Choosing your first credit card can be difficult. The annual fee, benefits and rewards earned on purchases all factor into the decision. A card that pays miles or points can earn you incredible travel experiences, but on the other hand, cash-back cards can get those same travel experiences — or anything else. Both types of cards have their strengths and weaknesses for first-time cardholders.
Is cash back or travel rewards better for your first credit card? Here's what to think about.
Reasons to choose a cash-back card
Cash-back credit cards offer greater flexibility and in some cases, a lower price tag, too.
Cash can be used for anything — at any time
With a cash-back credit card, your rewards are completely flexible. Use the cash back to pay down debt, save for the future or splurge on something special. The options are limitless, and you're not forced to spend your hard-earned rewards with a specific airline or hotel chain.
Also, cash doesn’t expire. So there's no pressure to redeem it for a less-than-desirable purchase before it’s too late.
More freedom on travel
If you decide to use your cash-back rewards to pay for travel, you can choose any airline or hotel you like — no loyalty required.
But when you opt for miles rather than cash back, you might have to fly at an inconvenient time of day because only certain flights have award seat availability. Worse, your airline or hotel could have blackout dates when you can’t use points or miles at all.
A credit card that offers cash back instead of points could mean you won’t have to stay at a poorly located hotel or one that doesn't provide your preferred amenities. You can book whenever, wherever and without having to worry about loyalty program restrictions.
Lower annual fees
Travel rewards cards often come with luxury travel perks, like airport lounge access, that correspond with a high annual fee. For example, The Platinum Card® from American Express ($695) and Chase Sapphire Reserve® ($550) both have very high annual fees. Terms apply.
By comparison, many excellent cash-back credit cards have no annual fees, like the Citi® Double Cash Card – 18 month BT offer or the Capital One Quicksilver Cash Rewards Credit Card. Low annual fees mean even more cash can stay in your wallet.
Reasons to choose a card that earns miles or points
Travel credit cards that earn points or miles are incredibly popular because they make travel attainable that otherwise may not be. These cards enable the average person to book luxurious vacations and save money on fees, plus they come with nice perks like airport lounge access or free checked bags.
First-class travel within reach
Sometimes using miles instead of cash back to book travel gets you more value. For example, a luxurious lie-flat seat in business class that costs thousands of dollars in cash could be had for a surprisingly affordable sum in points or miles. Earning enough cash back to pay for the same trip would take much longer.
Save money while traveling
Travel credit cards not only earn miles — they can also save you money. Airline credit cards often waive checked bag fees, provide complimentary priority boarding and offer discounts on in-flight purchases.
Furthermore, hotel credit cards, like the Marriott Bonvoy Brilliant™ American Express® Card, typically grant automatic elite status that can get you complimentary upgrades or breakfast, early check-in or late checkout. Terms apply.
These savings can add up if you're a frequent traveler.
Enjoy lots of travel perks
Many travel credit cards provide other benefits that, for some users, justify the higher annual fees. For example, reimbursement for TSA Precheck or Global Entry application fees is a popular benefit. Other favorites include complimentary airport lounge access, baggage delay protection, rental car insurance and annual travel credits. Some hotel cards, like the IHG® Rewards Club Premier Credit Card, give you a free hotel night in exchange for the annual fee.
These perks can add value for the cardholder, even if they come at a yearly cost.
Questions to ask before getting your first credit card
Here are a few questions you should be able to answer about the credit card you've selected before hitting the "apply" button:
Is there an annual fee?
What's the welcome bonus?
How much do you need to spend to earn the bonus?
Does the card earn cash back or travel rewards?
How much will you earn on purchases?
Are there other perks that matter to you, and what's their personal value to you?
The bottom line
As you figure out if cash back or travel rewards is better for your first credit card, think about your immediate goals.
Do you need to build up your emergency fund or pay off debt? A cash-back credit card can help you achieve those goals faster.
Do you want to travel, but aren't sure that you can afford the flight or hotel? Points and miles can significantly reduce the cost.
Your answers to these questions should reveal whether you should apply for travel rewards or cash-back credit cards.
If you’re still having difficulty, consider a card that offers the best of both worlds. A card like the Chase Sapphire Preferred® Card earns points that can be redeemed for cash or travel, while also giving you the option to convert points into travel rewards with airline or hotel partners for potentially higher value. It also includes attractive benefits like primary rental car protection, delayed baggage insurance and trip cancellation protection.
How to Maximize Your Rewards
You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2021, including those best for:
Flexibility, point transfers and a large bonus: Chase Sapphire Preferred® Card
No annual fee: Bank of America® Travel Rewards credit card
Flat-rate travel rewards: Capital One Venture Rewards Credit Card
Bonus travel rewards and high-end perks: Chase Sapphire Reserve®
Luxury perks: The Platinum Card® from American Express
Business travelers: Ink Business Preferred® Credit Card