5 Reasons to Skip Travel Rewards and Pursue Cash-Back Instead
April 27, 2018
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When it comes to credit card rewards, you’ll find an astounding number of cards to sign up for and awards programs to pursue. With co-branded airline credit cards to hotel cards, flexible travel cards, and premier travel cards, you can rack up points for airfare, hotel stays, train tickets and more.
Still, it’s perfectly understandable that these programs aren’t for everyone. While earning free travel may sound amazing (and it really is), there are still people who ignore travel rewards and earn cash-back instead.
Cash-back may not always be as lucrative, but there are a lot fewer hoops to jump through with a cash-back rewards program. Some of the reasons consumers forego travel rewards to pursue cash-back include:
#1: You don’t want to deal with limited award availability.
The top reason many people choose not to deal with hotel rewards and frequent flyer programs is the fact that these programs can be both limited and fickle. You can rack up an unlimited number of points if you want, but hotel and airline programs still limit the ways you can use them.
Frequent flyer programs may only offer a few award seats on a particular flight, for example, and hotel programs may limit the number of rooms bookable with points at the same time.
Cash-back doesn’t have the same limitations, however. If you pick up a card like the Chase Freedom®, you’ll earn a flat 1% cash-back on each dollar you spend plus 5% cash-back on the first $1,500 you spend in categories that rotate every quarter. And when you go to redeem your cash-back, you can cash it in for statement credits, gift cards, merchandise, and more. You don’t have to worry about award seats or capacity controls like you do with travel rewards.
#2: You’re tired of program devaluations.
Another reason some consumers have grown tired of frequent flyer and hotel rewards programs — devaluations. Around once per year, most loyalty programs devalue their offerings so your points are worth less and less. A hotel that cost 12,000 points last year may cost 16,000 points this year, for example. And a flight that was only 50,000 miles a few months ago suddenly surges up to 65,000.
If you’re someone who spends time accruing points throughout the year, there’s nothing more frustrating than realizing the travel you wanted to book suddenly costs more. Obviously, you don’t have to deal with this issue when you pursue cash-back.
#3: You don’t want to pay an annual fee.
While many of the top travel rewards cards offer perks that make annual fees worth paying, that doesn’t mean everyone wants to fork over $95 - $550 per year for a travel credit card. The Chase Sapphire Reserve®, for example, is consistently considered one of the top travel rewards cards thanks to its annual travel credit, earning structure, and airport lounge access. Yet, it has a $450 annual fee that many just can’t stomach.
Since many of the top cash-back credit cards are fee-free, however, they offer an alternative for fee-adverse consumers. If you can earn 2% cash back with the Citi Double Cash Card, after all, why pay an annual fee?
#4: You want to redeem your rewards however you want.
Travel rewards programs are certainly lucrative. With certain frequent flyer programs, you can sometimes get more than 2 or 3 cents of value for each mile you redeem. The same goes with hotel programs if you are able and willing to make optimal redemptions. Cashing in 30,000 World of Hyatt points for a night at the $1,000 per night Park Hyatt Paris Vendome will obviously yield you over 3 cents per point in value. No matter how you cut it, that’s a stellar deal.
Unfortunately, not all hotel and airline programs offer more than one way to redeem your points. Some do, of course, but their options aren’t always optimal. You can redeem British Airways Avios for some hotels through their program, but you typically only get around .5 cents per point, for example. The same is true with most other airline miles that offer some alternate redemption options but almost no good ones.
Hotel programs tend to be even worse when it comes to alternative redemptions. Once you rack up points in a hotel program, you can usually only use them for hotels within that brand. Very rarely, such as with the Marriott Rewards Air + Hotel Packages, you may be able to transfer them to an airline.
With cash-back, your redemption options are cut and dry. One you cash in your points for statement credits, you can spend them however and wherever you want.
#5: You don’t want to deal with a complex rewards program.
Last but not least, there are plenty of people who are just sick and tired of dealing with rewards programs. From their constant devaluations to ongoing changes in earning structure or redemptions, it’s hard to keep up with all the changes that take place with frequent flyer and hotel programs each year.
Cash-back credit cards may not come with any spectacular travel perks, but they do have one thing going for them — simplicity. Most cash-back cards offer a flat rate of rewards (usually 1%-2% back) on any purchase, although a handful offer bonus categories that are fairly easy to follow.
The Bottom Line
If you don’t “get” the allure of travel credit cards, rest assured you’re not alone. For every person who is obsessed with airline miles and hotel points, there are just as many who don’t want to deal with the pressure or stress.
Fortunately, there are rewards cards to fit every personality type and spending strategy out there. So, figure out what you want to get out of a rewards card and pick the right card for your needs.