Southwest Jet Plane

Cash Back or Frequent Flyer Miles Credit Card?

I’ve had a few conversation with friends lately about cash back credit cards and miles credit cards. I recorded my first ever video blog post to explain which one I think is better.

Questions? Comments? Thoughts? Leave them in the comments below!

Transcribed Below If You Prefer to Read Rather Than Watch:

Hi everyone, this is Eric from Narrow Bridge Finance here with my first video podcast, video blog post rather, so welcome. We’re excited to have you.

So I’m here today to talk to you about the difference between cash-back credit cards and rewards credit cards with miles and points. I talked to a few people about this lately, and some people think the cash-back’s better, some people think miles is better, so I wanted to clear up the difference and explain a few things about it.

So first I want to talk about the benefits of cash-back credit cards. They’re pretty simple, you get the idea. You spend money, a certain percent you get cash back in your account, you get that as a check, you can spend that however you like. It’s money in the bank. Pretty straight forward.

Miles and points are a little more complicated. There is often big signing bonuses, you get more miles one place than another. There’s a lot of different options; you can use the points for expensive flights, cheap flights, first class, coach. The miles have a lot different value structure than the cash, which is pretty straightforward.

And myself, I prefer to use miles and points. Why? As one example, I went to Israel last year, 100% covered by miles other than $200, less than $200, a person. I know that’s pretty crazy, right? I flew a kind of complicated route from Denver to New York to Germany to Israel, but I got to the other side of the world for less than $200 a person, so I was able to take my girlfriend with on a great trip to my cousin’s wedding.

So I think the value of those miles, where I could get a flight that might have been $1200 a person, so $2400 total, I could get for $400 total. Now you might think “Well, if I spend enough money on my cash-back card, I’ll have enough cash to buy those flights.” You know, that might be true, but it takes a lot longer depending on how you do it. Because most cash-back cards give a flat 1% back, maybe 2, 3, 4, even 5% on some bonus category, whereas on my special mileage card, you can get 5 times on whatever you spend on office supplies, or your cell phone bill in points.

So for every $200 phone bill you pay, you get a thousand miles, and I know a thousand miles doesn’t sound like a lot, but that adds up pretty quick. For example, I’m going to Las Vegas tomorrow for the weekend. YEAH! Party in Las Vegas! It cost me $5 out of pocket, and about 11,000 miles on Southwest. I was able to do that by spending on my Sapphire Preferred card, transferring just the number of miles I needed, and getting that flight and everything squared away. So I think the miles card and miles credit card options are much better than cashback, and that’s why.

If you have any questions, feel free to comment, and I’ll be happy to answer. Have a great day.

Image by jordanvuong / flickr

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