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What's typically better, cash back or rewards points?

By , CardRatings contributor
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American Express and Citi are CardRatings.com advertisers.

Getting a better deal from a cash back credit card or a rewards credit card depends on your spending patterns and on how you like to treat yourself. You might be surprised to see some "cheesy" looking rewards points programs doling out five to six times the value of a typical cash back rebate.

First, it helps to understand the real motivations behind many of the most popular rewards credit cards. Getting a great rebate every year might inspire you to funnel all your purchasing through a single credit card, which helps your preferred bank beat its competitors.

But, your bargain-hunting behavior also encourages you to start swiping plastic for items you might otherwise have paid cash for. Merchants start feeling more pressure to accept credit cards, especially for smaller purchases. Yet, if they mark up their prices to cover the cost of acceptance, you're already reaping those rewards.

Trading cash back rewards for bonus dining credits

However, your rebate potential really kicks into high gear when you let your credit card issuers' marketing partners steer some of your behavior. Even though a number of cash back credit cards offer occasional 5 percent rebates on your restaurant tabs, a rewards point program could match or exceed that amount all year long.

If your tastes lean toward city bistros instead of suburban malls, an American Express card with Membership Rewards can still help you score plenty of bonus points while dining out.

Doubling or tripling cash rebates for travel rewards

If you never know how you'll spend your rebate, Capital One cards let you squirrel away at least a penny for every dollar in transactions.

And, if you hit the road often, hotel credit cards from Starwood, Hyatt, and Hilton will multiply your free room nights if you show them your loyalty.

Bottom line: Get clear about how you want to redeem your rewards, then find the credit card that maximizes your earning potential for that prize. If you prefer the flexibility and convenience of tracking cash, sign up for the best cash back card you can find. Just make sure you're earning something when you pay with plastic, or risk leaving cash on the counter.

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