Choosing between a cashback credit card and a points based credit card is one of the biggest decisions when selecting a rewards card. Both reward systems offer value, but they work very differently and benefit different types of spenders. Some people save more with straightforward cashback, while others prefer the flexibility and enhanced value that travel and rewards points provide. This guide explains the differences, strengths, weaknesses, and how to choose the right type of rewards card for your lifestyle in 2025.
How Cashback Rewards Work
Cashback rewards are simple. You earn a percentage of your spending back as cash. This can be redeemed as:
- Statement credits
- Direct deposits into a bank account
- Gift cards
- Purchases in reward portals
Common Cashback Rates
Most cashback cards offer:
- One percent on general purchases
- One point five percent on everything
- Two percent flat rate
- Three percent to six percent in categories like groceries, gas, or dining
Cashback is predictable and easy to calculate.
How Points Rewards Work
Points based cards award points instead of cash. You earn points per dollar spent, and the point value varies depending on how you redeem them.
Common Redemption Methods
- Travel bookings
- Airline miles
- Hotel stays
- Gift cards
- Statement credits
- Purchases in reward marketplaces
Some points are worth one cent each, while others can be worth more when redeemed for travel or transferred to partner programs.
Cashback vs Points: What Each Type Does Best
Both reward systems offer advantages. The right choice depends on how you spend and how you prefer to redeem rewards.
Strengths of Cashback Rewards
1. Simple and Easy to Understand
You do not need to track point conversions, transfer bonuses, or variable redemption values. Cashback rewards are straightforward. If you earn two percent back, you know exactly how much you will receive.
2. Useful for Everyday Spending
Cashback cards work well for:
- Groceries
- Gas
- Dining
- Household expenses
- Bills
Everyone spends money in these areas, so cashback fits almost every lifestyle.
3. Flexible Redemption Options
Cashback can be used for:
- Statement credits
- Savings
- Bills
- Emergency expenses
There are no blackout dates or travel restrictions.
4. Works Even if You Do Not Travel
Not everyone travels often enough to maximize points. Cashback works for anyone, anywhere.
5. Low Maintenance
You do not need to track point value changes or transfer partners. Cashback is ideal for people who prefer simplicity.
Weaknesses of Cashback Rewards
1. No Extra Value Above Face Amount
If you earn one hundred dollars in cashback, it is worth one hundred dollars. You cannot increase the value through bonuses or redemption strategies.
2. Lower Value for Frequent Travelers
Travelers may earn more value with points because points can be worth more than cash when redeemed for flights or hotels.
3. Limited Premium Benefits
Cashback cards tend to offer fewer premium perks compared to travel rewards cards.
Strengths of Points Based Rewards
1. Higher Potential Redemption Value
When used strategically, points can be worth more than cash. Some travel redemptions value points at:
- One point five cents
- Two cents
- Sometimes even more for premium flights or hotel upgrades
Example:
Fifty thousand points might be worth seven hundred dollars in airfare when transferred to the right partner.
2. Travel Benefits and Perks
Many points based cards offer valuable extras:
- Airport lounge access
- Travel insurance
- Rental car coverage
- Hotel upgrades
- Trip protections
These benefits can save frequent travelers a lot of money.
3. Transfer Partners
Some points systems allow you to transfer points to:
- Airlines
- Hotels
- Travel partners
This can dramatically increase point value when used wisely.
4. Big Welcome Bonuses
Points cards often offer large sign up bonuses worth hundreds of dollars in travel.
Weaknesses of Points Based Rewards
1. More Complex to Manage
Points systems vary widely. You must understand:
- Point values
- Transfer partners
- Redemption rules
- Expiration policies
People who do not enjoy managing their cards may find this frustrating.
2. Travel Restrictions Apply
Some redemption options have:
- Blackout dates
- Limited availability
- Higher point costs during peak travel seasons
3. Lower Value for Non Travelers
If you rarely travel, points may not offer better value than cashback.
4. Higher Annual Fees
Many premium points cards have higher fees. You only get value if you use the benefits regularly.
Which Reward Type Earns You More Money
This depends entirely on how you spend and how you redeem rewards.
Cashback Earns More For:
- People who want simplicity
- People who do not travel often
- People who prefer statement credits
- People who want straightforward redemption
- People who want no annual fee cards
Cashback is ideal for maximizing everyday spending without complicated rules.
Points Earn More For:
- Frequent travelers
- People who use transfer partners
- People who understand redemption strategies
- People who want premium perks
- People who value lounge access, hotel upgrades, or travel insurance
Points can be far more valuable, but only if you use them properly.
Which Card Type Is Better for Beginners
Most beginners benefit from cashback cards.
Why Cashback Is Better for Beginners
- Easier to understand
- Lower fees
- Low maintenance
- Useful for everyday life
- No special strategies needed
A simple two percent cashback card is a great fit for most people who are new to credit.
When Beginners Should Consider Points
If you are planning a major trip or want to build toward premium travel perks, a beginner friendly points card is a good starting point. Just understand the rules before you dive in.
Which Card Type Is Better for People Rebuilding Credit
People rebuilding credit should almost always start with cashback cards.
Reasons
- Many secured cards offer cashback
- Lower APR options exist
- Lower fees
- Less complexity
- No need for high credit limits or premium perks
Once credit improves, upgrading to rewards or travel points cards becomes easier.
Which Card Type Is Better for High Spenders
High spenders may benefit more from points, especially if they redeem for travel.
Why
- High spending earns more points
- Premium travel redemptions give higher value
- Transfer partners multiply redemption power
However, high spenders who do not travel often still benefit more from flat rate cashback.
Which Card Type Is Better for Travelers
Frequent travelers benefit the most from points based rewards.
Benefits Travelers Gain
- Free flights
- Free hotel nights
- Upgrades
- Lounge access
- Priority boarding
- Rental car protections
Travel rewards often stretch point value far beyond the value of cashback.
How to Decide Between Cashback and Points
Ask yourself these questions:
1. Do you travel at least once or twice per year
If yes, points may offer more value. If not, cashback is better.
2. Do you want simple rewards you can use anytime
If yes, choose cashback.
3. Do you want premium perks
If yes, choose points.
4. Do you want a no annual fee card
Most cashback cards fit this preference.
5. Do you enjoy maximizing reward strategies
If yes, points may be more fun and profitable.
Final Verdict: Cashback vs Points in 2025
Cashback is best for:
- Beginners
- Rebuilders
- Non travelers
- Simplicity seekers
- Low fee cardholders
Points are best for:
- Travelers
- High spenders
- People who enjoy reward optimization
- People who want premium perks
Both reward types offer strong value. Choosing the right one depends entirely on your lifestyle, travel habits, and financial goals. If you want simplicity and everyday savings, cashback is the better option. If you want maximum travel value and enhanced perks, points based cards provide more long term benefits.
