Cash Back Credit Cards vs. Points/Rewards Credit Cards

I sometimes discuss with colleagues and friends which "benefit" credit card they use and why they use it.

Some of them reply that they use some sort of points or reward card which earn them airline miles, gift certificates, cruises, electronics, whatever... the smarter ones reply that they earn "straight cash homey!"

I always recommend a cash back credit card in today's world of discount retailers, because one can almost always find these other "reward" items for less someplace else. See my article on why I love the Chase Freedom Cash Back Credit Card.

What do I mean? Let's look at the pro's and cons's between these two popular "benefit" credit cards:

1. Cash Back Credit Card
2. Airline Miles Credit Card

The Pro's" of Cash:

• Can be used anytime, anywhere, any increment, to buy virtually anything
• Cash has NO "blackout dates"
• Cash NEVER expires
• Note: You can still earn "miles" by joining free frequent flyer programs that virtually all airlines offer

The "Con's" of Cash:

• Inflation will erode the value of cash over longer periods of time
• It takes more discipline to use cash "wisely" once received

The "Pro's" of Miles:

• Airline tickets are one of the most expensive parts of travelling and "miles" that are exchangeable for tickets are a nice reward feature

The "Con's" of Miles (This is where the proverbial $hit hits the fan):

• Most miles programs restrict the dates that you can fly (called blackout dates).


• Most airlines only reserve a few (sometimes none!) seats for "miles" usage; therefore, it's often times impossible to get on a flight unless you book almost a year in advance.
  
• A ticket, is a ticket, is a ticket: 25,000 miles are usually redeemable for one ticket within the continental US. These means you only obtain the true value of the ticket if you fly to an obscure or distant destination


• Let's say you want to travel from DC to the Caribbean: then you need extra miles, regardless of whether or not the flight is cheaper or more expensive then a domestic flight! (If you get cash back, then you can put that towards a flight anywhere in the world, not just what you are eligible for)
  
• Miles literally expire (unbelievable, right!) - Cash never does!
  
• You can always find a cheaper price (then retail value) on the online discount websites (my favorite is cheapair.com)
  
• If you earn cash back then you might have enough money to purchase two or more flights from a discount or local carrier. The same amount of miles card spending might only earn you enough miles for a single flight.
  
• Some airport destinations simply aren't even eligible for mileage usage.

I could go on even more, but you get the point. The bottom line is as follows:

Reward programs restrict or constrict your spending habits. Cash programs allow YOU to determine who, what, when, where and how you spend your hard earned dollars (and who better to make this decision then YOU!)

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