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Americans love our credit cards. And almost all credit cards now come with some incentives like points or cash back.

I love to travel. I don’t love to do complicated calculations and shuffle a deck of cards every time I want to go shopping. Travel hacking with credit cards just seemed much too complicated to me.

Maybe it was the way I grew up. As a youngster it was drilled into me that credit cards had a very limited purpose. They were for emergencies, for building your credit history, and things like car reservations that required using a card. They were rarely to be used and always paid off at the end of the month. In fact, I was taught that you should always use cash. Why? Because studies show that you are more conscious of your spending when using cold, hard cash than plastic. So that’s what I did.

That kind of thinking is now out of date. Credit cards are king and cash is dying out. In fact, where I live now there are many shops and restaurants that only take cards. One health grocery chain claims it’s better for the environment as trucks don’t have to come pick up the cash every day. Who knew? (at least not me)

Anyway, all this is to say that I am certainly no long time expert when it comes to travel hacking with credit cards, but recently I have seen the light and started taking advantage of collecting these points and bonuses.

I’ve done quite a bit of research into what cards are best for my particular situation. I travel frequently, so my number one concern is a card that does not charge foreign transaction fees.

When I began looking into cards I wondered which was better? A card with points that could be used for airline tickets and other shopping, or one that gave cash back on some or all purchases?

Here are the pros and cons I’ve found.

Credit Cards: Points vs Cash Back

PROS OF POINTS CREDIT CARDS

some cards have huge sign up bonuses
points can be used for plane tickets, hotels, and online shopping
some cards allow you to earn double or triple points (or even 10x) on certain spending categories

CONS OF POINTS CREDIT CARDS

some cards have an annual fee or spending minimum or both
you have to spend quite a lot to earn significant points
points can only be used to pay for certain purchases like flights
if you don’t have enough points to buy a certain item the points are kind of useless
if you don’t pay your balance in full each month the benefits are erased by interest fees

In summary, if you have decent monthly spending that you can put on credit cards and you enjoy air travel, points credit cards can be a excellent way to save money.

PROS OF CASH BACK CREDIT CARDS

some cards offer cash bonus for signing up
cash back credits can be redeemed to pay your balance or put in a bank account
some cards give extra cash back percentages on certain spending categories
cash is cash, you don’t have to wait to spend it on a certain type of purchase like flights or hotels

CONS OF CASH BACK CREDIT CARDS

some cards have an annual fee or spending minimum or both
cash back rewards are sometimes “worth” less than points (ex: 1¢ cash back vs points worth 2¢ or triple points rewards)
sometimes you have to request the cash back reward and if you forget you don’t get them

In summary, cash back rewards might not always be as high value as points, but it is cash and can be used for any purchase anytime, anywhere.

In the end it comes down to a personal decision about which type of credit card is best for you. While I do have some points cards I prefer my cash back card which gives me 1.5% cash back on all purchases.

Why did I choose this card over a points card or a different cash back card?

I found some cash back cards that gave 2% back on certain purchase categories like groceries, and 1% cash back on other categories. But it seems overly complicated, and in the end 1.5% on everything is probably a better deal for me as a single person without huge grocery bills.

There were also plenty of points cards which caught my eye. But I don’t really like to fly everywhere, and when I do I like being as flexible as possible in my plans, rather than being forced to use one specific airline or book an overpriced ticket through my credit card portal.

I do have a few cards that accrue points. I have had issues in the past with not having quite enough points to book a flight or a hotel stay. In the end I would rather have the cash than some imaginary points that can be traded in for a category of goods. That way I can book my travel at the lowest cost or most convenient time and I don’t have to worry that my “balance” is not high enough because I can supplement any cash back with regular cash.

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Comparing Capital One Venture One vs Capital One Quicksilver

Two of the cards I considered when searching for a new no foreign fee credit card were the Capital One Venture One and the Capital One Quicksilver.

Both cards have no foreign transaction fees and no annual fee. But one is a points card and one is a cash back card.

Capital One Venture One Points Card

The Venture One card gives 1.25 points for each dollar spent, with additional bonus points for booking lodgings through Hotels.com. The beauty of the Venture One card is that points can be used to pay for any travel related expenses, not just certain partner airlines. This would be incredibly useful to me because most of my travel spending is on local transportation like trains, buses and ferries plus lodging. I don’t purchase a lot of flights.

The Venture One card gives a bonus of 20,000 points at sign up after you spend $1000 within three months.

Capital One Quicksilver Cash Back Card

The Quicksilver card gives 1.5% cash back for each dollar spent. You can redeem the cash back toward the balance on your card, effectively giving you a 1.5% discount on all purchases. Or you can ask for the cash to be deposited in another bank account.

The Quicksilver card also offers a sign up incentive of $150 cash if you spend $500 within the first three months.

I went with the cash back card. Why? First of all, the 1.5% cash back is a better value than 1.25 points. Also the cash back can be used for anything, not just travel. As mentioned above I think of it as just getting 1.5% discount on all purchases. However, the sign up incentive of 20,000 points on the Venture One card is slightly higher value at $200 than the $150 cash back. But to be honest, I am quite frugal and might have more trouble reaching that $1000 spending minimum in three months. I am more comfortable with $500.

Another reason is because of the inherent risks and complications of points. Let’s say I spend $1000. With the cash back card I get $15, easy. With the points card I get $12.50 worth of points. Then I can use these points to pay for future or recent travels. But what if I don’t have a trip planned? Yes I can use these points any time but I have to keep track of them and remember to redeem them.

The beauty of the Capital One card unlike other points cards is that the points can be used to pay for past travels too, up to 90 days. And the points can be put toward a balance rather than having to save them up to get enough for redemption. My other card uses that system and until I earn enough points, the ones I have are relatively useless. I don’t spend enough money on my cards to regularly accrue tons of points.

What about you? Do you prefer cash back or points cards for budget travel hacking?

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