Cash Back vs. Travel Rewards Credit Cards: Which Is Better in 2021?

In 2021, both travel credit cards and cash back cards can still garner high value depending on how you use them.
Sally FrenchSep 2, 2021

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Holding a travel credit card during a year of little travel can seem paradoxical at first glance. But, even if you can’t take full advantage of everything these cards offer right now, there remain a few surprising ways to use them.

So which is better in 2021? A cash back credit card or a travel rewards credit card (spoiler: it depends)? Here are the pros of each.

The case for travel credit cards in 2021

Like many industries, travel credit cards have been reinvented since the pandemic began. In many ways, holding a travel card now is actually more valuable than before, and this is why:

Earn more points for everyday spending

Many travel credit cards normally earn the most rewards for travel spending. But now, travel credit cards have added increased bonus points in categories more relevant to daily life, like supermarkets and gas stations.

Travel credit card perks have improved

While travel credit cards typically have annual fees, they often offer generous perks that offset them, like food delivery or flexible travel credits that even work on public transit or toll roads.

Some premium travel credit cards also have added even more generous perks, including items such as credits for Peloton, restaurants and PayPal, which have little to do with travel.

Travel is coming back, and you want to be ready

You might not know when your next trip is happening, but you know it’s happening eventually. If your goal is to leverage credit card perks and points redemptions for travel, it’s generally a good idea to apply for that credit card at least six months in advance of your trip. You’ll need that time to earn bonus points from potential welcome offers, which are useful in funding a significant chunk of your travels.

Additionally, it typically takes a few months (and sometimes up to a year) of card ownership to earn your card’s other valuable benefits, such as free night certificates. You’ll also want to budget at least a few weeks to apply for and receive membership to programs commonly offered through credit cards, like TSA Precheck and Priority Pass.

Even if you aren't traveling soon, if you have dreams of traveling at some point in 2021 (or even early 2022), now is a good time to add a strategic travel credit card to your rotation, or keep the one you have to maximize its benefits in preparation for future travel.

The case for cash back in 2021

Travel credit cards can save you money and score you upgrades when you travel – but what if you aren’t sure when you’ll next hit the road? The free breakfast with Hilton Diamond status doesn’t mean a whole lot when you haven’t stayed at a hotel in a year, and a Southwest Companion Pass is worthless if you’re not flying in the first place.

If that resonates with you, skip the travel card. Here’s why cash back is better in 2021:

You have more freedom where and how you travel

What if you’ve been collecting World of Hyatt points, but this year’s vacation is at Zion National Park? The nearest Hyatt hotel is about an hour drive away, but there are plenty of hotels near the park entrance. Instead, earn credit card rewards as cash back and budget that money to fund your lodging.

Rewards are easier to track

While some cash back credit cards offer bonus points in certain spending categories (e.g., 5% on gas, but 1% on everything else), their points are generally easier to track compared to their travel counterparts'. Better yet, look for a cash back card that earns a flat rate and you won’t have to worry about whether your local coffee shop is considered a restaurant for bonus dining rewards. You can then spend confidently knowing you’re getting a solid rewards rate on everything you buy.

Your rewards have a clear value

What the heck is a Bonvoy? How much are my United miles worth? With cash back rewards, the question is moot. You know exactly what your cash back rewards are worth.

Your rewards can pay for anything

Cash back credit cards typically let you claim your rewards a few different ways:

  • Direct deposit to your bank account.

  • Paper check.

  • Statement credit.

  • Deposit into a linked investment account.

No matter which way you choose, you are earning rewards as the most fungible currency out there: cash. These days, you might find cash back invaluable for covering unanticipated expenses, like an iPad for your kid’s online schooling, or necessities, like rent if you’ve lost income. Your landlord probably won’t take your frequent flyer miles in exchange for rent payments.

The bottom line

Which type of credit card is better in 2021? The answer isn’t so simple because it depends on your financial situation and priorities.

Travel credit cards are as valuable as you make them. Add up the number of free airport lounge meals, upgrades, complimentary hotel breakfasts and waived resort fees for booking on points. If your grand total for the last year is zero, you’re not alone. But when you are ready to book travel again, being armed with points and miles might very well pay off. They are often key for potential upgrades, elite status and extra cash from the credits you took advantage of along the way.

Cash back credit cards are a straightforward way to earn money back for your spending. Use your cash back rewards to treat yourself to a nice evening out, take some of the sting out of your monthly bills or fund future travel without the stress of maximizing rewards.

Whether you opt for travel or cash back rewards, it’s tough to go wrong. Either way, your credit card is rewarding you for spending you’re already doing. Plus, the typical benefits of credit cards go far beyond rewards. They offer stronger fraud protections than debit cards, not to mention that they help you build credit and more easily track your spending. As long as you pay your bills in full each month, then using any credit card — travel or cash back — can be a smart financial move in 2021.


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:

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