Travel or Cash Back Credit Cards?

If you want to use a reward credit card for getting free airline tickets, you have a choice of choosing a dedicated airline credit card, a travel reward credit card or a cash back credit card. A dedicated airline credit credit card has hefty annual fees and may not be worth it if you are not a very frequent traveller or do not spend enough on your credit card. But assuming that you do take a couple of vacations here and there, is it better to choose a no annual fee travel credit card or a cash back credit card? This article examines the factors to consider if you decide not to get a dedicated airline credit card, but instead to choose between either a no annual fee reward or cash back credit card.

Let is assume we now have one reward credit card and one cash back credit card to choose from. The reward credit card pays one point for every dollar you spend on purchases. The cash back credit card pays a 1% rebate. Essentially, they both have identical payout formula of 1%. Let us assume both have no annual fee (very realistic) and both have identical apr. Would there be any difference between the two credit cards? Should we be indifferent? How do we decide which is better?

How much does your typical vacation airline ticket cost?

The most important factor that in this decision is actually the average cost of your airline ticket when you take your vacation. Why? Because most travel reward program (in fact, most frequent flyer program) require that you earn 25,000 miles or points to redeem a roundtrip restricted economy ticket within continental US. You are required to purchase the ticket either through the specific airline directly (in the case of a specific frequent flyer program) or through the reward program's agent. If you have a cash back credit card, 25,000 points will get you a $250 cash rebate (assuming a 1% formula).

But we all know that a domestic economy ticket cost can vary anywhere from about $99.00 to $350.00. If you are flying short haul, you can get a $99.00 ticket from a low cost discount carrier. If you fly from coast to coast, you are likely to have to folk out over $300 for a ticket. If you use get a special deal from expedia or priceline, you may get it cheaper.

Choose a cash back credit card if you airline ticket cost less than $250

Hence, it is very important to know your vacation habits. Where do you tend to go for your vacations? How much does your average airline ticket cost you? If you tend to fly short haul to a nearby place for your vacation and your airline ticket cost about less than $250 (say for example $150), you are better off using cash rebates from a cash back credit card. This is because you only need to spend $15,000 on your credit card to get a $150 cash rebate. Spending $15,000 on a reward credit card only earns you 15,000 points, not enough on most reward program to earn a free domestic economy flight.

Choose a travel credit card if your airline ticket cost more than $250

However, if you fly long distance (New York to LA for example) and your airline ticket tends to cost over $300, then using a reward credit card makes more sense. This is because if you use a cash rebate credit card, you need to earn over $300 in cash rebates (ie spend over $30,000). However, with a regular reward program credit card, you only need to spend $25,000 to earn your 25,000 points.

So if you tend to take vacations that require long haul flights that cost more than $250, use a travel reward card. If your vacation flights cost less than $250, use a cash rebate credit instead. Some reward program only require 22,000 points to redeem a domestic roundtrip flight. In that case, use $220 or 22,000 points as your guide when you are choosing between a travel or cash back credit card.

Click on the links to see a list of cash back and reward credit cards
http://www.compare-apply-credit-card-online.com/CashRebateCreditCards.html http://www.compare-apply-credit-card-online.com/RewardProgramCreditCards.html"

About The Author

Nick Lian
http://www.compare-apply-credit-card-online.com
Credit Card Tips, News and Reviews for those looking for a credit card.

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