Price each point at the redemption you’ll actually use before choosing points or cash back. Statement credits and gift cards top out around a penny a point, so two points per dollar pays the same as 2% cash back. If you won’t book travel that gets more than a cent per point, choose cash back.
A cash back card pays a fixed rate. Two percent back is two cents on every dollar, whatever you do with it. Points have no price until you redeem them, and the same balance buys more in some places than in others.
The issuers publish what their points are worth. Chase Ultimate Rewards points are worth a penny each as cash back or gift cards. American Express Membership Rewards points get a penny on flights booked through Amex Travel but 0.6 cents as a statement credit, so 40,000 of them cover $240 of charges, not $400.
Beating a penny usually means travel. NerdWallet values Amex points at 1.3 cents each when they’re transferred to the program’s most valuable airline partner, more than twice the statement credit rate. Getting that value takes flexible dates and some searching, and it only counts if it’s a trip you’d have paid for anyway.
Start with how you redeemed rewards last year. If the honest answer is statement credits, gift cards, or cashing out whenever the balance looked big, value your points at that rate. Multiply it by the points per dollar you’d earn on your real spending, subtract any annual fee, and compare the result with what a flat 2% card would pay. Wells Fargo’s Active Cash and Citi’s Double Cash both return 2% on every purchase with no annual fee.
If you do travel on points, price a specific flight or hotel stay you’d book. Divide its cash price, minus any taxes still due on the points booking, by the points it costs. A $450 flight that takes 30,000 points works out to 1.5 cents a point. At that rate, $20,000 of spending at two points per dollar returns $600, against $400 from a 2% card. Take out a $95 annual fee and the points card still comes out $105 ahead.
Pick the card for the redemption you’ll make, not the best one on the issuer’s website. If you can’t name the trip your points are for, count them at a penny or less and let that number decide.
Editorial & Advertiser Disclosure: The editorial content on this page is not provided, commissioned, reviewed, approved, or otherwise endorsed by any advertiser. Opinions expressed here are ours alone, not those of any advertiser. The offers that appear on this site are from companies that compensate us. That compensation may influence which products we cover and where and how they appear on a page – including the order in which they appear – but it does not influence our evaluations, ratings, or opinions. We do not include every company or offer available in the marketplace.
Related:
