Points or cash? How to choose the best rewards card

How to choose the best rewards card

Points or cash? Here’s a handy decision tree that will help you make your choice


If you’re shopping around for a new credit card, you may notice most boil down to two types of rewards: points or cash back.

It might be tempting to pick the card that gives you the best return, but it’s not that simple. Where you shop, how much you spend, and the type of rewards you prefer are all part of the decision-making process.

The case for cash back

If you prefer simplicity, cash-back cards are the way to go. The best cash-back credit cards give you the highest return based on your everyday spending habits. Here’s what you should consider.

Payouts: Depending on the card, cash back is paid out monthly, quarterly, or annually and refunded in the form of a statement credit, direct deposit to your bank account, or a cheque in the mail.

Percentage earned: Cash-back credit cards earn you a fixed percentage based how much you spend. Generally speaking, cash-back cards with an annual fee will earn you a higher base percentage, so you need to factor that in if you’re comparing it to a no-fee card.

Multipliers: Some cash-back cards offer multipliers, which give you a higher percentage of cash back in popular spending categories such as grocery stores, gas stations, drugstores, and recurring bills.

The case for rewards

Instead of earning cash, travel rewards credit cards net points that can be used to claim travel (flights, hotels), gift cards, or merchandise. Rewards cards can be quite lucrative when you know how to earn and redeem points effectively, but there are several features to consider.

Type of rewards earned: Rewards cards are either linked to a specific travel brand (airline or hotel), or give you flexibility to travel on any carrier. If you’re loyal to a specific brand, it makes sense to pick a co-branded card. If you prefer flexibility, then pick a card that gives you the most options.

Signup bonus: Most rewards cards offer a huge signup bonus to entice you to apply. Assuming you can meet the minimum spend requirement, that bonus could be worth a few hundred dollars.

Ease of redemption: Rewards are useless if you can’t use them. Look for programs that don’t have blackout dates or many restrictions so you can claim your points when you want to.

Value of your points: Know what your points are actually worth. For example, if you earn 1 point for every $1 spent, and it takes 100 points for you to claim $1 in rewards, your points are worth 1%. If you have a co-branded credit card for flights or hotels, you need to determine how many points it takes to get a free flight or hotel room.

Additional benefits: Besides rewards, you’ll want to look at the additional benefits offered. Many rewards card offer a comprehensive travel insurance package, auto rental insurance, and price protection as standard benefits.

The best rewards credit cards are the ones that make it easy for you to redeem something that you’ll actually enjoy. There’s no point in collecting airline points if you don’t like to fly. Pick a card that works for you!

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