Picking a rewards credit card can seem overwhelming. There are many types of credit cards -- you’ll find cash-back credit cards that let you redeem points for cash, gift cards and statement credits, co-branded credit cards that earn airline miles or hotel points with specific programs, and general travel cards not tied to any one brand.
For example, American Express Membership Rewards and Chase Ultimate Rewards are two of the most popular programs offering cards in this category. They both let you redeem your points for statement credits, gift cards, merchandise, travel through a portal or transfers to airline and hotel partners (on participating cards).
That’s a lot to remember, so we’ll break down the differences between the types of cards and how to make the most of them.
What’s the difference between cash back, points and miles?
Cash-back credit cards
With cash-back credit cards, you can earn rewards as a percentage of your spending. They then let you redeem for easy options like statement credits to lower the balance of your credit card account, direct deposits into your bank account, or merchandise you order directly with points or gift cards.
Cash-back credit cards come in three types: Flat-rate credit cards that offer the same rewards rate on all purchases, tiered cash-back cards that provide greater rewards for specific purchases and rotating category cash-back cards whose elevated earnings categories change quarterly.
Co-branded miles and points credit cards
A co-branded credit card earns points or miles with one specific brand, like Southwest Airlines or Marriott Bonvoy hotels. As such, they tend to be more limited in their redemption options. You can typically redeem airline miles only for airfare, seat upgrades and a handful of other options, and hotel points are typically good only for stays, room upgrades and various on-site hotel benefits.
If your points belong to a specific airline or hotel loyalty program (as opposed to transferrable credit card points, which we’ll discuss below), you can typically only use them with that airline or hotel. Some loyalty programs offer point transfers to partner loyalty programs -- for example, you can transfer Marriott Bonvoy points to certain airlines -- but that’s the exception, not the norm.
Flexible reward points cards
Flexible rewards points, where your points belong to your credit card’s rewards program rather than an airline’s or hotel’s, have more redemption options and a wider range of potential value. For example, you can redeem Chase Ultimate Rewards points for options like gift cards or statement credits at a typical rate of 1 cent per point, but the value you get for booking travel through the Chase portal depends on which travel credit card you have.
The Chase Sapphire Preferred® Card gives you 25% more value for points when you redeem for travel through Chase Travel℠, whereas the Chase Sapphire Reserve® card gives you 50% more value.
Points can also be transferred to airline and hotel partners where they could be worth more or less, depending on how you redeem them. Chase Ultimate Rewards and American Express Membership Rewards are worth on average 2 cents per point if transferred to a partner airline or hotel, according to The Points Guy’s valuations.
The actual value you get from your points will vary from redemption to redemption. You can calculate your exact cents per point value on a given redemption by dividing the cash cost of the booking by the points cost. For example, a $600 flight that costs you 15,000 points would give you a value of 4 cents/point.
| Cash Back | Co-branded points and miles | Flexible points | |
| Ease of earning | Easy. Awarded as a percentage of your spending. | Easy but limited. You can earn the most miles and points when making purchases within the brand; other purchases typically earn at a lower rate. | Easy. Awarded as a percentage of your spending. Some cards offer higher reward rates for category-specific purchases. |
| Ease of redeeming | Easy. Cash back can typically be redeemed at the approximately same rate in multiple ways, including statement credits, gift cards, merchandise and direct deposit. | Limited. Co-branded points and miles are typically limited to redemption within the brand, although some offer point transfers to partner loyalty programs. | Varied. Flexible points can be redeemed for many types of rewards, but the point value is often more variable depending on the card program and reward. Rates can often be significantly higher if redeemed within the card issuer’s reward program. |
| Flexibility | Easy. Rates and redemption are typically simple and standard. | Limited. Most valuable for purchases and redemption within the brand. | Varies. Can offer greater category-specific rates and redemption. |
| Best feature | Typically the best set-it-and-forget-it way to earn rewards. | For brand-loyal customers, more rewards and perks come with the card. | Typically the best chance to get the maximum value for and from rewards if you plan strategically. Benefits and partnerships with airlines and hotels often make the cards better for flexible travel. |
| Downside | Cash-back rewards value may not be as lucrative as points and miles in some cases. | Used outside of the brand, cards don’t offer as much value. Cards often have an annual fee. | Typically requires the most work to realize the most value. |
| Overall effort required | Typically minimal. | Typically some so long as you make purchases within the brand. | Typically more to maximize point rewards. |
When should you choose a cash-back, points or miles card?
Whether you should get a cash-back credit card, a flexible travel rewards card, or a co-branded airline or hotel card depends on how you normally spend and how you want to redeem your rewards once you’re ready.
Some types of rewards credit cards offer more perks than others, typically in exchange for an annual fee. Here’s a rundown of the types of credit cards out there, how they normally work and who they’re best for.
Cash-back
You might prefer a cash-back card if the following apply to you:
- You like to keep things simple: Generally speaking, cash back is the easiest rewards currency to understand and redeem, so cash-back cards are great for everyday spending that doesn’t require much strategizing.
- You want to save money quickly: They’re also good if you want to use your rewards to save money quickly, as they can usually be redeemed for statement credits, direct deposits, gift cards or merchandise or used with select merchants at checkout.
