Travel and Rewards Credit Cards Outperform Cash Back Cards

Travel and Rewards Credit Cards Outperform Cash Back Cards

Author: Ari Socolow on March 24, 2015

The Wall Street Journal recently ran an article entitled "Don't Settle for 1% Cash Back of Credit Cards".   The article, which confirms that the basic cash back rewards cards offer 1% which can usually be redeemed for merchandise or gift cards, cites several cards that pay slightly more including a Citizens (CFG) World Mastercard card that pays 1.50% to 1.80%.  (Oddly, the Wall Street Journal neglects however to highlight the fact that several cards actually pay over 2%, including the Merrill Lynch Travel Rewards card and the Barclays Arrival Card, paying 2.65% and 2.20% cash back when the value is taken as a charge against travel related charges on the card).  The article ends with a quote from someone at CardHub saying that people should avoid cards that earn travel and rewards miles because these miles can be devalued.  It neglects, however, to point out that - other than Delta Airlines  – very few loyalty programs have engaged in such a significant devaluation as to render the value of those points in the program to be worth less than 1 cent each (or 1 cent per dollar spent on a eligible travel and rewards program).  

Because the value in travel and rewards cards is significantly higher than cash back cards, strongly recommends airline and hotel loyalty credit cards for all individuals and couples not requiring immediate cash back.  Airline points ordinarily have a value well over 1 cent and can often be much higher, enabling cardholders to travel around the world in class of service that they might not be able to afford otherwise (see the BestCashCow airline mile valuation chart here).  Hotel points, likewise, can easily be worth as much as 3 cents, or 3% of spend in certain programs (see chart here).   The Club Carlson card, in particular, which gives 5 points per dollar spend, can often return value as high as 13% of spend if you redeem for hotel stays in London as this article explains.

Those who are not planning an immediate travel redemption and who are going to lose sleep over the possibility of their points being devalued should look to a flexible travel and rewards card instead of a direct airline or hotel loyalty credit card.  The top three are listed on this page.   In this category, the Chase Sapphire Preferred card is the best bet as those points can be transferred to United, Singapore, Korean and British Airways or to Hyatt or Intercontinental hotels.  You may maintain the points at Chase until you are ready to transfer them, and you always have the option of redeeming at 1% cash back.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to bank transparency and the climate crisis. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

Editorial Disclosure: Opinions expressed here are author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.

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