Miles business credit cards can be useful for frequent travelers, while cashback may be more advantageous for businesses looking for uncomplicated and valuable rewards.
In this article, we’ll compare miles and cashback credit card rewards programs so you can choose the best option based on your business spending habits.
Miles vs. cashback rewards at a glance
Here’s how miles and cashback rewards credit cards work at a high level:
| Cashback | Miles | |
|---|---|---|
| Types of rewards | Statement credit, check, direct deposit | Airline miles, hotel points, flexible points |
| Suitability for daily spending | Excellent for everyday purchases | Great for frequent travelers |
| Reward rate consistency | Usually offers consistent rates for purchases | Usually offers variable rates for spending categories |
| Expiration of rewards | Rarely expire | May expire if not used |
| Credit score required | Varies | Usually requires a good credit score |
| Annual fee | Usually has no annual fee | Usually has an annual fee |
Cashback credit cards
Cashback credit cards give you back a portion of the money you spend on your card in the form of cash rewards. For example, if your card offers 1% cashback rewards, you’ll receive 1% of the amount you spend as cashback. You can choose to receive cashback by check, direct deposit into your bank account, or a monthly statement credit toward your card balance.
The nature of this type of credit card makes it easy to calculate how much you’ll earn, as compared to points-based rewards, which can be trickier to translate into cash value. Unique to cashback cards is their potential to serve as a budgeting tool, directly reducing monthly business expenses or accumulating savings. This means using your card saves you money rather than encouraging you to spend more to accumulate miles or points.
Pros of cashback:
- Straightforward: It’s easy to calculate the real value of cashback rewards
- Flexibility: Cashback cards often apply rewards to all categories of purchases rather than only certain purchase types
- Resistant to inflation: While points-based rewards can decrease in value as prices rise, cashback rewards increase proportionally with inflation
- Easier accounting: Cash rewards can be directly credited, while miles come with valuation and conversion challenges
Cons of cashback:
- Lower rewards: Cashback programs often offer lower rewards rates than other credit cards
- Reward caps: Some cashback cards cap your cash rewards credit after a certain spending amount
Miles credit cards
Miles credit cards will earn you airline miles on card purchases, which you can redeem for travel rewards like flights, hotel stays, and rental cars. These cards generally offer higher rewards on travel than cashback credit cards, which can be useful if you’re a frequent flyer.
The value of miles varies across cards and the method by which you redeem them. For instance, miles are generally worth more when redeemed for travel rewards vs. shopping, cash, or gift cards. Some miles credit cards allow you to transfer your miles to different airline and hotel partners who offer higher value per mile.
Types of miles reward programs
There are three main types of miles reward programs:
- Airline credit cards: Airline credit cards are directly tied to specific airlines, allowing you to earn miles on purchases that you can redeem for flights, upgrades, or other travel benefits with that airline and its partners. They often include brand-specific perks like priority boarding and free checked bags. The rewards value of miles on these cards is highest when flying with the associated airline.
- Hotel credit cards: Hotel credit cards partner with specific hotel chains, offering rewards points for stays and purchases within the hotel network. Cardholders can get benefits like complimentary room upgrades, late checkout, and annual free night stays.
- General travel rewards credit cards: General travel rewards credit cards offer the most flexibility, providing points or miles that you can redeem across a wide range of travel services and loyalty programs, including multiple airlines and hotels. Generally, they don't restrict you to a particular brand, allowing you to use rewards for a wider range of travel expenses, such as flights, hotels, rental cars, and even non-travel purchases.
Pros of miles:
- Higher travel rewards: Miles credit cards usually offer higher rewards on travel than cashback credit cards
- Variety of travel rewards: Aside from just flights, you can usually redeem miles for other rewards like seat upgrades, meals at certain restaurants, and nights at hotels
- Additional perks: Travel rewards cards often come with extra benefits, like travel insurance, priority boarding, and airport lounge access
Cons of miles:
- Complexity: Miles can be more difficult to translate into dollar value vs. flat-rate cashback rewards
- Expiration risk: Miles from credit cards may expire if you don’t use them within a certain time frame, leading to lost rewards
- Annual fees: The best travel rewards cards often carry high annual fees
Calculating the value of miles vs. cashback
Figuring out the value of different rewards programs can be tricky if you have to convert miles into dollars, but it can be done.
