Cash Back or Travel Rewards: Which Should you Choose?

“Do you travel? Then a travel rewards card is your best bet.”

There was a time when I’d agree with this advice. Years ago, travel cards were like rolling luggage — purpose-built to make the frequent flyer’s life easier.

Now, however, travel rewards cards have become more complex. They’re stronger in some areas but weaker in others — and in the latter category, they’ve lost serious ground to cash back rewards cards, which have really only improved in the past few years.

Now that the line between travel and cash back cards is so blurred, which one is right for you? Even if you travel every week or never plan to travel again, the answer may surprise you.

Travel Card Pros

Major savings and perks on travel

It’s not surprising, travel rewards cards can save you silly amounts of money on travel.

Take, for example, the popular Chase Sapphire Preferred® Card. You’ll get 2 points per dollar on all travel purchases, 3 points per dollar on dining, and 5 points per dollar on all travel booked through Chase’s rewards program, Chase Ultimate Rewards®. Plus, your points are worth 1.25 cents per point when redeemed through Chase’s travel portal.

So, in a nutshell, if you’re a Sapphire Preferred cardholder and redeem 150,000 points for a vacation (including flights and hotels) through Chase Ultimate Rewards, you’ll actually save 30,000 points (150,000 points/1.25 cents per points redemption as a Chase Sapphire Preferred cardholder = 120,000), which is at minimum $300 in savings.

Sweet travel perks

Travel rewards cards aren’t just great for getting your next flight comp’d. They also include a bonafide toolkit for making the frequent traveler’s life a little easier.

Common perks among travel rewards cards include, but aren’t limited to:

• No foreign transaction fees.
• Free airport lounge access.
• Complimentary 24/7 travel concierge.
• Access to special booking sites like Capital One Travel.
• Auto rental collision damage waiver.
• Roadside Dispatch.
• Partner discounts and bonuses with companies like Hertz, Delta, etc.

But if you ask me, the most underrated perk of a travel rewards card is travel insurance. Still using the Chase Sapphire Preferred® Card as an example, the card includes:

• Trip Cancellation/Interruption Insurance.
• Trip Delay Reimbursement.
• Travel and Emergency Assistance.
• Baggage Delay Insurance.

So if you have a trip from hell, like missing your cruise due to weather delays, your travel rewards card could cover your last-minute hotel stay, provide reimbursement for essentials, and even reimburse your whole trip for up to $20,000.

Insane, and yet this isn’t uncommon among travel card perks.

Read more: Best Credit Cards for Travel Insurance

Hearty Welcome Bonuses and Travel Credits

To top things off, travel rewards cards often come with eye-popping welcome bonuses.

The Capital One Venture X Rewards Credit Card, for example, offers an impressive 75,000 bonus airline miles worth $750 in travel (when booked through Capital One Travel) when you spend $4,000 on purchases in the first three months from account opening. So your new travel card alone may pay for some or all of your next vacation.

Travel rewards cards also tend to offer some generous statement credits. The Capital One Venture X Rewards Credit Card is a shining example, offering up to $100 towards TSA PreCheck or Global Entry, up to $300 back as annual statement credits for bookings made through Capital One Travel, and more.

Travel Card Cons

Annual fee

To put it simply, most travel cards aren’t free.

The Chase Sapphire Preferred® Card costs $95 annually, and the Capital One Venture X Rewards Credit Card is $395. Travel rewards cards and premium rewards cards are often one and the same, and you’ll have to pay some cash upfront to get access to their lucrative perks.

Travel cards could be considered an investment — you’ll want to ensure you take advantage of all of their perks and rewards to maximize your ROI, so to speak.

Read more: Is an annual fee credit card ever worth it?

High credit requirement and APR

The best travel rewards cards also tend to be unforgiving of imperfect credit or late payments. Since they’re marketed towards big spenders and luxury lifestyle leaders, they almost always require an excellent credit score (720+) and charge the industry’s highest APR right out of the gate: 26.99% or higher.

Make no mistake — travel rewards cards are not designed to help you transfer a balance or pay off big purchases with a long introductory APR.

Travel redemption restrictions

This one often sneaks up on new travel rewards cardholders, which is why I mention it as often as possible; in most cases, you can only redeem your credit card points through your credit card company’s proprietary booking site — and these sites may not have as many options as KAYAK.com.

Cash Back Card Pros

Rewards for everyday purchases

Compared to travel rewards, cash back rewards tend to be smaller, percentage-wise — but they cast a much wider net.

