With hundreds of credit cards available and a ton of great rewards and signup promotions, how can you choose between cash back credit cards and travel rewards credit cards?
I’ve written about both the top cash back credit cards and the best travel rewards credit cards, and at the end of the day I love them both! But it’s not good practice to constantly sign up for credit cards (ideally no more than one every 90 days), so you really have to pick and choose which you want to sign up for.
I was faced with this dilemma recently when I had a really great travel rewards credit card offer come up that I wanted to take advantage of, yet there were also two really solid cash back credit cards that I was hoping to get as well. If you find yourself in this situation, what should you do?
Read on to find out what I decided to do as well as some tips if you find yourself debating between the two different types of cards.
Cash Back Rewards Credit Cards or Travel Rewards Credit Cards?
There are two cash back credit cards that I would like to get as soon as possible. They are the Fidelity® Rewards Visa Signature® Card (aka “the best cash back credit card you have never heard of“) and the Amazon Prime Rewards Visa Signature Card. The Fidelity card offers a flat 2% cash back on every purchase, which is the highest cash back rate you will find out there today. The Amazon card gives 5% cash back on Amazon so I feel like I’m losing 5% if I don’t have it. Both really solid cards I would use as my go-to / default cards.
I would have signed up for one of these cards except Delta Airlines was running an offer that was expiring soon (I’d share but the offer is expired as of this post going live). Delta is based where I am, in Minneapolis-St. Paul and I’ve been keeping my eye on their card for a while now to see if their offer would increase anytime soon. Well…it did. And the offer would essentially equal two free round-trip flights for my wife and I anywhere in the United States (Vegas here we come!).
You may be asking “why not sign up for both cards? Or even all three” I have a general rule of only signing up for a new card every 90 days. When you consider the fact my wife also travel hacks that’s plenty of cards to take advantage of the best offers. So if I signed up for the Delta card
Ultimately I decided to sign up for the Delta Airlines card. The reason I went with this offer over the other two cards was simple. First, we are almost certainly going to use the flights even if we don’t have it assigned to a specific trip. Second, it takes a while to sign up for the card and get the points, so there is a sense of urgency there. And lastly the offer was going to go away while the other two credit card offers are unlikely to go away anytime soon.
Know Your Goals
I don’t think that travel rewards credit cards are always better than cash back credit cards. Trust me, I would love to have that Fidelity card for everyday purchases. And I would immediately start saving money with the 5% Amazon cash back credit card. For me it was more about the offer going away and knowing that my wife and I were almost certainly going to book flights within the next year using the points.
As we pay down debt travel has been something we haven’t had to sacrifice because of travel hacking, so you can see why it’s easy for me to choose a travel rewards credit card over a cash back card. If we are able to fly somewhere for free it makes travel much more affordable to us and much easier to justify given the fact that the money could be used to pay down debt.
If you don’t know whether you would use the travel rewards, the choice is an easy one. Cash back credit cards are easy, straightforward, and usually you get the same cash back rate forever. Travel rewards credit cards, on the other hand, take time and effort to keep track of and use.
Knowing your goal can help you pick which type of card you should open. While I know many people love to travel, many aren’t willing to put in the time and effort to plan how they will use the card, keep track of when they open it (and when they should close it by to avoid the annual fee), or create one more login and have one more card in their wallet.
At the end of the day it comes down to goals and what you value. If you value simplicity travel rewards might not be for you. If you are willing to pout in some effort to get free flights or hotels, travel rewards credit cards likely should be your focus (warning: it can be addicting once you get started!).
Know Your Card & Have a Plan
Understanding the cards you are signing up for is key. Cash back credit cards typically have no annual fee and are really straightforward. For example the Discover it® Card has quarterly “bonus” categories where you can get 5% cash back. They change it quarter so you have to stay on top of them. This is pretty much the most complicated cash back rewards card there is, and it really isn’t that complicated at all.
Travel rewards credit cards are more complicated as you need to understand what the annual fee is and decide before you open the card if your plan is to close it before that fee kicks in a year later. You also want to understand what the points can be used for and what it translates to. For example, if you get 60,000 “points” for opening a card and spending $3,000 within the first three months, what does that translate to? Two roundtrip flights in the United States? Or two roundtrip flights abroad? How do the flights fluctuate based on time of the year and when you book them? A lot to consider.
Planning ahead is key. Make sure you understand the card you are signing up for, what the reward/promotion is, and what your plan is for redeeming the rewards. I’m all about tracking things in spreadsheets so feel free to use my free credit card rewards tracking file.
Do Your Research and Find the Right Card for You
If you are interested in cash back rewards credit cards check out The Top Cash Back Credit Cards and How to Get a Free International Flight on United Airlines.
And if you are interested in travel rewards credit cards check out Top Travel Rewards Credit Cards and The Best Cash Back Credit Card You Have Never Heard Of.
Finally consider reading my guide The 7 Keys to Successful Travel Hacking.
If you had to choose between a travel rewards credit card or a cash back credit card, which would you choose? What makes you choose one over the other? Do you travel hack or have you considered travel hacking?