There are a number of rewards credit cards out there, and each seems to offer the user something different. Some offer points rewards that you can spend in their online store or trade in for discounts. However, two of the most common types of rewards are frequent flyer points or travel rewards and cash back rewards. How do you decide between these two types of rewards? By asking yourself a few simple questions.
How much do you travel?
This may seem like an obvious question, but the simple answer is if you don’t travel that much, frequent flyer mile rewards may not be nearly as beneficial to you. If you often travel by car, they also may not be worthwhile.
However, if you do travel frequently by air, getting frequent flyer rewards points, especially for other types of purchases you make besides travel, can be a great benefit and save you money in the long run, more money than you might make from cash back rewards.
What kind of travel do you do?
Do you travel for business or for pleasure? This may sound like a silly distinction, but business travel is often tax deductible and paid for with a business card. A frequent flyer rewards card might make more sense for your business than for you personally in that case, and even a branded card just for air travel can work well.
If you travel a lot personally, or your business reimburses you for travel expenses, a frequent flyer card can still make a lot of sense. Many companies have incentives for employees who are frugal on travel expenses and save them money, even cash bonuses.
This means that sometimes using your travel rewards makes a lot of sense and getting a frequent flyer miles card will work well for you.
What does the rewards program cost?
Many cards come with an annual fee, and rewards cards generally have higher fees. So whatever you are going to make from either frequent flyer miles or cash rewards should be more than that annual fee, usually substantially more, or the card is not really paying for itself.
For instance, if your card has an annual fee of $500, and is a frequent flyer miles card, if it takes you more than one year to earn back a $500 flight, the card is not worth it for you. If you have a cash back rewards card that has an annual fee of $100, but you earn back $700 cash in a year from your typical spending, the card is profitable, and worth having.
There are some great cash back rewards cards out there, that offer great benefits at a low cost, like the HSBC Advance Card available exclusively through Bank Bazaar.
Do I carry a balance on the card?
If you use the card for business or for personal use, do you carry a balance on the card? If you do there are other expenses you should consider. If you carry a balance, there are interest charges each month, and potential penalties if you are late with a payment.
These all should be counted against the rewards you might receive and added to the overall cost of having the card. Ideally you are paying off your card every month when you get your statement, and will not encounter these charges, but things are not always ideal, and you need to look at different scenarios.
They key is to make sure that the card is not costing you more than it is saving you, or if you know the card will cost you something, that the rewards pay back enough of that to make it worthwhile.
Am I saving miles for a specific trip?
Another time that frequent flyer mile cards are worth it is if you are planning to travel to a specific destination or are saving up miles for a vacation and using points to cover the tickets. This can be a great way to plan a vacation if you have the right strategy.
● Use the frequent flyer card for bill pay: Your bills add up and you are going to pay them anyway. Use your credit card to pay them, and then pay it off. That way, you get points for paying your bills.
● Gas up: Use your card to pay for fuel expenses you were going to pay anyway. These will add up and add up to miles you can use.
● Just eat it: You are going to buy groceries and go out to eat anyway, right? Well, grab your card and pay the tab or the grocery bill, and pay it off each month. This will earn you points faster toward your trip.
Your purchases can add up to miles very quickly if you use the right methods, and pay for things you would anyway, then simply pay off your card each time you get a statement.
Choosing between a frequent flyer miles cared and a cash back card is a simple matter of doing math: which one of those cards will cost you less and benefit you more? By making reasonable comparisons before you apply for a card, you can determine which one will work best for you.