Despite the fact that you earn rewards in a certain “rewards currency” (i.e. cash, points or miles) most credit cards allow you to use/redeem them for other things. For example, you can turn your Capital One miles into cash or redeem your United Airline miles for merchandise. In most cases, though, you lose value by redeeming your rewards outside their particular “rewards type” and we therefore advise against it.
In order to maximize your rewards potential, it’s important to pick a card that provides the most valuable rewards on your biggest expenses. For instance, if you are a frequent flyer, perhaps an airline miles credit card is right for you. But, on the other hand, if you spend more on gas than on airfare, a gas credit card might be a better choice.
If you’d prefer simplicity and predictability, just get a rewards cash back card since:
- Cash can be used anywhere
- Cash back credit cards allow for simple comparison, given that you don’t have to figure out how many points or miles it takes to get a certain piece of merchandise or a free flight. Cash is cash.
- There is no risk of rewards devaluation
What is rewards devaluation, you may be asking yourself? When rewards are issued in the form of points or miles, issuers typically set plateaus you must reach in order to redeem these points/miles for certain goods and services. However, these plateaus are not guaranteed to be static, and whenever an issuer increases the number of points/miles needed for redemption, the points/miles you have saved effectively become worth less all of a sudden.
In order to avoid rewards devaluation, we recommend redeeming your points/miles as frequently as possible. This will not only minimize the number of points/miles that are vulnerable to devaluation at any given time, but will also allow you to benefit from your rewards credit card more often. To be able to redeem frequently you must, of course, open a credit card offering rewards on something you purchase frequently. Or, as mentioned above, you could just go for a cash back credit card and avoid the hassle altogether.