Co-branded points and miles
A co-branded points and miles card could be a good fit for you if:
- You are loyal to a specific brand: If you’re loyal to a specific airline or hotel, a co-branded card could be the best option for you. Sometimes the rewards are flexible, as certain cards let you transfer points to partners.
- You’re willing to pay for perks: These credit cards typically offer the best reward rates when used within the brand and can come with perks and status. These cards typically charge an annual fee.
Flexible points
Consider a flexible points card if this sounds like you:
- You like flexibility when planning (and saving on) your travel: If you prefer flexibility when it comes to using rewards for travel, credit cards with flexible points could be your preferred choice. The cards often partner with multiple airline and hotel partners, and they may offer higher reward rates for category-specific purchases.
- You want the maximum value for your rewards: The cards may require more work to figure out how to maximize the reward value, but the trade-off is that you can typically strategically get the most bang for your (award) buck.
Pros and cons of cash-back cards
Pros
Many come without an annual fee.
Some cash-back credit cards offer an introductory 0% APR for a limited time.
Many come with perks like extended warranty and purchase protection against damage or theft.
You can earn a welcome offer.
Earning and redeeming rewards is easy.
Cons
Many cash-back credit cards charge foreign transaction fees.
You will typically get no more than 1 cent per point in value when you redeem.
You won’t get many travel-specific benefits, if any.
Pros and cons of co-branded miles and points cards
Pros
You can earn hotel loyalty points or airline miles.
Hotel credit cards usually offer automatic elite membership status.
Airline credit cards often come with free checked bags, priority boarding and other travel perks specific to that airline.
Co-branded travel cards may let you work toward higher levels of elite status through credit card spending.
Some come with premium perks like airport lounge access or free-night awards at hotels.
They usually come with no foreign transaction fees.
Cons
Rewards points can be difficult to redeem.
Rewards are notoriously inflexible.
Many of the best cards have annual fees.
Redemption values can range from disappointing to exceptional depending on the travel arrangements you book.
Pros and cons of flexible reward points credit cards
Pros
Rewards can be redeemed for travel and non-travel options.
Earn rewards for popular travel expenses like food and transit.
Potential for superior redemption values if you transfer to travel partners.
Some premium travel credit cards come with annual travel credits, airport lounge membership and other perks.
Most have no foreign transaction fees.
Many travel credit cards come with complimentary travel insurance benefits.
Cons
Most have annual fees, typically ranging from $95 all the way up to $695. (No-annual-fee travel rewards cards exist, but are rare.)
Travel rewards programs can be complicated.
You rarely get any airline or hotel-specific travel benefits.
Redemption values can range from disappointing to exceptional depending on how you redeem.
How to choose which reward type is right for you
To find the right rewards credit card, think over how each type might suit your needs best. Consider the following tips as you compare cards to find the right fit.
- Decide on the type of rewards you want to earn. Think about how you want to redeem your rewards, then pick a card that helps you meet your goal. For example, flexible rewards credit cards are good for people who want multiple redemptions to choose from, whereas co-branded points cards are best for people who travel with a specific brand all the time. Cash-back credit cards work well for anyone who is fine redeeming rewards for statement credits, gift cards or merchandise instead of travel.
- Figure out how much work you want to put into it. If you are willing to do some research and planning, picking a card with bonus categories for rewards or a somewhat complicated rewards program can help you get more value over time. For example, you may have to research multiple travel redemption options to find one with the best value.
- Determine which credit card perks you can actually use. Decide if you want credit card benefits like free checked bags, automatic elite status with a hotel brand, airport lounge access, annual travel credits or a fee credit for Global Entry or TSA PreCheck membership. If these benefits speak to you, look at cards that offer them. Just keep in mind you’ll likely need to pay an annual fee to get the best perks.
- Check for consumer protections. Decide whether you want consumer benefits like purchase protection against damage or theft, extended warranties or return protection. If so, look for rewards credit cards that have these perks built in.
- Compare cards based on their annual fees. Determine how much in annual fees you feel comfortable paying, then compare cards with annual costs in that range. Remember that rewards credit cards with the highest annual fees offer the most in benefits, but you’ll only come out ahead if you can utilize most or all the perks you get. In the best-case scenario, the rewards you earn from your normal spending should cover any annual fee.
- Be honest with yourself when it comes to whether you’ll carry a balance. Finally, remember that credit cards charge interest that can wipe out your rewards in a hurry. If you think you might need to carry a balance in the short term, you’ll be better off with an introductory 0% APR credit card that promises zero interest on purchases, balance transfers or both for a limited time. Luckily, there are some great 0% intro APR cards that also offer ongoing rewards.
The bottom line
The right credit card for you depends on how you want to redeem your rewards and which cardholder benefits you want access to. In the meantime, you’ll want to decide whether you want to put any work into maximizing your rewards as you redeem them, or if you prefer a standard cash-back credit card that makes redeeming your points as simple as possible.
There is no “right” or “wrong” type of rewards credit card to get, but there is an optimal card type for every kind of consumer. Figure out what you really want and what you’re willing to pay, and you’ll eventually find the card that suits your spending style best.
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.
