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Redeem Travel Rewards for Cash Back? Think Twice

Oct. 9, 2015
Credit Cards
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Many travel credit cards come with a great sign-up bonus and high travel rewards rates. But if you’re hoping those lucrative rewards will translate well into cash back, you’ll probably be disappointed. Here’s why, along with a few cards for travelers that can put cash back in your wallet.

Great on travel, weak on cash

Most travel credit cards are naturally geared toward travelers, so they typically give you a poor redemption value when you redeem rewards for cash back. Let’s use the Barclaycard Arrival Plus® World Elite Mastercard® to explain.

Travel buffs love this one because it offers 2X miles on all purchases and a hefty sign-up bonus. When redeeming for travel in the form of a statement credit, each mile is worth $0.01. But if you redeem your miles for plain old cash back, you get only half as much.

For example, let’s say you’ve earned the Barclaycard Arrival Plus® World Elite Mastercard®’s sign-up bonus. Enjoy 70,000 bonus miles after spending $5,000 on purchases in the first 90 days. Those miles are worth $700 when redeemed for a statement credit against a recent travel purchase, such as a plane ticket or a hotel booking. Plus, you’ll receive another 3,500 miles in your rewards account because the card provides a 5% bonus on miles redeemed.

But if you choose to get a cash back — meaning, a statement credit against your overall balance as opposed to against a travel expense — you receive only half of the value in addition to the 5% rewards bonus. You get a statement credit either way, but one’s larger.

Consider these cash-back heavyweights

Travel credit cards are attractive because of their high rewards rates. But as we just saw, redeeming for cash instead isn’t as worthwhile. If you’re not a globetrotter but want a high-rewards card, here are some cash-back options to consider.

Get 1.5%, every day: Capital One® Quicksilver® Cash Rewards Credit Card

The Capital One® Quicksilver® Cash Rewards Credit Card’s strength lies in its simplicity. It offers unlimited 1.5% cash back on every purchase with no limit on how much you can earn, and no changing bonus categories. You can also earn a sign-up bonus: One-time $150 cash bonus after you spend $500 on purchases within 3 months from account opening.

If you’re fee-averse, you’re in luck. The Capital One® Quicksilver® Cash Rewards Credit Card has a $0 annual fee and no foreign transaction fees. It also has an introductory 0% APR period if you want to score cash back on a large purchase: 0% on Purchases and Balance Transfers for 15 months, and then the ongoing APR of 14.74% - 24.74% Variable APR.

All in all, the Capital One® Quicksilver® Cash Rewards Credit Card is a great choice. It’s simple, predictable and affordable.

Nerd note: If you need more time to pay off purchases, there are better 0% APR cards to choose from.

Earn now and later: Citi® Double Cash Card – 18 month BT offer

Plenty of credit cards reward you for making purchases, but cards that reward you for paying off your balance are rare. The Citi® Double Cash Card – 18 month BT offer is one of them, giving you unlimited 1% cash back on every purchase you make and an additional 1% cash back when you pay for those purchases in full or over time. That’s one of the highest ongoing rewards rates for cash-back credit cards.

The Citi® Double Cash Card – 18 month BT offer also has a $0 annual fee and an introductory APR of 0% on Balance Transfers for 18 months, and then the ongoing APR of 15.49% - 25.49% Variable APR.

With its high cash-back rate and incentive to pay your balance quickly, the Citi® Double Cash Card – 18 month BT offer gets high marks.

The bottom line

With a few exceptions, travel credit cards don’t typically provide cash-back rewards with the same value as their travel rewards. If you’re ever in doubt, a straightforward cash-back card is usually a safe bet.

Ben Luthi is a staff writer covering personal finance for NerdWallet. Follow him on Twitter @benluthi and on Google+.


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