There’s an age old question that has been asked by credit cardholders—travel rewards or cashback? Often, the answer is that it depends on your requirements and your lifestyle. For instance, if you’re a frequent traveller, it makes sense to get a travel card that will fund your trips around the world and those expensive first-class tickets. However, if you prefer money instead of miles, a cashback card is the right choice for you.
But it all boils down to one question—how hard are you willing to work for these rewards?
And to help you figure out what card gives you the best value, we’ve broken down the pros and cons of both travel and cashback cards.
Cashback Credit Cards
The logic behind a cashback card is simple. You’re rewarded with money instead of points or miles. Your redemption isn’t limited to just crediting money into your account; you can use the cashback for gift cards and vouchers.
The reason cashback cards are the preferred option is because of the simple redemption process. If you’re someone who enjoys flexibility and ease, a cashback card should be your go-to choice.
Let’s examine the pros:
- Flexibility: There’s nothing better than earning money every time you spend. And with this type of card, there’s no restriction on how you can utilise the cashback. However, you should keep in mind that some cards offer just statement credits and gift cards.
- No restrictions on transactions: You can use your cashback card anywhere and for almost every category. However, the cashback earned can differ from overseas to local spends. Some card issuers offer cashback bonus on the amount you spend within a specific period—keep a tab on those!
- Ease of use: Redemption works like a dream with a cashback card. You won’t have to worry about losing out during conversion or sitting with a calculator to ensure you get the best value.
Now the pitfalls
- Basic sign-up bonuses: Don’t expect a world of rewards when you sign up for a cashback card. Some issuers require you to spend a minimum amount with a month or 60 days’ time to earn the sign-up bonus. Travel cards, on the other hand, have incredible bonuses that could almost get you a free air ticket.
- No reward hacks: There are several tips and tricks that come in handy when you want to maximise your travel rewards. But things are black and white with cashback programmes. You get only what you’re offered.
- Lesser perks: You will get basic features like purchase protection, extended warranty, and more. But with travel cards, the perks are far better. With the right card, you’ll get travel insurance, access to airport lounges, and sometimes, no foreign transactions fees either.
Travel Credit Cards
Travel cards typically have two categories—general and airline. And each card offers you different types of reward programmes as well.
With a general travel card, the programmes are a little more flexible. You can redeem the points or miles you earn for different types of travel. These cards also tend to provide great rates on your regular spending and the redemption methods are pretty easy.
Airline cards give you points or miles only with the airline they’re co-branded with. And generally, you don’t tend to earn additional awards on your other purchases with this card. The biggest limitation is that your rewards are restricted to one airline.
Below are the pros of this type of card:
- Sign-up bonuses: With the right card, you can use the bonus points to get heavily-discounted air tickets for your next vacation. The rewards tend to be in the hundreds and this works great if you have a trip lined up.
- Additional perks: Whether it’s room upgrades or priority boarding, there’s an array of perks you’ll receive with this card. Again, this completely depends on which card you’re opting for. Some cards also offer access to airport lounges within your country and across the world.
- Reward hacks: Now, if your reward programme allows it, you can transfer your points or miles to other travel programmes. This works great if you’re getting more value per point or mile.
Now, the pitfalls:
- Limited airline options: With a travel card, you have just a few airlines to choose from. If you have a co-branded card, you can use the miles earned only for that specific partner airline.
- Complicated process: The points or the miles you get differs from card to card and provider to provider. In some cases, you’ll have to go the extra mile to earn your miles or figure out some tricks to get the best out of your travel card.
- Little flexibility: Now, here’s what makes cashback cards a winner in comparison to travel cards—the conversion value. Your points are limited to travel use only, even if you want to use them for something else; unlike cashback cards that let you convert points for cash, gift cards, and vouchers.
Which Card is Best for You?
If you’re still debating if you should opt for a cashback or a travel card, you can ask yourself one last question. Do you want short-term value or long term value?
If you are a frequent traveller, having a travel card makes sense. Also, there are quite a few travel cards that let you earn rewards on transactions. You can convert those rewards to get air miles or use them to redeem annual fee, or get vouchers and gifts. However, with a travel credit card, the net rewards you receive are lesser in the long run. For example, it’s easy to exhaust your sign-up bonus on air tickets. However, getting yourself another heavily-discounted ticket means accumulating a lot more miles through the years.
Whereas, things are a lot simpler with a cashback card. Even though the minimum you earn per month is capped at a certain amount, you’re still getting cash. This is either credited to your account or deposited to your savings account. You also don’t have to worry about the conversion value with cashback cards. But, most cards have a cashback cap. So, if you spend more, you will still be earning based on the cashback cap.
Use comparison websites and tools, compare hundreds of options and apply for the right card online, based on your lifestyle needs.