Points vs. Cash Back: What Are the Differences?

One important factor to consider when choosing a credit card is how different cards reward their account holders. Many credit card issuers reward customers by allowing them to earn either cash back or points. Ultimately, choosing a card that offers points vs. cash back should depend on your spending patterns, travel habits, and personal preferences. 

In this guide to points vs. cash back, we'll discuss both options to help you make an informed choice.

Points vs. Cash Back: Understanding the Basics

First, let’s review what you need to know about credit card points and cash back.

What Are Point-Based Credit Cards?

Many credit cards reward their users with points that they can redeem for travel spending (often called "frequent flyer" or "airline" "miles"), gift cards, or merchandise. For some cards, the issuing bank may collaborate with a specific airline, hotel chain, or retail company. These co-branded cards typically allow users to earn points to spend on goods or services offered by the company.

Often, with points-based credit cards, you earn rewards for using the card. Some cards may pay more points depending on the spending category. For example, it may offer one point for every dollar spent on most purchases but two points for every dollar spent on travel, dining, or purchases made at a particular store.

The methods by which a credit card issuer allows you to redeem rewards may vary widely. Some credit card issuers may allow you to redeem points for purchases on their shopping or travel-booking websites. Others may issue gift cards to a particular retailer or restaurant in exchange for points. Other issuers may convert points to dollars redeemable as a monetary credit that can be applied to your account balance.

Some cards allow users to transfer their earned points to a company's customer loyalty rewards program. Sometimes, these programs give you extra benefits, such as complimentary nights at a hotel or airline seat upgrades.

What Are Cash-Back Credit Cards?

With cash-back credit cards, there's no need to navigate a potentially complicated rewards program. With these types of cards, users earn a percentage of cash back on every qualifying purchase that they make. 

For example, a credit card that offers 2% cash back allows you to earn two cents for every dollar you spend with the card. As with points rewards cards, some cash-back credit cards may offer higher reward percentages for certain spending categories. 

The rewards in cash-back programs are typically easier to understand. With cash-back programs, you're earning a clear cash value, unlike points which may fluctuate in value depending on how they are redeemed.

Redemption options also vary with these types of credit cards. While some issuers may send the earned amount directly to your bank account, others may issue redemptions as gift cards or statement credits. Still other issuers may allow you to request a certain amount of your earned cash back sent to you in the form of a check.

The Pros and Cons of Points Credit Cards

For some credit card holders, points-based credit cards have plenty of appeal. This is especially true if they offer bonus points for favorite spending categories or allow users to redeem points for goods and services. Frequent travelers who enroll in travel rewards programs, in particular, enjoy the ability to earn airline miles by using their credit cards for everyday spending.

That said, there are some drawbacks to points credit cards. For one thing, they may not offer the most value. For another, the reward program itself may be complicated and confusing.

Advantages of Points Credit Cards

Here are some benefits of points-based rewards credit cards to consider:

• They may offer bigger signup bonuses than cash-back cards.
• They may allow you to choose a preferred method of redeeming points.
• They may allow you to transfer the points to a company's loyalty program offering even more value.
• Many offer rewards particularly suited to frequent travelers, such as airline miles.
• Some offer additional perks, such as airline seat upgrades, free checked bags, access to airport lounges, or complimentary nights at a particular hotel.

Disadvantages of Points Credit Cards

Here are some of the drawbacks to points credit cards:

• Points credit cards often charge high annual fees.
• Points credit cards may have higher annual percentage rates (APRs).
• Navigating the points and reward redemption systems may prove confusing.
• You may have to earn a certain number of points before being eligible for redemption.
• The card's redemption options may not be suited to your tastes or lifestyle. As one example, if you don't frequently travel an airline miles card may not be helpful.
• Some cards have points expiration dates, which means you may lose unredeemed points if not used within a specified time frame.

The Pros and Cons of Cash-Back Credit Cards

Cash-back credit cards may offer a streamlined way to redeem rewards. However, cardholders may ultimately lose out on the travel savings that many points cards provide.

Advantages of Cash-Back Credit Cards

Here are some of the qualities that may make a cash-back credit card a good choice:

• The redemption system is straightforward. Rather than earning points, which may fluctuate in value, you’ll earn dollars instead.
• You may spend cash back on anything rather than being limited to redeeming rewards on certain goods or services.
• Some issuers offer automatic cash-back redemptions.

Disadvantages of Cash-Back Credit Cards

Here are some downsides of cash-back credit cards:

• Cash-back cards may offer smaller welcome bonuses than points credit cards.
• They don't typically offer special perks and discounts for travelers.
• The total amount of cash that can be earned in a given period may be capped.

Points vs. Cash Back: Which Is Right for You?

The choice between a points credit card and a cash-back credit card depends on several factors. Let's review scenarios in which either type of credit card makes more sense.

Who Are Points Credit Cards Right For?

A points-based rewards credit card makes sense for you only if the rewards are useful. For example, if a credit card allows users to earn airline miles for every dollar spent, but you seldom travel, it may not be a good fit. Similarly, a co-branded credit card that offers bonus points for purchases made at a particular store may not be the best bet if you rarely shop at that store.

However, if your spending habits align with a card's points program, it may be the right option for you. For instance, someone who travels frequently may use a points card to earn airline miles, receive a seat upgrade, and get access to airport lounges.

If you enjoy the idea of maximizing points for more significant rewards and are good at navigating sometimes complex reward systems, a points card may work well.

Who Are Cash-Back Credit Cards Right For?

Cash-back credit cards may prove a better fit for consumers who don't travel often or who wouldn't otherwise find value in the redemption methods and perks offered by points credit cards. For example, if you seldom shop at a particular store, there would be little sense in signing up for a credit card that allows users to earn bonus cash back on purchases made at that store.

However, if you don’t travel often or prefer the flexibility of spending rewards any way you like, cash back may be the better option. You may be able to redeem your earned cash in a variety of ways, such as a statement credit, a direct deposit to a bank account, or a paper check.

Points for Cash Cards: The Best of Both Worlds

If you’re stuck deciding between a points reward or cash back credit card, there’s another solution gaining popularity.

"Points for cash" cards offer a flexible hybrid between traditional points and cash-back rewards, allowing cardholders to redeem their points as cash back. This structure gives users more freedom to maximize their benefits, whether they prefer travel rewards, merchandise, or simply money back into their accounts.

One example of this is PNC’s Cash Unlimited card, which offers 2% unlimited cash back on purchases^[1]. With this card, points earned can be redeemed as statement credits, meaning you effectively get cash back by converting your rewards into spending power. Cash Unlimited also allows points to be redeemed for gift cards and travel. These cards are ideal for those who like the idea of earning points but want the flexibility to access that value as cash when needed. 

The hybrid structure of “points for cash" cards like the Cash Unlimited card provides convenience and flexibility, making them a great choice for anyone looking to optimize rewards for everyday purchases without being locked into specific redemption categories.

For those debating between points vs. cash back, these hybrid cards can offer the best of both worlds.

The Bottom Line: Maximizing Your Rewards

To maximize the rewards, it's important to choose a card that aligns with your lifestyle and spending habits. For example, if you spend heavily on dining and entertainment, look for a card that offers bonus points or higher cash-back percentages in those categories. Similarly, frequent travelers may benefit more from cards that offer miles or travel-related perks.

Whether you choose points or cash back — or a hybrid "points for cash" card — remember to use the card responsibly. Pay your balances on time to avoid interest charges, which can quickly negate the value of any rewards you have earned.