Travel points vs. cash back: Choose the best rewards credit card for you
When it comes to choosing a credit card, the way to get the most bang for your buck is to pick the one that’ll give you the most rewards for your spending. A cash back or a travel rewards credit card is the easiest way to use everyday purchases to give your budget a boost.
The basics of credit card points vs cash back
Travel credit cards let you earn points for every dollar spent, which can be redeemed for travel-related purchases like flights, hotels, car rentals, and more. The best travel credit cards often offer additional perks such as travel medical insurance, trip cancellation coverage, and lost baggage insurance. On the other hand, cash back credit cards reward you with a percentage of your spending, which can be credited to your card statement or deposited into your bank account.
Both types of cards come with unique benefits, making the choice between them a matter of personal preference.
Credit card points vs cash back – how to decide what's right for you
If you’re struggling to decide on which type of credit card rewards you want to rack up – points or cash back – here are some important factors to consider that can help steer you in the right direction.
1. Credit card benefits and side perks
Travel credit cards often provide exclusive benefits like airport lounge access, discounted vacation packages and free checked baggage. They excel in travel-related insurance and their coverage periods and amounts tend to be higher compared to cash back cards.
2. How often you travel
If you rarely travel abroad or prefer staycations, a cash back credit card may suit you better. Travel credit cards are ideal for frequent flyers and those who take advantage of various travel-related purchases. Most travel cards also offer bonus points on travel-related purchases, so if you seldom spend on flight tickets or hotels, you may not rack up as many points and could end up with a credit card that isn’t aligned with your spending habits.
3. Bonus categories and net rewards
Bonus categories are types of purchases that earn you a higher amount of rewards for every dollar you spend. For example, if a credit card offers 4% cash back on groceries and 1% back on all other purchases, groceries are considered a bonus category.
Aside from a few exceptions, the majority of cash-back credit cards offer the same limited selection of bonus categories (namely gas, groceries and recurring bills payments. Travel credit cards in comparison typically offer a broader range of bonus categories, providing more opportunities to earn points on various purchases.
4. Ease of use and flexibility
Cash back rewards are straightforward and flexible, applicable to everyday expenses. Travel point programs may require more effort to understand, and are usually accompanied by terms and conditions that can impact the value of your points based on when and how you redeem them. It is worth noting though, every program is unique and some are a lot simpler than others. For example, AMEX Membership Rewards offer relatively simple redemption processes with straightforward point values.
5. Rewards values
Here’s where things get interesting, and dare I say, more complex.
Cash back rewards have a straightforward value (for example, 1% equals 1 cent). Travel points, on the other hand, can offer more value depending on how you redeem them and the specific rewards program.
For instance, if you book a vacation with AMEX Membership points, you could settle for 1 point being worth 1 cent. But, if you were to transfer over your AMEX points to another rewards program (like, say Aeroplan), or strategically take advantage of the AMEX Fixed Points Program, the value of your points could go from 1 cent to upwards of 2 cents each. That’s a doubling in value. The same logic applies to programs like Aeroplan, where if you book a trip to maximize your miles in mind, you could exploit the program’s stop-over policy to visit more destinations without owing extra in airfare. Every rewards program is different though, so maximizing points values does require some research and know-how.
You’ll also want to consider the fact that travel points only offer the best value when actually redeemed for travel rewards like flights or hotel stays. By using points for anything else, like cash statements or gift cards, you’re making a compromise and reaping far less value out of each point.
6. Annual fees
Cash back credit cards often have lower or no annual fees compared to travel credit cards, which may have higher fees, especially premium travel cards.
7. Welcome bonuses
The ability to gradually earn rewards on your everyday spending is one thing, but in the case of many travel credit cards, you can quickly amass a ton of free points by taking advantage of lucrative welcome bonuses. Typically, cash back cards have lower bonus offers.
8. Interest rates
When it comes to interest rates, there’s very little to differentiate cash back from travel credit cards. As long as you pay off your balance in full and on time every month, you won’t owe anything extra on either card type.
If you tend not to pay off your balance fully every month, consider ditching rewards cards altogether and sticking with a low interest credit card.
Top cash back credit cards
Best for Groceries & gas
based on spending $2,200/mo after the annual fee
- Earn rewards
1% – 4% earn rate
- Welcome bonus
$250
- Annual fee
see Details
The CIBC Dividend Visa Infinite stands out for its great rewards on everyday essentials. With a 1% earn rate on all purchases and an impressive 4% cash back on groceries and gas - the most cocmmon spending categories for Canadian households - this card is a top choice. Plus, the new Cash Back on Demand feature from CIBC allows cardholders to redeem rewards whenever they want, starting at $25 increments as a statement credit.
Best for Everyday spending
based on spending $2,200/mo after $0 annual fee
- Earn rewards
1.25% – 2% earn rate
- Welcome bonus
$100
- Annual fee
$0
The SimplyCash credit card from American Express is a hassle-free choice for earning cash back. It keeps things simple by offering 2% cash back on gas and grocery purchases (up to $300 annually) and 1.25% cash back on all other spending. This no fee card is perfect for those who want straightforward rewards without any complicated categories or premium features.
Top travel credit cards
Best for Groceries & dining
based on spending $2,200/mo after $156 annual fee
- Earn rewards
1pt – 5pts / dollar earn rate
- Welcome bonus
15,000 bonus points (a $150 value)
- Annual fee
$156
The American Express Cobalt has established itself as one of Canada's top travel credit cards. If you’re looking for a versatile and rewarding card that excels both in everyday spending and travel, the American Express Cobalt is the perfect pick. With robust travel insurance, a generous welcome offer, and flexible point redemption options, cardholders can enjoy a range of benefits.
Best for Travel perks
based on spending $2,200/mo after $150 annual fee
- Earn rewards
1pt – 3pts / dollar earn rate
- Welcome bonus
30,000 bonus points (a $300 value)
- Annual fee
$150 $0 first year waived
The Scotiabank Passport Visa Infinite card is tailored to be your perfect travel partner, catering to Canadians with a passion for travel. Setting it apart from others, this card stands out by waiving foreign transaction fees and providing essential travel benefits.
The bottom line
When it comes to choosing a cash back or travel rewards credit card, pick the one that offers the best return on your purchases and the best rewards for your lifestyle. Still undecided? You can always get one of each.
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