Which is Better: Cash-Back, Hotel Loyalty Points, or Airline Miles?ReviewAdvice

Which is Better: Cash-Back, Hotel Loyalty Points, or Airline Miles?

Credit card rewards come in all shapes, sizes, and currencies. However, the most popular types of rewards typically come in the form of cash-back, hotel loyalty points, and airline miles. Which form of currency you prefer could depend on a lot of factors, including your personal goals, desires, or travel plans. Before signing up for a new card, take some time to figure out what exactly you are after. For example, would you prefer to earn free hotel stays or free flights? Or would you rather keep your options open?

If You Want Free Hotel Stays

If you are mainly looking for a way to earn some free hotel stays, a co-branded hotel credit card might be the perfect option. For example, the Citi Hilton HHonors Visa Signature card offers 40,000 Hilton HHonors bonus points to cardholders once they spend $1,000 within the first four months of card ownership. Cardholders can also earn 6 points/$1 spent at Hilton properties, 3 points/$1 spent at drugstores, supermarkets, and gas stations, and 2 points/$1 spent on everything else- and all with no annual fee.

Since a free night at certain Hilton properties starts at only 5,000 Hilton HHonors points, the signup bonus alone could be worth a staggering eight free nights. That's why this card is a no-brainer for people who want to get away from it all without breaking the bank.

Of course, there are many other hotel loyalty programs out there- including IHG, Marriott, Starwood Preferred Guest, and Hyatt. All of them make it easy for qualifying customers to earn free hotel stays and more.

Which is Better: Cash-Back, Hotel Loyalty Points, or Airline Miles?

If You Want Free Flights

Almost every airline out there offers some type of loyalty program, and most of the larger airlines hand out airline miles that can drastically reduce the cost of a flight- or even make it free. American Airlines is no exception. In fact, their loyalty program is by far one of the most lucrative out there, mostly because they make their miles so easy to earn.

Most people begin building a balance of airline miles by signing up for a co-branded airline travel credit card such as the Citi Platinum AAdvantage World MasterCard. The deal is this: Spend $1,000 within three months of account opening and earn 30,000 American Airline miles. You also earn 2 miles/$1 spent with American Airlines and 1 mile/$1 spent everywhere else- and all without an annual fee for the first year. With a round-trip flight from the U.S. to the Caribbean costing as little as 25,000 American Airline miles during off-peak times, this card is the perfect way to earn a flight for pennies on the dollar.

If You Can't Decide

If you can't decide whether to invest in airline miles or hotel loyalty points, your best bet is to pursue a rewards card that offers travel credit or cash-back. A few examples:

The Chase Sapphire Preferred card, for instance, offers 40,000 Ultimate Rewards points to new customers after they spend $3,000 on the card within 90 days of account opening. Customers also earn an additional 5,000 Ultimate Rewards points after an authorized user makes a purchase within 90 days, and enjoy the first year without an annual fee. In addition, cardholders earn the base rate of 2 points/$1 spent on travel and dining and 1 point/$1 spent on everything else.

The great thing about Ultimate Rewards points is that they transfer out to a wide range of hotel and airline loyalty programs. Even better, you can also redeem your Ultimate Rewards points for straight-forward cash-back. In this example, the 40,000 point signup bonus from the Chase Sapphire Preferred card is worth $400, an amount of money that can be used to pay for airfare, hotel stays, or more.

Another great option is the Barclay Arrival Plus World Elite MasterCard. Simply sign up for the card and spend $3,000 within 90 days to earn 40,000 bonus miles which can be redeemed for $400 in travel. Cardholders also earn 2 points/$1 spent on all purchases and the card's $89 annual fee is waived the first year.

When it comes to earning cash-back, hotel loyalty points, or airline miles, there is no right answer for everyone. Fortunately, there are plenty of options out there when it comes to rewards cards. So if you can't decide, you might just need to get more than one.

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