Cashback or Points: Which Credit Card Reward Program Is Better?

When comparing credit cards, the type of rewards offered is one of the important factors that should be considered, aside from credit limits, interest rates, and annual fees. A quick side-by-side look at credit cards from different banks will show you that the rewards opportunities vary, and that no single card is perfect for everyone.

Many credit cards give cashback, points, and discounts for partner establishments. Some provide incentives for specific categories, such as groceries, shopping, and travel.

When choosing a credit card based on its rewards program, you should always take your spending habits into consideration. It is also crucial that you understand the differences, benefits, and drawbacks of specific types of credit card rewards.

Cashback or Points: What is the Difference?

While they are both considered rewards, cashback and points differ in terms of the flexibility they offer to consumers. Although they essentially work the same way, one will always be more advantageous than the other, depending on your specific needs or preferences.

For points, a consumer is rewarded through prize or service redemption. The actual “reward” will be in the form of a free product or service selected by the card issuer.

Cashback, on the other hand, is more straightforward than that. As the name suggests, it entails getting your money back in the form of a rebate. This can be used to pay for a percentage of an item purchased using the credit card.

Which One Is Better?

Most people want to maximize the use of their credit cards through rewards programs. Choosing the right program for you depends on your spending habits, but your choice may also be affected by the different types of thank-you gifts being offered.

Below, we take look at these two primary types of rewards offered by most credit card companies, along with their perks and drawbacks:


With cashback reward credit cards, spending more may not always be a bad thing. In fact, this card may offer more rewards than you expect, especially since you may end up earning more than you spend.

The most significant perk you get from using a cashback credit card is the amount you save from the rebate your purchases. It is credited to the account, thereby reducing the outstanding balance reflected in your statement.

However, it is not correct to assume that cashback rewards are the same as discounts. This is because most cashback rewards aren’t applied to the account until one or two billing cycles have passed. On top of that, you have to earn a minimum accumulated amount of rewards before you can use the cashback offer.

Some credit cards also have a limit on the number of cashback rewards that can be earned by a consumer. This means that, if you have already maxed out your annual cashback limit, you will no longer enjoy its benefits for the remainder of the year.


Point-based credit card rewards essentially work by allowing the consumer to rack up points from their purchases. In most cases, different categories have varying point levels. Plus, points can be exchanged for several items, including:

  • Air miles that can be used to pay for plane tickets and other travel needs
  • Waiver for the credit card annual fee
  • Charitable donations to specific charities chosen by the card issuer
  • Cash credits

Aside from receiving the above-mentioned perks, some companies that offer credit card reward points also give away freebies. This can range from a corporate giveaway bag to a gift certificate covering a luxurious stay at a partner hotel.

However, there are certain drawbacks to this type of rewards system:

  1. It can be complicated to use. Each reward point has a different value than actual currency or even air miles. This makes it quite exhausting for busy people to redeem their gifts from using their credit cards.
  2. It can be time-consuming. As mentioned earlier, reward points only kick in when you’ve accumulated a minimum amount of purchases. For this very reason, it may take time before you can appreciate the value of having such a card since you won’t be able to use the points right away. This is especially true if you’re not a big spender.
  3. Limited rewards. Credit cards that offer points as a reward incentivize specific types of purchases. It is very rare that one credit card would reward multiple types of purchases, let alone every single one of them.

Comparing Rewards Based on Your Needs

Basically, the key to maximizing your credit card successfully is having the right knowledge on how each rewards program works. When comparing cards that offer reward points with cashback credit cards, you must always consider your spending habits. After all, spending more just so you can rack up on points is not an effective way to save.

Of course, you can always carry multiple cards to take advantage of their different benefits. Just make sure you keep your expenditures in check to avoid going on a debt spiral.


Deepak Kumar is a Co-Founder of SoulWallet, a neutral comparison portal for consumer financial services. With a team of “out of the box” thinkers and a deep understanding of the UAE consumer banking industry, the company helps customers make the best choices when shopping for financial products such as credit cards and loans.