Miles vs. cash back: Which type of reward is right for you?

Got your eye on a credit card that offers rewards? When used responsibly, a rewards credit card can help you build credit and earn as you spend.

There are generally three types of credit card rewards: cash back, miles and points. Learn some differences between cash back and miles credit cards to help you decide which is best for you.

Key takeaways

• Cash back and miles are two types of credit card rewards.

• Cash back rewards cards help you earn money as you spend. And some purchases might earn a higher rate than others.

• Travel cards typically offer rewards as miles or points that can be redeemed for travel purchases and beyond.

• The type of rewards card that’s right for you can depend on your spending habits. Frequent travelers might enjoy travel rewards, while people who want to earn on everyday purchases might benefit from cash back.

With cash back credit cards, you earn a percentage of your purchase price on every eligible transaction. Generally, there are three types of cash back cards:

• Flat-rate cash back cards let you earn the same percentage rate on everything you buy with your credit card. For example, Capital One Quicksilver and QuicksilverOne cards let you earn 1.5% cash back on every purchase, every day. 

• Tiered cash back cards give you different percentages of cash back, depending on the type of purchase. The Capital One Savor card offers 4% cash back on dining, entertainment and popular streaming services, 3% at grocery stores and 1% on all other purchases.¹

• Rotating cash back cards typically offer a lower flat rate for most purchases but a higher percentage for categories that rotate throughout the year. In some cases, you can pick the categories. In other cases, the credit card issuer chooses the categories.

Once you’re ready to cash in your rewards, you can usually choose how you redeem the cash back. Your options might include a statement credit, check or gift card. You can find out from your issuer which choices are available for your card.

Travel rewards credit cards let you earn miles or points for every dollar you spend. Generally, there are two different types of cards that can earn miles:

• General travel cards may give you more choices over how you can earn and redeem your miles. For example, using a Capital One Venture Rewards card lets you earn unlimited double miles with every purchase as well as bonus miles with qualifying purchases. Miles can be redeemed for any hotel, airline or travel purchase—and much more.

• Co-branded airline rewards cards are associated with one particular airline. You’ll typically earn the most miles by using the card to buy flights and other travel purchases with that airline and its partners. Airline-specific rewards cards can also include benefits like priority boarding or seat upgrades.

Keep in mind that the term miles doesn’t have anything to do with the actual distance you’ve traveled. The value of a mile—and what you can do with it—depends on the issuer and its rewards program.

How do you choose between a cash back and a miles rewards credit card? Both types can offer many of the same advantages as other cards. And over time, if you use your credit card responsibly, it can help you build or rebuild your credit history and improve your credit scores.

One way cash back and miles cards might differ is in their terms. That could include things like the interest rate, whether there’s an annual fee, if or when rewards expire and whether you’d get a bonus for qualified purchases with your new card.

Rewards cards may also offer bonuses to new cardholders. Capital One’s Venture and Venture X offer 75,000 bonus miles when you spend $4,000 in the first three months from account opening.

Knowing the terms of your credit card could help you decide which card works best for your personal situation and needs.

Here are some situations when you might want to use a cash back card:

• If you want direct access to cash rewards: You use your card, you earn cash back—simple as that. For example, with the Quicksilver card, you earn 1.5% cash back on every purchase.

• If you tend to spend more in certain categories: You may earn more if you find a card that offers good rewards on things you usually buy. Dine out a lot? The Savor card offers its highest tier of rewards—4% cash back—for dining, as well as entertainment and popular streaming services. Some cards offer rotating bonus categories where you earn a higher percentage back on spending at certain times, like gas one month and groceries the next.

• If you like flexibility: Don’t have a grand plan for your rewards? A cash back card may let you redeem what you earn on all types of purchases—or as a check or statement credit.

Ultimately, the value of your rewards depends on how you want to use them. For instance, rewards miles may be worth more than when they’re earned or redeemed in the card issuer’s travel portal.

It’s also worth considering whether the card has an annual fee.

Here are some situations when you might want to use a miles rewards credit card: 

• If you travel often: A card that earns miles could deliver big rewards. With the Venture or Venture X credit card, you earn unlimited double miles on every purchase and 5 miles per dollar on hotels and rental cars booked through Capital One Travel.² Travel cards may also come with benefits like travel insurance or waived foreign transaction fees.

• If you want to elevate your experience: A travel rewards card may offer special benefits. Venture and Venture X cardholders could receive up to a $100 statement credit for either Global Entry or TSA PreCheck®.³ Venture X also offers complimentary access to participating airport lounges thanks to a complimentary Priority Pass™ membership with Visa Infinite® benefits.⁴

• If you love a bargain: The value of miles can change depending on when and how you redeem them, so you could snag a better deal than you imagined.

If you’re wondering: Are travel miles or cash back better? A look at your lifestyle and spending habits could help you decide what kind of rewards card is right for you.

If you don’t travel much and like keeping your options open, you might find that the flexibility of a cash back credit card suits your needs better. But if you’re a frequent traveler and enjoy travel-related perks, a miles card could help snag you a dream vacation and special upgrades.