When it comes to credit card bonuses, there are generally three types you can earn: airline miles, rewards points, and cash. For folks getting started with credit card bonuses, it can be a bit confusing what each one is, the pros and cons, and most importantly, which is best for you.
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Frequent Flier Airline Miles
Some credit card companies have relationships with certain airlines which allows them to offer frequent flier miles as a credit card bonus. When you apply for the card, they will ask you for your frequent flier number, and when you meet the spending requirement for the bonus, your frequent flier account will be credited with the miles, sometimes as much as 50,000 miles or more.
How much is a “mile” worth? There’s no final answer, but my rule of thumb is 100 miles is about $1.
Benefits of Airline Miles Bonuses
Frequent flier programs are a great way to travel cheap, or even free. If you have a specific airline you like to travel on, a credit card bonus can get you closer to your next flight much faster.
The benefit to using airline miles is they can sometimes get you a flight for cheaper than you would find with cash. And because the miles are tied to an airline program, not a credit card company, you can cancel the credit card at any time without risk of losing your bonus.
Often times, the credit card will earn you even more miles for travel-related purchases, usually with the associated airline. This is great for folks that travel often.
If your frequent flier program is part of an airline alliance, you can usually use your miles on any other partner airline.
Downsides of Airline Miles Bonuses
The miles you earn in a frequent flier program are not as flexible for redemption as rewards points or cash. Although you CAN use them for shopping or cash back, the value of the miles for those exchanges drops dramatically, so you’re best off using them exclusively for travel.
Also, depending on your frequent flier program, there is a good chance that your miles have an expiration date. If you don’t have travel plans, you may be forced to use them on something else. If they are free bonus miles, it’s not all that bad, but you would do better with cash back in that case.
The Bottom Line on Airline Miles Bonuses
Choosing cards specifically for airline miles is ideal for people who know they will travel frequently or already participate in some frequent flier program. This way you know the miles will be used at their highest value.
If you are unsure about your ability to use the card, you might be better off with a cash back bonus card for flexibility.
Recommended Airline Mile Credit Card: United Explorer Card
- Good bonus (40,000 miles) with reasonable spending requirements ($2,000 in 3 months)
- United is part of the Star Alliance, so good partner airlines
- Miles do expire, but can easily be reset
Reward Points Programs
Many credit card companies offer some sort of rewards program so that when you spend monye you earn points. These points can be tracked and managed right through the same account you manage your credit card with. Once you have enough points, you can go to an online marketplace provided by your credit card company and exchange your points for a variety of things: travel, gifts, cash back, etc.
How much is a “point” worth? There’s no final answer, but my rule of thumb is 100 points is about $1.
Benefits of Reward Points Bonuses
The biggest benefit to rewards points is flexibility. You can use them for many different things including shopping, travel, and sometimes even cash back (as a reimbursement). The value for the points is also relatively high compared to miles.
In some cases, rewards programs also offer special discounts to folks in the program. So you might be able to do some shopping or traveling for less by spending points instead of cash.
Downsides of Reward Points Bonuses
The marketplaces for rewards programs are ok, but they are not great. You probably won’t be able to find everything you’re looking for. It’s a good idea check in advance what they offer. Using a marketplace also means that in order to use the bonus, you have to actually log in.
Also, although the exchange value for points is relatively high, the marketplace costs can be as well. Points carry arbitrary value, making it hard to figure out how much they are actually worth. And at any point the marketplace could decide that the cool camera you had your eye on is now going to cost more points. Unlike cash that can go anywhere else, with points, you’re kind of locked in.
The biggest problem, however, with reward program points is if you decide to cancel your card (maybe there is an annual fee you don’t want to pay). You don’t get to keep the points. If you can’t find something to spend your points on or you can’t exchange for reimbursement, you may be out of luck.
Bottom Line on Rewards Points Bonuses
Credit cards with reward point bonuses offer more flexibility than airline miles, and sometimes more value than cash back. The flexibility and their relatively high value means you get a lot for free. If your card offers reimbursements for points, it’s even more flexible. That said, nothing is as flexible as cash.
Recommended Rewards Points Credit Card: Chase Sapphire
- Big bonus (60,000 points after spending $4,000 in 3 months)
- Good travel bonuses (2X points and 25% more redemption)
Cash Back
Cash back cards are a lot more straight forward than the other bonus types. You spend money, you get cash back. The cash you earn can be redeemed in a number of ways: credit applied to your statement (essentially a refund), bank transfer, or a mailed check.
Benefits of Cash Back Bonuses
Naturally, cash is the most flexible reward type. You can spend it wherever, on whatever you want.
There is also something to be said for the benefit of simplicity. No dealing with frequent flier programs or rewards point marketplaces. Just tell them how you want your cash and that’s it.
Downsides of Cash Back Bonuses
Unfortunately, cash back rewards are usually lower value than the others. A cash back card could offer you a $150 sign up bonus, while an airline mile card might offer 50,000 miles (roughly $500 value). That can be a big determining factor when choosing a new card.
Bottom Line on Cash Back Bonuses
I really like cash back cards, but I wish their bonuses were a big higher. If you like simplicity, cash back cards are a great way to go.
If you want to maximize your rewards though, take a look at airline miles or rewards points.
Recommended Cash Back Credit Cards: Savor Rewards
- Decent bonus ($300 after you spend $3,000 in 3 months)
- Unlimited 4% cash back on dining and entertainment
- No foreign transaction fees
- Additional warranty protection at no charge on eligible items
- Travel accident insurance