Cash Back Vs. Flexible Rewards Points: How To Decide What’s Right For You | Smart Change: Personal Finance

The biggest downside to the variability of flexible points is the possibility that your preferred points currency is devalued. Devaluations can happen in many ways: A flexible points program may change the rules for transferring points to an airline. A partner with attractive redemption options may be dropped. An airline partner may increase its award prices. Points may suddenly become worth less toward travel booked through a portal. A redemption option may disappear altogether.

The longer you hold points in a transferable points program, the more risk you have of some sort of devaluation. Devaluations often happen with little or no notice and are not predictable.

Learning to use cash back is easy. With cash back rewards, often the only thing you only have to learn is how to redeem your rewards through your bank’s website and what options are available. Usually these options will be some combination of a credit toward past purchases, a statement credit, a cash back check or a deposit to your bank account.

In contrast, the many redemption options available in flexible point programs mean that you will usually want to spend time learning about how your flexible points program works. To effectively use flexible points, you’ll need to learn what the points can be redeemed for and how to redeem them. Often, you will redeem points through a portal on a bank website, but there may be some rewards that require you to visit a third party website or call a call center. For redemption options like point transfers, it is good to understand when points post in your airline or hotel account.