Choosing Rewards - Cash Back or Points?

If you do decide to take the plunge and get a rewards credit card, one of your first choices you have is what type of reward do you want. Typically you would choose between cash back or points towards a loyalty program. You redeem these rewards for various things (airfare, hotels, store credits, etc.). Which one should you choose?

Cash back is much simpler to understand. Sign up bonuses are for set amounts, reward bonuses are distributed at set percentages. Meaning if a card offers a $200 bonus with 2% cash back, you would receive $200 if you met their spending requirements and would receive an additional 2% cash back from your expenditures on the card at your statement dates.

Points are much more confusing. Reward points vary greatly between companies (i.e. some offer 2 pts per dollar, some offer 12 pts per dollar spent, etc.). Other points blogs go into great details about these “point valuations” and how to compare them between companies but for me I take a much simpler approach (life’s too short to go through all those calculations IMHO). Just look at the actual cost of the thing you want versus your points costs (how hard was it to get your points, what else could you buy with those points, etc.).       

Cash back also provides instant gratification at the end of every statement. If you are a little tight, the cash back could definitely help with your expenses. Accumulating points until you could redeem them for actual rewards takes longer. However, when the time finally comes to redeem your points, you could find some excellent values. For example, I once found a hotel room that was $500 for ~$80 in points. 

In short there is no obvious answer, it all depends on what you want.