Originally posted onto WalletPath.com 6/3/16.
How great are rewards points? It’s like getting paid to spend money (even if the money you are spending is your own). Although only some of us will openly admit it, we all enjoy the little dose of satisfaction we get when we swipe the plastic instead of pulling out cash, and knowing that you will receive a little “thank you” from the credit card companies just for remembering them makes that feeling all the more enriching. You can receive rewards points for swiping on pretty much anything these days: for pumping gas, buying groceries, refilling prescriptions from specific pharmacies, even taking your dog to a day spa could result in you earning some kind of reward points.
With so many avenues that can lead to rewards, how do you know which method you want to cash out those rewards points into? When it comes to which methods of cashing out rewards points are the most popular, it’s a tie between travel rewards, and cash back. Both methods translate into some pretty fantastic outcomes, but how do you know which kind of rewards program is right for you? Below is a breakdown of which rewards points method might be best for you.
Everyone’s reward goals are different.
What you should know first off is that there is no straight forward “one size fits all” answer for how you should decide to spend your reward points. When deciding which method works best for you, know that every spender and card user has a different life style that could be better off with cash back or travel rewards. It comes down to knowing which method you think you could be better off with.
Are you a traveler at heart who fantasizes about your next vacation abroad? Then great! Your choice is a no brainer, but what if you are a traveler at heart who is tight on cash and looking for a way to get a little extra useable cash for your day purchases before you can even consider planning a vacation? This is where the choice between which rewards points method gets tricky.
Cash back is fantastic because, duh! Its cash! You can spend those green-backs anywhere and on anything. But what if you are a workaholic who neglects his paid vacation days and can’t normally afford a vacation overseas? If that scenario sounds familiar, then perhaps a travel rewards card may work best for you. Think of it as a little extra incentive to get you out-and-about to see what else in the world is out there beyond the walls of your office and living room. Collecting those miles and having them burn a hole in your pocket is a great excuse to start traveling and save piles of money while doing it.
So whether you are a traveler trying to get out and travel that much more often or a budget-master workaholic trying to get more bang for your buck as you go about your daily purchases, knowing what your true goals are in life can help you decide which method works best for you as far as rewards points go.
Know exactly what you’re getting before you sign on.
In the case for travel rewards, the obvious perk is free (or at least steeply discounted) airline miles. Past that, you can also earn some pretty sweet discounts on anything pertaining to your travel plans. This can translate into discounts on rental cars, hotel rooms, and even select restaurants and food vendors. If you can get approved for select airline cards, you can even get baggage fees waived for you and a select number of guests, and even earn access to private lounges in airports (which is a pretty notable perk, to be sure).
For those of us who travel quite a bit, we are no stranger to the painfully high ticket prices it costs us to travel. Tickets are just so expensive that it is one of the main reason that many hard working citizens don’t bother traveling altogether. They don’t want to travel because the price to head out and see the world is just so high, and round-trip airline tickets account for a massive chunk of the vacation cost.
Enter the airline miles rewards points – When you earn enough points from your travel rewards card, you can cash in those points in exchange for cost covered miles. Every airline has a differing method of points-to-miles conversion, but overall, the more points you have accumulated to your account, then you could be looking at a free ticket, or at the very least a heavily discounted ticket.
Obviously the farther you want to travel, the more miles you are going to need to convert from your gained points. So if you just got your travel rewards card and don’t plan on using it that much, then you cannot expect to cover the entire cost of an international flight anytime soon. But for individuals who use their travel rewards card as often as they breathe, then they could very well be able to send themselves and their entire family to Spain and back pretty easily.
Before you start planning your European vacation with the entire family, look into the point earning rate for your desired travel rewards card. Some card providers offer 1 point for every dollar spent, and some offer more or less than that. Also, look up how many points covert into how many miles for when it finally comes time for you to cash in those rewards points with the airline. Knowing exactly what you can expect from using your card will let you know how big of a vacation you can look forward to and how soon you can take it.
In the case for cash back, know the rate of cash back that you can expect as well as where you can use the card to earn points. Some card services can offer 1% cash back, and another may offer up to a whopping 6%, with other cards anywhere in between. So before you go all in with one rewards card, do your homework to see which offers the best percentage.
Before you start singing the praises of cash back cards, you should know that they have their own version of blackouts. Depending on the card, not all purchases may qualify for cash back rewards. For example, some gas stations may qualify to earn you points, but not others. Same thing goes for grocery stores, clothing vendors, and in some cases even travel purchases.
So for those of us who have made specific stores and markets into everyday trusted partners for our daily routines, it is important to read the fine print to see if the store down the street and the gas station you always visit on the way home from work could in fact help you earn more points. If the store you frequent all the time is not on the list of cash back qualifying stores, there is no shame in trying to find another cash back rewards provider. Check out the list of approved vendors online before you sign.
Are the rewards worth more than the annual fees?
Regardless of which rewards cash out method you decide to go with, be aware of the annual fees, as it may actually cancel out the benefits you receive from using the card day-to-day.
Look for cards that can genuinely make your life better. If the annual fee is too steep and you don’t plan on using the card very often, then it might be best for you to continue looking elsewhere. If the annual fee is steep, but you do plan on using the card extremely often, or at least often enough to receive more rewards that it outweighs the fee, then you don’t have to worry too much about paying that annual fee.
The idea of the rewards card is help you advance your life in positive way and make you come out on top, and if the annual fee is making you come out breaking even or anything less, then don’t be afraid to walk away from the offer.