Cash back vs. points rewards

Cash back and points are two types of credit card rewards. Here’s a look at some of the similarities and differences between them.

What you’ll learn:

• Cash back and points credit cards let you earn rewards as you spend that you can later redeem.

• The rewards can come in different forms: cash back or points.

• Depending on the card, you may be able to redeem your rewards for things like a check, statement credit, gift card or travel purchase.

• Points and cash back cards might come with different interest rates, annual fees and redemption options.

A cash back credit card lets you earn back in dollars a percentage of what you spend on it. You can redeem those dollars for things like a statement credit or gift card. For example, if you earn 2% back on certain purchases, that’s $2 for every $100 you spend. The amount you could earn varies by card and how much you’re spending.

Points credit cards also offer rewards based on how much you spend. But instead of earning cash back, the currency is points. The value of the points and how you earn and redeem them depends on the card’s terms and conditions.

In general, both cash back and points credit cards fall into one of three different rewards categories:

1. Flat or fixed rate: The percentage you earn on purchases is generally the same on every transaction—whether you’re buying gas, groceries or something else. For example, with the Capital One Quicksilver card, you can earn unlimited 1.5% cash back on all purchases. 

2. Tiered: Sometimes called bonus-category cards, rewards for tiered cards change based on the type of purchase. Higher-tier rewards percentages are usually on selected bonus categories. Purchases outside those bonus categories generally earn rewards at a flat rate. For example, Capital One Savor cardholders earn unlimited 3% cash back at grocery stores and on dining, entertainment and popular streaming services, plus 1% cash back on all other purchases.

3. Rotating: Rotating cash back cards function much like tiered cards, but bonus categories can change periodically. Purchases in these rotating categories typically earn a higher rate than other purchases. Purchases that don’t fall into these bonus categories are typically rewarded with a flat cash back rate.

If you’re not sure which rewards credit card to choose, you might want to think about your lifestyle and spending habits. If you’re trying to decide between the two, you might consider these factors:

The best rewards credit cards help you maximize rewards for things you already buy. You might compare redemption options and whether the rewards expire. Capital One rewards don’t expire for the life of the account, and there’s no limit to how much you can earn.

In addition to looking at the annual fee, it’s a good idea to understand all of the card’s terms before you apply. These terms include APR, introductory offers and other benefits. Other potential fees include balance transfer fees and foreign transaction fees.

Many card issuers offer bonuses to new cardholders. And a low or 0% promotional interest rate can give you more time to pay off your purchase while paying minimal or no interest. But Bankrate warns about overspending and going into debt just to earn a reward or benefit.

Some credit cards offer fraud protections and security features. There may also be extras like exclusive event access, travel upgrades, insurance and other benefits.

The right card for you is one that’s tailored to your spending habits. Whether you’re a globe-trotting adventurer, an avid foodie or someone who wants to earn cash back on everyday purchases, Capital One has a rewards card to fit your lifestyle.

• See if you’re pre-approved for credit cards without harming your credit scores. 

• Explore travel rewards cards with unlimited miles you can actually use. 

• Earn unlimited 1.5% cash back on every purchase, every day, with a cash back rewards card. 

• Earn unlimited cash back on food and fun with a dining and entertainment rewards card.