Which Type of Credit Card Rewards Program Is Best?

By Leni Parrish on August 14, 2013

Millions of Americans currently hold one or more credit cards, and many of them offer rewards in the form of points, cashback or airline miles. Many business travelers opt for airline miles when possible, while the average consumer usually prefers the cashback option. Regardless of preference, most rewards programs can be transferred or exchanged for other items in some form or another, but those who wish to get the most out of their cards’ rewards may wish to consider all of the above before selecting the perfect card for them. How can consumers be sure which card is right for them? In the following article, we will review the pros and cons of cashback, points and miles programs in order to help you determine just that.

Credit Card Rewards

Cashback Programs

Cash is the language that we all speak, and this makes it a very attractive option for most consumers (as no conversion from one format to another is needed). The biggest advantage is precisely that: the cashback rate promised is the cashback rate you will receive. If your rate is 3% and your spend $300, then you can calculate easily that you will receive $9 in cashback. Cashback programs also make it easy for you to exchange your rewards – who doesn’t accept cash or credit? Disadvantages to cashback programs include a lack of bonus redemption options that can boost your overall earnings, and an effectively lower rate when all is said and done – you may get 3% cashback as advertised, but you may have to convert it into a gift card in order to receive the full amount or risk a penalty.

Points Programs

Points programs can be great for those who want to retain some versatility when it comes to cashing out their points for cash or other items. In many cases, these points can be traded for cash, gift cards, travel, merchandise and other select options. This means that you will always have a preferred way to enjoy your rewards. Sometimes, points will be worth more if you trade them in on certain promotions. Users will find that penalties exist if you exchange your points for cash in many cases, however, and the number of redemption options often overshadows the limitations of selection within each category.

Miles Programs

Perfect for those who travel frequently, miles programs can help users wrack up the necessary points necessary to pay for airfare and other select accommodations. In some cases, these programs offer a bonus whenever you book with a select airline company. There are also big signing bonuses that can help you earn a ton of points quickly – many cards will offer you up to 20% equivalent in points for spending within the first three or six months. Some downsides include the limitations of where you can redeem these points and penalties when you attempt to redeem your points for something other than travel-related expenses. With miles programs, it only makes sense if you plan to use the points exclusively for airfare and have a card that is compatible with your favorite airlines.

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