Cash back vs. miles

You’ve decided you want a credit card that offers rewards. And why not? Used responsibly, rewards credit cards can help you earn something back from your spending.  

But which credit card rewards are best for you? There are generally three types: cash back, miles and points. Read on for an overview of the differences between cash back and miles-earning credit cards and what to consider about each.

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. For example, the Capital One Savor card offers 4% cash back on dining, entertainment and popular streaming services; 3% at grocery stores;¹ and 1% on all other purchases. 
• 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 receive the cash back. For example, your options might include a statement credit, a check or a gift card. You can find out from your issuer which choices are available for the card you have.

Travel rewards credit cards let you earn a certain number of 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 card earns you unlimited double miles with every purchase as well as bonus miles with qualifying purchases. You can redeem them on any hotel, airline or travel purchase, with no blackout dates.
• 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.

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 lender and the rewards program it’s related to. 

How do you choose between a cash back and a miles-earning 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 score. 

One way cash back and miles-earning 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.

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

When to consider using a cash back credit card

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, the Quicksilver card earns you 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.
• 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.

When to consider using a miles-earning credit card

Here are some situations when you might want to use a miles-earning travel rewards card: 

• If you travel often. A card that earns miles could deliver big rewards. For example, with the Venture card, you’ll earn unlimited double miles on every purchase and 5 miles per dollar on hotels and rental cars booked through Capital One Travel.²
• If you want to elevate your experience. A travel rewards card may offer special benefits. For example, if you’re a Venture or Venture X cardholder, you could receive up to a $100 statement credit for either Global Entry or TSA PreCheck®.³ And Venture X also offers unlimited access to participating airport lounges thanks to a complimentary Priority Pass^TM 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.

Cash back or travel miles? A look at your lifestyle and spending habits might 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-earning card could help snag you a dream vacation and special upgrades.

As with any credit card, it’s a good idea to check the terms and conditions before you apply. And whichever credit card you choose, remember you could get the most out of your rewards by paying off your balance on time every month and using your card responsibly.