Why Travel Cards Triumph Over Cash-Back Cards

You've probably used some type of cash-back credit card for a long time. I remember getting my first cash-back credit card 20 years ago, and since then I've had many different cards that have earned me 2-5% cash-back on all of my purchases. Now, I can look back and see how much I actually missed out on by using the wrong type of cards in the wrong way. If I had used travel rewards credit cards instead of cash-back cards, I could have earned millions of travel rewards points instead of hundreds of dollars in cash-back.

The Case For Cash Back Cards

At a foundational level, getting cash back is great! Anything that puts more money in our pockets is very useful. Many people enjoy using cash-back cards to fund Christmas gifts, pay for date nights with their spouse, or give them extra spending money. Those things are good, but if you are someone who values travel, there's a much better alternative!

The Case Against Cash Back Cards

Let me show you how this played out for me. For years, I used my Amazon Prime Card to get 5% cash back on all Amazon purchases. We intentionally channeled many of our personal expenses through Amazon to get 5% back. Plus, I also used it for many reimbursable work purchases to earn even more. In my highest year, my personal & professional expenses on Amazon were around $25,000, which earned me around $1,250 cash back. I took that money and used it to book a weekend at a one-bedroom apartment for our family on the oceanfront boardwalk in Ocean City, New Jersey. But because of the high cost to book that place during the Summer, we had to wait and book it in the September off-season when the weather and water were both much colder. If only I had known there was a better way that could have earned us enough travel points to book an ocean-front suite in peak season for a week (or longer) for free.

Why Travel Points Are So Much Better

Travel Hacking is all about strategically layering and leveraging credit cards to generate rewards on everyday purchases. Continuing my example from above, I actually could've easily earned around 370,000 travel reward points by strategically channeling that $25,000 through the right cards. Plus, those 370,000 points can be redeemed for much more than 1¢ each in value. Assuming those points were worth 2¢ each, that means that those 370,000 Travel Points are worth $7,400 in travel rewards! So rather than settling for a meager 5% cash back on my Amazon purchases, I could've alternately earned 29.6% back in travel rewards which could've done much more than book my family a short, simple weekend at the beach in the Fall. The average American spends $4,000 per year on travel, but you don't have to be like most people. Start using travel rewards cards and you can travel around the world with free travel and save or use the money you used to spend on travel in other areas.

What You Miss at First Glance

Credit card companies love when you opt for cash back or redeem your credit card rewards for gift cards, because you're only getting 0.7¢-1.0¢ per point in value. In contrast, you can redeem travel rewards points for 1.25¢-10¢ per point in value.

Another industry secret is that many cards that are marketed as "cash back" cards can be used for travel points if you learn to layer and leverage them in the right way. For instance, the Chase Freedom Cards tell you that you'll earn $200 "cash back" if you spend $500 in your first three months. If you first get the Chase Sapphire Preferred Card, that "$200" now becomes 20,000 Chase Ultimate Rewards Points. You could opt to cash in those points for $200, or you could use them to transfer to a travel partner like Hyatt and stay in Orlando Florida, right across the street from Universal Studios, for 6,500 points per night. Those rooms normally cost $190 per night... So your $200 cash back could purchase one night with cash, or your 20,000 travel points could book you three nights! This is just one of the thousands of examples of why travel points are so much greater than cash back.

You Actually Have Nothing To Lose

Even if you decide against redeeming your Chase, American Express, Citi, Capitol One, Barclay, Bilt, or Wells Fargo points for travel, you can opt to redeem them for cash back. Many of the travel rewards cards actually earn better earning rates and category bonuses than standard cash-back cards. So returning to my Amazon example from above, you could use travel rewards cards to earn the 370,000 points on $25,000 in spending and then cash out those points for $3,700 in cash. Plus, it's likely that you spend much more than $2,100 per month, so you could earn even more! 

Think Before You Act

All of this paints a compelling picture of what you've likely been missing out on and how much more you could be earning on everyday expenses like gas, groceries, utilities, cell phones, entertainment, online shopping, and more. But here's a key thing you need to know, there are over 90 different travel credit cards on the market. Knowing which cards are worth it, which cards to get, and what order to get them in is the difference of thousands of dollars in rewards.

I would love to help you navigate all of that! I can teach you how to earn 5-50% return on everyday spending to leverage for world-class travel through my Travel Hacking Course or Travel Hacking Coaching!