Thursday, September 04, 2008

Credit Card Rewards: Cash Back or Airline Miles?

Last month we received our annual cash back reward from our AmEx Blue card. The loot this year came to a total of $853. Not bad at all for a tax free bonus. Later that week I had a conversation with one of my colleagues and the topic of reward cards came up. My colleague uses an AmEx card that gives airline miles, usable on all airlines. So which is better? Cash back cards or airline miles cards? I vote for cash back cards, for two main reasons:

1. Cash is King - Cliche, but true. The biggest problem with cards that give you airline miles is that... you get airline miles. This is a very specific benefit that can only be used for one thing: going somewhere. Cash back cards, on the other hand give you an open ended benefit. Last time I checked cash was usable for buying airline tickets (as well as a few other items). Get your cash, buy your ticket or buy diapers, if you are so inclined.

2. I Got Enough Miles - I travel a lot on business, and I have plenty of miles. Over 300,000 on United and over 150,000 on Continental... I never, ever get a chance to use them. Well, actually, I do use my miles for magazine subscriptions and I did use some miles last year to buy that nifty robot of ours. BUT - I got so many miles already, what would I do with more?

My colleague on the other hand, says that he ran the numbers and cash back or airline miles were basically a wash from a total value perspective. He says that the fact he gets miles forces him to take a vacation with his family - one that is free of charge. To quote him: "if we got cash, we would use it to pay for our groceries. Since we get airline miles we feel good about taking a vacation".

I say: to each his own. Personally, I don't need to play mind games with myself and I prefer the flexibility of having more money in my bank account. If we want to take a vacation, we'll take it. We don't really need an extra incentive.


frugal zeitgeist said...


(Plus the occasional refill on my coffee rewards card.)

tina said...

I was after a cash back reward credit card and found price comparison websites such as eComparison a useful avenue when comparing the benefits of the cards available on the market. Definitely worth a look before you commit yourself to any particular card.

Shadox said...

Thanks for the recommendation Tina.