Cash vs. Miles Study Finds 11 Travel Reward Cards Beat 2% Cash Back

ExpertFlyer Hot Topics — Where the Rubber Meets the Runway

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In a recent study, MileCards.com ranked 38 travel rewards cards with points that can be used for domestic flights, including the primary airline mile cards of the 5 largest airlines, along with the bank point rewards cards from the 10 largest banks.  Here are the key findings:

Eleven travel rewards cards beat 2% cash back

·         11 of the 38 travel rewards cards ranked came out ahead of a no annual fee 2% cash back card for domestic flight rewards when factoring annual fees. And three significantly outperformed.

·         The Barclaycard Arrival Plus, Amex Everyday Preferred, and Chase Sapphire Preferred each offer over $2,000 worth of reward value over 3 years, compared to $1,687 for a 2% cash back card.

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Only two airline cards came out ahead, both from Southwest

·         If you’re looking for domestic flight awards, sticking to a single airline card isn’t a good bet unless you fly enough to cover the annual fee with bag fee waivers or other perks. And even then, you’re often better off putting your spending on a different card.

·         Two things put airline cards at a disadvantage. First, most only earn a basic 1 mile per dollar spent with few bonus categories like dining or groceries. Second, excluding Southwest, the average price of a domestic award in miles is a high 37,332 miles round trip.

·         Southwest is the exception. With a generous sign on bonus and anniversary bonuses, plus very low prices of 13,722 points on average for a round trip flight, the flight value from its two credit cards, the Southwest Rapid Rewards Premier, and Southwest Rapid Rewards Plus from Chase, beat a basic 2% cash back card.

When paying no annual fee, cash back usually wins

·         When travel rewards are involved, an annual fee can pay off. All of the cards that came out ahead of a 2% cash back card carry an annual fee.  But for consumers who want to pay no annual fee, a 2% cash back card like the CIti Double Cash is usually a better bet than using a travel rewards card for domestic flight awards.

·         The Discover It Miles, with a generous first-year offer that effectively offers 3x points on all spending, is the only no annual fee travel rewards card that matches a 2% cash back card for earning power.

·         Bank of America customers with high account balances can also get better than 2% rewards via the Bank of America Travel Rewards card using Bank of America’s Preferred Rewards program.

Personal spending habits matter

·         It’s important to take into consideration personal spending habits when evaluating a card. For people who spend more than the average $3,008 a year on dining away from home, a card with a 2x or 3x bonus on dining like the Chase Sapphire Preferred or Reserve can outshine the Barclaycard Arrival Plus.  For example, a consumer who spends $6,000 a year on dining could earn $2,252 in flight awards net of fees over 3 years with a Chase Sapphire Reserve versus $2,104 with a Barclaycard Arrival Plus.

While the MileCards study used the average spending habits by category reported by the Bureau of Labor Statistics, using a calculator that calculates card rewards based on personal spending habits can help give a better sense of which cards will outperform. Read the full study on MileCards.com.

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