View source for Template: Earning Cash vs Points

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Whether it makes sense to earn cash back or transferable points (like Ultimate Reward, Membership Reward, or ThankYou points) depends on how much these transferable points are worth to you. For example, if you value Membership Rewards points at 2 cents each, 3x Membership Rewards points are worth more than 6% cash back on particular bonus category. But, if you only value those points at 1 cent each, they are worth much less. 

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The value you should place on transferable points depends on how you plan to use them.</blockquote>
 
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Some credit cards are true "cash back" cards. You'll receive points that you can use to offset any charge on your credit card bill, or that you can transfer to a bank account. 

Many other cards offer special credit card points that work like cash, at least when used to pay for travel. For example, the U.S. Bank Altitude Reserve card earns points you can use for travel. But these aren't true airline miles that you can use to book frequent flyer tickets. Instead, they are each worth 1.5 cent each against travel purchases that you make with the card. In essence, it is just a 1.5% cashback card (with some excellent bonus categories), where you can only get full value when you use the "cash" for travel purchases.
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<li>'''As a reminder, Ultimate Reward, Membership Reward, and ThankYou points can be converted into points with a number of different frequent flyer programs, and are generally more valuable than any particular type of frequent flyer mile'''. You can transfer them to whichever program has award availability for your upcoming trip, allowing you to book award tickets on over 100 different airlines. And you frequently have the flexibility to transfer your points to whichever of several different partner airlines requires the fewest points for the ticket—allowing you to take advantage of the "sweet spots" of each different frequent flyer program.</li> 

Marriott and Capital One points can also be transferred to frequent flyer programs, but at transfer rates that are worse than 1:1. So, while they are flexible, they aren't worth as much as a frequent flyer miles. 3 Marriott points or 1.33 Venture points is about equal to one Ultimate Reward, Membership Reward, or ThankYou reward point, when it comes to redeeming frequent flyer miles. 

<li>'''You can't go wrong with Ultimate Rewards points—they are worth at least 1.5 - 1.8 cents each'''. With Ultimate Rewards points, you have the best of both worlds. You have the opportunity to get very high value from your points by using them for frequent flyer tickets. But, if you have trouble finding award availability, or want to reward yourself more frequently, you can get great value by using your points for Southwest Airlines tickets (where you can get more than 1.5 cents per point on many flights) or on award nights at Hyatt hotels (where points are typically worth at least {{Value|Hyatt}} cents each). Worse comes to worse, if you have the Sapphire Reserve card, you can use your points (at 1.5 cents each) to book a wide variety of travel through Chase's website.</li> 

Capital One Venture points are also relatively fool proof. You can easily use your points like cash, while retaining the upside to redeem them for frequent flyer tickets. However, the overall value proposition is not as good as Ultimate Rewards points. When used for frequent flyer tickets, you'll get about the same 1.5 airline miles per dollar spent, but when used in easier ways, you'll get the equivalent of 2% cash back, instead of 2.25 - 3%, and there are no opportunities for earning high bonus reward rates or collecting multiple signup bonuses. 

<li>'''If you highly-value premium cabin award seats, and have the patience to build up large number of points and to find award availability, transferable points are always the best option'''. When you use points to book business and first class international frequent flier tickets, you'll typically get at least 3 or 4 cents in face value from your points, and often much more. For example, you'd expect to get at least $3-4,000 in airfare from 100,000 points.</li>

However, these values are based on the cash prices of the tickets. If you don't value the seats this highly, the real value you are getting from the tickets is lower. For example, you might get more value out of two sets of coach tickets, than one set of business class tickets, despite the fact that the cash price for the business class tickets is much more than twice as much money. In addition, you'll need to save up all your points to use for very few redemptions, and have the flexibility to take advantage of available award space. 

<li>'''If you are interested in economy class or domestic frequent flier tickets, and you have a lot of flexibility, you should be able to get around 1.5 - 2 cents in value from Membership Rewards and ThankYou points—which usually makes them a better option than cash back'''. And often considerably more. There are good opportunities to use points to get frequent flyer tickets. It is just hard to be able to use them if you need to fly to a specific destination on a limited set of dates, especially if you don't want to take inconvenient flights. If you have more flexibility, booking frequent flyer tickets is the almost always the most valuable use of your points.</li>

For frequent flyer tickets, Membership Rewards points are generally the most valuable of the three major types of transferable points. They have the most partners and occasionally offer transfer bonuses. Thank You points are the least valuable, due to a more limited set of partners. 

<li>'''If you don't have a bunch of flexibility, Membership Rewards and Thank You points are worth much less—you are probably better off getting cash back (or Ultimate Rewards points instead'''. Most of the time you want to use your tickets, there simply won't be any award availability, especially on the flights you want to take. In some cases, you'll have the opportunity to pay a lot of extra points to use an "Anytime" award. Otherwise, you'll need to use your points, like cash, to pay for tickets booked through the credit card company's website. In either case, you'll get much less value from your points. Count on 1.5 cents from Ultimate Rewards points, 1.25 cents from ThankYou points, and 1 cent for Membership Rewards points. (If you can get the BUSINESS version of the Amex Platinum card, and are willing to pay the fee, you can get 1.54 cents in value from your Membership Rewards points when buying airplane tickets on your favorite airline.)</li>

<li>'''If you don't travel that often, and you want to pay as little as possible for your travel, you probably want to focus on cash back cards'''. You can't use your Membership Reward, Ultimate Reward, or ThankYou points to purchase nights through AirBnB, pay for your transit pass or ride service, or to pay for your activities and attractions. Nothing is more flexible than cash. And even most fixed-value points let you pay for a considerably broader range of travel purchases.</li> 
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