Credit Card Andy

Teaching the Basics of Personal Finance

Credit Cards Part 5: Points, Cash Back, or Miles?

You’ve decided you want to apply for a credit card, and you plan on paying the bill in full every month. Great! You are on your way to building a strong credit history.

Now what card should you choose?

Since you’re paying the entire credit card bill every month and not carrying a balance, you should be looking for a credit card that gives you lots of rewards. You don’t care about the APR (or the interest rate) because you won’t be charged any interest! You are going to want a card with no fees and the most rewards. If you do plan on carrying a balance even occasionally, then there are totally different considerations in choosing a credit card.

The Three Types of Rewards

There are three types of rewards you can receive through a credit card: points, cash back, or miles. With points, you accrue points from purchases that you can redeem for a whole host of items. With _cash back cards, the credit card company will actually give you a certain percentage of the money you spend back to you in the form of a check or statement credit either at the end of the month or at the end of the year depending on the card. Lastly, there are the cards that reward you with miles_. Most of you are probably familiar with this, but it works just like the points do, only you redeem the miles for flights.

All of them sound enticing, but a credit card will employ only one type of rewards system.

Which rewards system is right for me?



  • Potentially greater rewards
  • Versatile rewards

  • Redeeming for gift cards is better than cash

  • May require a little more work figuring out which credit card is best for you
    The one thing to remember with points is that not all points systems are created equal. Citi could offer you 5 points on every purchase and Discover could offer you one, but if Citi charges 50,000 points for a $100 gift card and Discover charges 10,000 points for a $100 gift card then their rewards are the same. In my own experience with the points rewards, I’ve found redeeming for gift cards much more beneficial than redeeming for straight cash. I have also found an easy way to redeem my gift cards for cash (which I will discuss in a future post).

Cash back


  • Very straightforward
  • Cash is king

  • Lower rewards
    Cash back is great for those who don’t want to deal with points or redeeming. If you want the easiest credit card to deal with, cash back is probably your best bet. I’ve found that other rewards systems like the points system offers more rewards, so just realize you are leaving some free money on the table with this option.



  • Great if you travel
  • Helps you quickly attain certain statuses with airlines

  • Redemption is almost strictly for flights

  • Not great if you don’t travel much
    If you travel a lot, you may want to consider getting a card that earns you miles. It’s a great supplement to your frequent flying. If you don’t fly a lot, then I would cross miles off your list. You only get something out of these cards if you fly a lot with the same alliance and are likely to reach the frequent flyer elite statuses. Otherwise, you’re better off redeeming for money with either of the other two types of rewards.

There are some fundamental differences to each of these rewards. I think it comes down to whether you want to redeem for gift cards (or spend a little more time and turn them into cash) using your points card or if you’d rather spend absolutely no time and get a $50 check in the mail every few months from your cash back card. If you’re a big flyer, then the mile-earning card is a great supplement to your traveling.

I’ll talk about how I made the decision to go with my Citi Forward card, but knowing the basics will help make your credit card search go more quickly. Some of you may decide right now to cross miles off your list, and that will save you some search time.