With the Citi® Double Cash Card – 18 month BT offer, for example, you’ll earn 2% cash back on everything, all the time. Get 1% on all purchases and 1% when you pay for those purchases. There’s also some beautiful simplicity in that — you never really have to worry about what you’re buying, what category it falls into, and whether you’ll get more points if you book online… it’s just a 2% off sale on life.

No fees

As mentioned, travel rewards cards can cost hundreds of dollars a year. These fees are obviously offset by high rewards categories, big welcome bonuses, statement credits, etc. But the big caveat is that if you don’t use these perks, you’re just losing out on potential savings.

Cash back rewards cards, by contrast, typically come with no annual fee, and even include a small welcome bonus of around $200.

0% APR on purchases and balance transfers (sometimes)

Finally, cash back rewards cards tend to offer stress-relieving APR incentives on both old and new eligible purchases.

The Capital One Quicksilver Cash Rewards Credit Card is a great example of this, offering an intro rate of 0% for 15 months on purchases and balance transfers (then an APR of 17.99% - 27.99% (Variable). It’s also a pretty competitive cash back card to boot, with unlimited 1.5% cash back on all purchases, and a one-time $200 cash bonus once you spend $500 on purchases within three months from account opening.

If you’re looking to carry over your old credit card debt onto your new card through a balance transfer, make a big credit card purchase with 0% APR financing, or simply aren’t sure whether you’ll be able to pay off your monthly credit card bill, the answer for you is easy: skip the travel rewards card for now and get a simple cash back rewards card.

Read more: What is a Balance Transfer Credit Card?

Cash Back Card Cons

As simple, straightforward, and inoffensive as they are, cash back cards aren’t perfect. Here are some of their hidden drawbacks.

Limited perks

Cash back cards typically come with fewer perks than travel rewards cards. You’ll still get the essentials, such as:

• $0 fraud liability.
• Autopay.
• Security alerts.
• Credit monitoring.
• Card replacement.

And more, and you might even get a few nice-to-haves like extended warranty protection. But generally speaking, cash back cards can’t compete with the veritable buffet of perks that travel rewards cards offer — especially those invaluable trip insurance perks.

Foreign transaction fees

Another clear divide between travel rewards and cash back rewards cards is the latter will typically charge a foreign transaction fee.

This can be a real buzzkill when you’re traveling abroad, as every meal, tour, and stay suddenly comes with a 3% fee. That may not sound like much, but take it from me, it’s like a mosquito bite that itches every time you make a purchase.

Read more: Foreign Transaction fees: What they are and How to Avoid Them

Lower welcome bonus

Generally speaking, cash back cards with no annual fee won’t come with much of a welcome bonus. The going rate these days tends to hover around $200, so don’t expect your cash back card to pay for your next vacation.

At least the spending threshold to trigger it is lower — you typically only have to spend $500 within the first few months of having the card, so it’s hard to miss.

Travel Credit Card Vs. Cash Back Rewards Credit Card: Which is Right for You?

Other sites will tell you that “if you travel a lot, get a travel card” — but the choice is much more nuanced than that.

Even if you travel weekly, you may find that based on your everyday purchases and personal needs, that a cash back card is more valuable because it puts money back in your bank account.

Conversely, even if you rarely take to the skies, a travel rewards card may be just what you need to get started with accruing valuable travel rewards and get you on the path to redeeming points for free trips.

Your card should fit your spending habits

Whether you pick a travel or cash back rewards card should depend on your existing spending habits. The card should always fit the lifestyle, not the other way around.

So, what categories do you already spend money on? Do you spend a ton on dining out and bar hopping but only earn 1 point per dollar on those purchases? Then you need to reassess your credit card usage strategy. Some cards deliver elevated bonus rates on  dining purchases. You may want to break out the calculator because the right decision here will depend on some cold, hard math.

For example, you may be comparing the Chase Sapphire Preferred® Card with the Citi® Double Cash Card – 18 month BT offer. You have a big European vacation planned this year, so you think the Chase card makes more sense, but you’re going to crunch the numbers to double-check:

So, despite the pricey vacation, the Citi® Double Cash Card – 18 month BT offer actually earns more.

Now, this comparison obviously controls for the welcome bonus, travel perks, etc., but it should at least serve to highlight why crunching the numbers is important.

Summary

The choice between a travel rewards card and a cash back card isn’t as simple as “travelers get travel cards.”

If you examine your own spending habits, you may find that you get a better return by traveling with a cash back card — or, conversely, staying rooted with a travel card.

Or depending on your card strategy, maybe even both.

Read more:

• Best Travel Rewards Credit Cards
• Best Cash Back Credit Cards