When you apply for a rewards credit card, you usually have to choose between cash back and travel rewards. To help sway your decision, the companies that offer travel rewards credit cards often try to seduce you with images of exciting vacation destinations that you can supposedly use your rewards for. (See also: How Travel Rewards Credit Cards Really Work)
For people who travel often, these rewards programs can be very valuable. Some expensive airfares, for instance, can be had for rewards rates that no cash-back card can compete with. (See also: Which Airlines Offer the Best Value for Their Miles?)
But most people don’t travel enough to earn the points needed to score such deals. You may find the points and miles that these travel reward cards offer to be difficult, or sometimes impossible, to redeem for reservations you need. As a result, cash back credit cards are the better choice for many people. (See also: How Cash Rewards Credit Cards Really Work)
Here are six reasons that cash-back cards could be a better choice than travel rewards.
1. Cash back offers consistent value
What’s a point or mile worth with your favorite airline or hotel program? You may never know, as you could receive excellent value from your rewards one day, and very poor value at another time. But with cash back, you always know exactly what your rewards are worth (usually 1 cent per point or a certain percentage of your purchases).
See also: Best Credit Cards that Offer Flat Rate Rewards for All Spending
2. Cash-back cards have gotten more competitive
It used to be that a strong cash-back card allowed you to earn 1 percent on most purchases, and perhaps 2 percent on a few bonus categories such as groceries or gas. But now, there are plenty of cards that offer as much as 5 or 6 percent bonus cash back on purchases from eligible merchants such as gas stations, grocery stores, and office supply stores. (See also: How Credit Card Issuers Classify Your Purchases for Bonus Points)
3. Frequent traveler programs are less valuable
If you’ve tried to redeem your airline miles or hotel points recently, then you know how hard it can be to get substantial value from your rewards. For example, most airlines now charge a “standard” rate that requires at least double the miles of the traditional rates, often referred to now as the “saver” rates. Unfortunately, airlines have gotten stingy about the amount of award seats available at the saver rate. (See also: Which Credit Cards Have the Best Travel Redemption Value?)
Likewise, hotel programs may claim to make every standard room available as an award for points, but many independently owned properties have gotten around this by curtailing the number of rooms that are labeled “standard.” As a result, you may well be told that no rooms are available for your points, as the remaining ones have a superior “city view” or “garden view.”
4. Cash back is more flexible
Even when you can earn travel rewards that are equal in value to the cash back that you could have earned, you may find yourself wanting cash instead. By using a travel rewards card, you are limiting yourself to travel rewards, whether or not you actually want or need to travel. For example, if you have several thousand dollars’ worth of travel rewards, you might regret not earning cash back if you decide not to travel next year due to illness, job loss, or just a busy work schedule.
In short, you can always use your cash back to pay for travel reservations, but you can’t pay your bills with frequent flyer miles. (See also: Best Ways to Earn Cash Back Without Spending Extra)
5. Points and miles depreciate, while cash earns interest
As travel reward programs have become less valuable, your points and miles have fallen in value as a “currency.” And there’s seemingly no end to this process. It’s a fair bet to say you can expect the miles that you’ve already earned to fall in value each year. This is important as it can take some people years to save up enough travel points for a big trip. On the other hand, you can invest your cash back rewards and earn interest just as you would on your other savings.
6. Travel prices are falling
Flying is less expensive than it once was, thanks in part to low fuel prices and increased competition from ultra low-cost airlines. It’s actually common to find sales offering domestic airfare for less than $100 each way. While that’s great news for travelers, it also means that your frequent flyer miles are worth less than they were when flights were more expensive. In addition, home sharing services like Airbnb have reduced the cost of lodging for many travelers. This makes hotel stays less necessary and their rewards points less valuable.