TULSA, Okla. — If you use a rewards credit card, you may feel like you're getting a great deal. But WalletHub research shows you could be losing money or spending power due to a phenomenon called "rewards devaluation."
Its financial experts at found that cash back credit cards often provide better value than points or miles-based rewards programs for most consumers.
The problem with points and miles
Every month, millions of Americans rack up points or miles on their credit cards for rewards that can be used toward travel or purchases. However, these point systems come with significant drawbacks that cash back cards avoid.
"This is why at WalletHub we recommend for most people to use cash back credit cards because you don't have the issue with points and miles that accumulate and can devalue," said Odysseas Papadimitriou from WalletHub.
Devaluation happens when credit card companies suddenly change the value of accumulated points.
"You can get a letter in the mail and say, oh, starting next month in order to get a free flight, you need double the points that you used to need," Papadimitriou said.
Consumer pros and cons
Cash back credit cards pros:
- Straightforward value that doesn't change over time
- No expiration dates on rewards
- No complex redemption processes
- Available for all credit levels, even bad credit
- Average cash back rate around 1%, with best cards offering at least 1.5%
- No annual fees on many top options
Points and miles cards cons:
- Points can be devalued without notice
- Complex redemption systems vary significantly between companies
- Expiration dates on accumulated rewards
- Value depends heavily on how and where you redeem
- Often require excellent credit for best offers
Points and miles cards pros:
- Can offer higher value for specific purchases like travel
- May provide additional perks like airport lounge access
- Bonus categories can maximize rewards for targeted spending
Cash back cards cons:
- May offer lower rewards rates in specific categories
- Fewer premium perks compared to travel cards
- Less flexibility for luxury travel redemptions
Choosing the right card
For general spenders, experts recommend getting a card that pays a flat cash back rate. If your spending focuses on gas, groceries or dining, look for cards that offer bonus cash back in those specific categories.
The best cash back cards require good credit, but options exist for all credit levels. Always check fees to ensure what you're getting is worth it.
Before closing out an old points or miles card, use the accumulated rewards first. There's no sense throwing away what you've already earned.
This story was reported on-air by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
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