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Cash back cards and airline mileage cards are two types of rewards credit cards. With both, you’ll earn something when you make a purchase with your card – cash in one case, miles or points in the other. The more you spend, the bigger your bonus.
Of the two, mileage cards have been around longer, with the first airline-specific credit cards introduced in 1986-1987. While the first Discover discount card made its public debut in 1986, the cash back concept didn’t really take off until the early 2000s.
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Cash back also refers to a credit card benefit that returns a portion of the purchase amount to the cardholder’s account. As the name suggests, this is real cash that can be used on a credit card account or received as a check or bank account deposit.
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While some cards pay the same percentage on all purchases, the level of cash back usually depends on the type of purchase or the amount of the purchase ($25 is usually the minimum spend). For example, a cardholder can earn 3% back on gas purchases, 2% on groceries and 1% on all other purchases. Most pay 1-2%, though some rewards can be as high as 6% of the transaction, though such generous returns are limited to spending categories (like groceries) and are often capped quarterly or annually.
Cash rewards are usually redeemed for statement credits, which can offset some of the cost of monthly purchases. Users can also receive cash by directly depositing cash into a linked checking account or by sending a check.
Alternatively, they can use the money on goods offered through the card issuer. Compared to points and mileage-based rewards, cash-back rewards tend to have fewer redemption options, but tend to have faster value.
The biggest advantage of cash back credit cards is their flexibility. You can choose to use that money for travel, use it for other purchases you want to make, or just put it in savings. However, if you carry a monthly balance on your credit card, even the most generous rewards program can be greatly offset, if not canceled outright, by the amount of interest you pay.
Credit Card That Rewards Users With Airline Miles And Points. Stock Illustration
Most cash back cards don’t have an annual fee, so you won’t have to determine whether you need to earn a certain value in rewards over the course of a year to justify spending. This makes cash back cards perfect for those who don’t spend a lot of money on a credit card.
There are two main types of travel cards that offer rewards with miles or points: airline-specific co-branded cards issued in partnership with airlines and banks, and more generic travel cards that earn rewards and can be redeemed for travel on any airline.
Of the two co-branded airlines, the mileage cards are more limited, but if your lifestyle involves travel or you expect to in the future (perhaps you need a little motivation to start planning a trip to Spain), they can be good. one choice). Airline miles typically earn about the same as cash back rewards (although airline cards often offer bonus miles for airline purchases and other categories like hotels, dining, or gas) and may offer one-time bonus rewards in return. for spending a certain amount in the months before the account is opened.
Conventional travel cards are similar to cash back cards in terms of flexibility, rewards and benefits, but rewards must typically be redeemed for travel through the card issuer’s rewards program portal, rather than through any airline’s frequent flyer program.
Credit Card That Rewards Users With Airline Miles And Points. Stock Image
One-time rewards can sometimes be the biggest rewards you’ll ever get from a credit card, so it makes sense to stick to the initial spending requirements. Premium airline cards may offer additional benefits such as seat upgrades, baggage fee waivers, priority boarding or access to airport lounges.
Some mileage cards (generic travel cards and co-branded airline cards) also allow you to redeem rewards earned for travel other than airfare, such as hotel rooms or car rentals.
The downside is that airline-specific cards often limit your ability to buy the cheapest ticket because you can only earn and redeem rewards on one airline. Sometimes rewards can be redeemed for better rates, especially during off-peak travel times. However, if you want to travel during the tourist season or holidays, don’t expect many breaks. And watch out for blackout dates that prevent you from using your credits at all.
Also, while 68% of credit cards have no annual fee, two-thirds of these travel cards have an annual fee — and they’re usually hefty, typically $75 or more. On the plus side, airline card interest rates that used to be well above average are now actually lower than normal APRs.
Understanding Cash Back Vs. Airline Miles
The Ideal Mileage Rewards Card also has no foreign transaction fees, miles do not expire, and no set date for redeeming travel credits, so it can be spent on any airline and hotel. Ironically, most mainstream travel cards have these attributes, while co-branded airline cards typically do not.
Before you sign up for any card with an annual fee, consider the value of the first-year bonus and its payout requirements and bonus earning rate to determine how much you need to spend each year to make the bonus worth at least the annual fee. toll
This can be a little tricky to figure out because sometimes you have to convert miles to dollars, but it can be done. For example:
When choosing between cash back cards and airline mileage rewards, the big question is what type of rewards card makes the most sense for you based on your goals and lifestyle?
Credit Card Points Vs Airline Miles — And Why You Should Earn Both
Before choosing a card, it’s important to consider whether you’re spending enough money to pay for yourself, as many rewards cards have an annual fee. If not, there are still plenty of credit cards that offer valuable rewards but no annual fee.
Then read the fine print. Are there any blackout dates that limit your ability to redeem travel rewards? Are your rewards running out? Is there a way to earn more like shopping online through a credit card rewards site? By paying attention to this information, you can optimize your rewards to get the most out of your credit card.
If you don’t think you’ll be redeeming your earned travel rewards for airfare or hotel stays often enough to justify all the associated annual fees, opt for the flexibility of a cash back card; your total value may be lower, but you may be able to take advantage of the bonuses.
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Update 2021.10: Capital One is now increasing the transfer ratio to 1:1 for many partners! Also note that as of 10.24 Capital One will lose its partner JetBlue Airways.[2021.5. Update] El Al (LY) Matmid is no longer a point transfer partner of MR. But that’s okay because most people aren’t interested in the program.
2021.4 Update: Capital One adds new transfer partners: British Airways (Avios) [BA] (2:1.5), Turkish Airlines (Miles&Smiles) [TK] (2:1.5 ) and TAP Portugal (“TAP Miles&Go”) [TP] (1:1); In addition, it increased the transfer ratio from 2:1.5 to 1:1 for the following existing partners: Avianca (LifeMiles) [AV], Etihad (Etihad Guest) [EY], Cathay Pacific (Asia Miles) [CX], Qantas (Frequent Flier) [QF], Aeromexico (Club Premier) [AM] and Finnair Plus [AY]. Considering you can earn 2x points per dollar with Capital One Venture, this new transfer speed is really cool! HT: frequency modulation.
Beginner’s Guide To Points, Miles And Credit Cards
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