Cashback vs. Rewards Points: Which Yields More Value?

When it comes to getting more out of your purchases, two popular options dominate the conversation: cashback and rewards points. Whether through a credit card, loyalty program, or shopping portal, these systems offer a way to earn something extra every time you spend. But which one gives you the better deal?

The answer depends on how you shop, what you value, and how you redeem. This article breaks down the differences between cashback and rewards points, where each shines, and how to decide which strategy fits your lifestyle.

What Is Cashback?

Cashback is exactly what it sounds like—you get a percentage of your purchase returned to you in cash, usually as a statement credit, direct deposit, or PayPal transfer.

Common examples:

• A credit card that gives 2% back on all purchases
• A browser extension like Rakuten or TopCashback that pays rebates after online shopping
• A store loyalty program offering 5% back in store credit

Cashback is simple and flexible. There’s no need to learn a point system or calculate conversion rates—you get money back, usually based on your spending category.

Pros of Cashback:

• Easy to understand and redeem
• Flexible (can be used however you want)
• Often available as a flat percentage on all purchases
• Ideal for everyday categories like groceries, gas, and utilities

Cons of Cashback:

• Rarely offers bonuses or multipliers like travel points
• Less “wow factor” compared to luxury redemptions
• Sometimes limited to certain portals or apps

What Are Rewards Points?

Rewards points are units you earn through spending, which can then be redeemed for products, travel, gift cards, or even experiences. These points often come from credit cards, store programs, or travel booking platforms.

Types include:

• Credit card points (Chase Ultimate Rewards, Amex Membership Rewards)
• Hotel or airline miles
• Store-specific rewards (like Target Circle or Starbucks Stars)

Points typically have variable values depending on how you redeem them. For example, 10,000 points might equal:

• $100 in travel bookings
• $80 in gift cards
• $70 in cash back
• 1 hotel night or flight segment

Pros of Rewards Points:

• Higher redemption value possible, especially for travel
• Access to exclusive perks and elite benefits
• Many programs offer bonus categories (e.g. 3x on dining or travel)
• Often come with welcome bonuses worth hundreds of dollars

Cons of Rewards Points:

• More complex to manage
• Redemption value varies depending on how and where you use them
• May expire or devalue over time
• Can be harder to access without excellent credit

Value Comparison: Cashback vs. Points

Let’s say you spend $2,000 per month, and you're choosing between:

Option 1: 2% Flat Cashback Credit Card

• Earns $40/month or $480/year in cashback
• No categories or redemption hassle

Option 2: 3x Points on Dining + 1x Elsewhere (Travel Rewards Card)

• Spend $600 on dining = 1,800 points
• Spend $1,400 on other categories = 1,400 points
• Total = 3,200 points/month or 38,400/year

If points are worth 1.25 cents each toward travel, you’ve earned $480 in value—the same as cashback. But if you find a 2-cent redemption value (e.g. flights), you now have $768 worth of travel.

Points often win in value—but only if you know how to redeem strategically.

When Cashback Is Better

Choose cashback if:

• You want simplicity and flexibility
• You prefer statement credits or deposits over gift cards or travel
• You don’t want to track redemption rules or bonus portals
• You’re building or rebuilding credit and prefer cards with no annual fee

Best cashback tools:

• Citi Double Cash: 2% on everything (1% when you buy, 1% when you pay)
• Chase Freedom Unlimited: 1.5% on all purchases + bonus categories
• PayPal Cashback Mastercard: 2% on all purchases with no redemption cap
• Rakuten, TopCashback: Online shopping portals that give real money back

When Points Are Better

Go with rewards points if:

• You travel frequently or plan a big trip
• You enjoy maximizing value through deals, transfer partners, and bonus categories
• You’re okay with managing different programs and redemption values
• You qualify for premium cards with high welcome bonuses

Best point-based programs:

• Chase Sapphire Preferred/Reserve: Travel redemption value up to 1.5x
• Amex Gold/Platinum: Great for food, airfare, and luxury travel
• Capital One Venture: Miles can be redeemed or transferred to partners
• Hilton Honors, Marriott Bonvoy, Southwest Rapid Rewards: High value for frequent travelers

Hybrid Strategies: Why Not Both?

Many people use a combination of cashback and points to optimize every purchase.

For example:

• Use a 2% cashback card for categories with no bonus
• Use a 3x dining card (points) when eating out
• Activate Rakuten to earn cashback while also earning points with your credit card

Some cards offer both:

• Chase Freedom Flex: Cashback that converts to points if paired with a Sapphire card
• Discover It: Rotating 5% cashback plus first-year match

You can even redeem points for statement credits in some programs if your travel plans change—though often at lower value.

Things to Watch Out For

• Point Devaluations: Programs can change redemption values at any time
• Expiration Policies: Some points expire after inactivity
• Annual Fees: Premium cards with points often carry high yearly fees—make sure the rewards outweigh the cost
• Minimum Redemption Thresholds: Some programs require 1,000 or 2,500 points before you can cash out
• Redemption Restrictions: Not all rewards can be used anytime—blackout dates or availability may apply

Final Tip: Match Your Strategy to Your Lifestyle

There’s no one-size-fits-all answer. The better value depends on how you spend and what you value.

• If you want money in your pocket every month with no fuss? Cashback is your friend.
• If you’re a planner with travel goals and time to learn the system? Points could unlock premium rewards for less.

With a bit of planning, you can even use both to earn rewards on every dollar you spend.