One® Quicksilver® Cash Rewards Credit Card another superb card with a one-time $150 cash bonus after you spend $500 within the first 3 month of signup. You can also earn unlimited 1.5% cash back on all spending.
For Excellent/Good credit: Blue Cash Preferred® Card From American Express
The Blue Cash Preferred® Card From American Express is a good cash back card with a $250 statement credit when you spend $1,000 within the first 3 months of signup. You also get 6% Cash Back at U.S. supermarkets up to $6,000 a year then defaults to 1%. You also earn 3% cash back at U.S. gas stations then 1% cash back on everything else.
If you know your credit score is not as excellent or good to qualify for some of the cards above, we have other options with great benefits as well:
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