For instance, consider a 2% cashback card vs. a travel credit card that earns 2x miles on purchases. For the cashback card, a $100 purchase would earn $2 back. The 2x miles card doesn’t always earn that same $2 back because the value of miles can vary depending on how you redeem them and the card you earn them on.
To compare the value accurately, you'll need to assess how much each mile is worth when redeeming rewards for flights, hotel stays, or other categories. Typically, miles are valued between 1 and 2 cents each, but this can vary widely based on the redemption option.
For example, using miles for an economy flight might yield less value per mile than redeeming them for a business class upgrade. Thus, the actual benefit of a 2x miles card depends on the specific redemption value of the miles, which requires a bit of research to determine the most advantageous use.
Strategies to maximize miles or cashback rewards
Choosing between miles and cashback credit cards involves more than just comparing rewards rates and perks; it requires a strategic approach tailored to your business's spending habits and goals. Here are some strategies for businesses to maximize the benefits of each card type:
For cashback card users:
Redemption flexibility
Opt for cards that allow for direct cashback redemption without minimum thresholds. This flexibility allows you to use cashback rewards at your convenience, helping to manage cash flow.
Stacking rewards
Maximize your savings on business expenses by pairing cashback rewards with merchant discounts and promotions. This strategic combination can greatly decrease the cost of your everyday purchases, allowing you to stretch your budget and boost your bottom line.
Budgeting tool
Use cashback rewards as a direct way to reduce monthly operational costs or reinvest in other areas of your business. This strategy not only provides immediate financial relief, but also lets you plan for future investments or expenses by strategically allocating cashback rewards throughout the fiscal year.
Consolidate purchasing
Try to use your cashback card for all business-related purchases instead of switching between cards. By funneling all possible business expenses through your cashback card, you can maximize your earned cash on every dollar your business spends.
For miles card users:
Strategic spending
Focus spending on your miles card for business travel expenses to earn more miles faster. Choose a card that offers bonus miles for airline, hotel, and car rental expenses to accelerate your accumulation of rewards. This spending strategy will increase the value of every business trip, ensuring every dollar spent contributes directly to your next travel opportunity.
Miles optimization
Make it a habit to regularly assess the value of your miles when considering different travel choices. Try to use your miles for more valuable rewards, like international flights or business class upgrades, to get the most value out of them. Keeping up to date with the changing value of miles and redemption opportunities can help you make smart choices that enhance the return on your travel expenses.
Transfer partners
Choose a card travel that allows you to transfer miles to a variety of travel partners, like airline and hotel chains, to take advantage of the best redemption rates and travel options. This flexibility will let you choose the most cost-effective flights and hotels while also adapting to changing travel plans without sacrificing the value of your miles.
Loyalty benefits
You might want to use travel cards affiliated with specific airlines or hotels to enjoy extra perks like free checked bags, priority boarding, or complimentary night stays, making your business trips more enjoyable and productive for employees.
Is it better to earn cashback or miles?
Cashback rewards are usually the best choice if you want to earn flat-rate rewards on all your purchases. You can then put your statement credit toward whatever you need most. However, if you spend an outsized amount on travel compared to other expenses, then a points or miles credit card may be a better option.
Is it better to earn cashback or points?
Depending on your rewards card, a point may be worth more or less than what you'd save on each purchase with cashback. Unlike cashback, the value of points typically varies by purchase type and how they're used, with some redemption options offering better value than others. So, points cards may offer equal or greater value than cashback, but they require more planning to get the greatest value.
Try Ramp’s corporate card with cashback rewards
Ramp is an all-in-one corporate card and expense management platform designed to simplify your company’s financial operations. By providing easy-to-use cards, spend limits, approval flows, vendor payments, and more, Ramp creates a seamless way to manage expenses and optimize savings.
Some of Ramp’s features include:
- Savings and rewards: Ramp customers save an average of 5% each year, directly contributing to your bottom line and offering immediate value
- Simplified expense management: Ramp's platform integrates with your existing accounting software, making it easier to track expenses, categorize spending, and automate reports, reducing administrative workload and human error
- Real-time insights: Get instant access to your spending data, allowing you to make informed and timely financial decisions
- Enhanced control: Set custom spending limits, create virtual cards for specific expenses, and manage employee spending with ease, ensuring compliance and preventing out-of-policy spending
