Editorial Policy

Cash Back vs. Airline Rewards: Which Is Best?

Eva Norlyk Smith Ph.D.

November 26, 2012

QHi Eva,

I’m trying to decide if I should get an airline rewards card or a cash-back card. I fly somewhere about once a month and take a big trip abroad once a year, so I’m thinking a card that gets me miles would be a good choice. But, at the same time, couldn’t I just get a cash-back card and use that extra cash to help defray the cost of the flights that I buy? Would it all even out in the end no matter which card I choose? Or do airline cards help you earn miles at a faster rate than cash? Thanks for your help. — Don

AHi Don,

A lot of people are asking those questions, because it’s not always easy to decipher rewards card terms to find out which type of card offers the best value. It doesn’t help that there is no one best option. The best rewards card really depends on each individual’s situation.Ask Eva

So, let’s take a look at the pros and cons of airline rewards cards and cash-back credit cards as they relate to your particular situation.

First of all, cash-back credit cards without a doubt have many appeals. The rewards structure is simple: You earn a straightforward cash-back rebate on all credit card charges. Rewards redemption, for the most part, is also very easy;  most cash-back credit cards let you take rewards earnings in the form of a statement credit or a check mailed to you. It doesn’t get easier than that!

Airline rewards cards, on the other hand, tend to come with a more complex rewards structure, and rewards redemption is rarely straightforward. With airline rewards cards, not only do you have to choose among ticket options with widely differing pricing, you also have many more options for using those rewards miles. In addition to free trips, you can use miles to upgrade your ticket to business-class or first-class seating, or redeem miles for other freebies with the airline’s partners.

That being said, in some circumstances, airline rewards cards can offer considerable additional value, not just in terms of free travel, but also in the form of other perks and benefits that make traveling easier — such as access to the airline’s cushy airport lounges.

So, which is the best rewards card choice for you? Well, there is one key difference between airline rewards cards and cash-back credit cards: For frequent fliers like you, airline rewards cards let you earn free rewards travel much, much faster! You earn rewards both from charges to your airline rewards card, as well as from the miles earnings from your trips. That’s a combo that’s hard to beat.

This can make a huge difference in terms of how quickly you can earn a free trip.

A U.S. round-trip flight, for example, will earn you anywhere between 2,000 to 5,000 frequent flier miles with that airline (you may earn less for very short routes). Free round-trip tickets generally start at 25,000 miles, so just one round-trip ticket will get you roughly 8 percent to 20 percent of the miles needed for a free ticket, depending on the miles earned.

To get the same rewards earnings with a cash back credit card alone, you’d have to charge roughly $2,000 to $5,000. So, for all but very big spenders, rewards earnings from flown miles easily dwarf rewards earnings from rewards card charges.

But there is more. Because you fly as much as you do, you should be able to qualify for elite status if you concentrate your flying with one airline. That, in turn, gives you access to many other perks and benefits, including free checked baggage, complimentary upgrades to business-class or first-class seats when available, higher miles earnings on your rewards card spending and much more.

There is one possible downside — to maximize rewards earnings on your travel, you’ll have to fly with just one airline, so you don’t spread yourself too thin. Airline credit cards often charge annual fees — so getting multiple rewards cards for multiple airlines won’t do you much good. The choice of which airline to go with depends on where you live. Be sure to pick the airline that offers the best travel choices in your area.

Generally speaking, for maximum flexibility, your best choice is to go with an airline rewards card affiliated with one of the three major airlines: Delta, United or American Airlines. If you live in an area served by smaller airlines like Southwest Airlines, AirTran, or US Airways, those can be good choices, too, as long as the airline serves the routes you travel most frequently.

If you don’t already have a frequent flier account with the airline, it will be created for you when you apply for the airline’s rewards card. And, in addition to cashing in on all your travel, you’ll find that most airline rewards cards come with some nifty sign-up bonuses, easily enough to get you well on your way to your first free trip.

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