Airline Reward vs. Cash Back Credit Cards

There are a lot of different reward programs with credit cards on the market. The two most popular ones are airline rewards and cash back. In order to determine which one is right for you, there are a few things you need to know.

How the Cards Work

The credit card rewards work in a very simple manner. For every dollar that you spend on the credit card, you earn either frequent flyer miles or a percentage of cash back. The cash back can be issued as a rebate check at the end of the year or accumulated and requested at various intervals throughout the year. As for the airline rewards, the cardholders will accumulate the frequent flyer miles until enough is in the account to cash it in for a free flight. With most airlines, the minimum number of miles for a roundtrip domestic flight is 25,000.

Earning Airline Miles

Many of the airline reward cards are sponsored directly through an airline. Southwest, American, Delta and virtually every other airline has their own reward credit card. There are also banks that offer airline reward cards which can be used with multiple airlines. The reward credit is usually one mile for every dollar spent, however the number can increase if the card is used at various merchants or with that specific airline. Further, thousands of bonus miles are often given just for getting the card and making an initial purchase of a certain amount on the card.

This can be an advantageous benefit for those who pay their balances at the end of every statement period. However, there are also annual fees and high interest rates to be on the lookout for with these cards. Some of the airline credit cards can charge as high as $100 per year in annual fees. If a balance is carried, the fees can amass a considerable amount of credit card debt. The annual fee over the course of a few years can add up to what a domestic ticket would have cost if purchased outright. More, it's important to note that many frequent flyer programs restrict dates, seats and other details about a flight.

A lot of the airline reward cards work with other travel companies, such as rental car companies, hotel and motel chains and more to make it easier to earn extra miles when shopping with them. Promotions are also offered in many cases to offer reduced travel prices and point values for certain destinations and dates.

Cardholders can get a lot of benefits out of these kinds of cards. Keeping up on the promotions is important as is using the partner merchants whenever possible. Cheaper tickets should also be purchased in order to keep the miles for some of the more expensive travel.

Earning Cash Back

The cash back cards help cardholders earn a cash reward on all purchases made with the credit card. The amount of cash back will vary from card to card between 1 and 5%. Further, some credit card companies use a tier for rewarding purchases with cash back. Travel or grocery categories can earn more. Some purchases may not even be included to earn cash back, such as fuel. Therefore it's critical to read the fine print to see what's included.

The cash back cards generally don't include an annual fee, which is an advantage over the airline reward cards. This can be a significant annual savings. Plus, cardholders don't have to determine how they have to use their rebate checks. Meanwhile, the airline reward cards often make a customer lock into one frequent flyer program over another.

Choosing the Right Card

Regardless of which card you decide to go for, you should try to pay the balances at the end of every month. This will ensure you aren't accumulating credit card debt while trying to take advantage of any of the credit card rewards. If you travel a lot on a single airline, the airline rewards credit card is likely going to provide you with a lot of benefits.

If you only travel occasionally, it may be better to go with a cash rewards card. You can always use the cash back on a plane ticket. What you don't want to happen is talk yourself into making purchases that you can't afford simply because you're earning travel or cash back. Both cards have benefits but you want to choose based upon your spending habits. If you are concerned about making a decision that will impact your credit, talk to a financial advisor first for some deeper perspective on the issue.

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