Transferable point cards are the name of the game when it comes to scoring high value redemptions—it's why Roame exists!
However, it's also important to talk about fixed value / cashback credit cards since they offer a more simplistic approach to the world of credit card rewards. The two schools of thought are typically "Team Cashback" vs "Team Points." Both have their pros and cons.
In this article, we will delve into fixed value / cashback credit cards and highlight what makes them good and bad.
What Are Fixed Value Cards?
Fixed value cards are essentially in the name—the value you get from the card is "fixed." It is not dynamic and is not subject to subtle changes.
Cashback Cards
Cashback cards are probably the most simple cards in the world of credit cards: you earn a % back as cashback and that's about it. Cashback typically ranges from 1-5% returns on your purchases.
For instance, the popular Discover It card earns up to 5% cashback on purchases with rotating categories. One quarter, you might earn 5% cashback on groceries, meaning if you spend $100, you'll get $5 back.
Fixed Value Point Cards
Huh? Earning points can be fixed value?
Yes—while this might be confusing at first glance, some cards while advertised as earning "points" or "miles" might as well just be earning cashback. You may also see this the other way around, where the cashback you earned is accumulated as "points."
For example, the Chase Freedom Unlimited® advertises itself as earning cashback, but accumulates cashback as "Ultimate Rewards points." However (in isolation), you cannot transfer these points to partners; you can only redeem these points against your statement credit, buy gift cards, or use them for travel. Essentially, a point here is going to be worth 1 cent each.
Wait, Can I Use These Fixed Value Points Or Cashback For Travel Via Transfer Partners?
In some cases, earning the points or cashback on a nontransferable card is not a dead end. For example, when earning cashback on the Capital One SavorOne, you can convert it to points with an active Venture card. Likewise, you can transfer your Chase Freedom Ultimate Rewards points to an eligible Sapphire card.
However, in some cases, earning cashback is a dead end. Such is the case for the Discover card, whose cashback earned is basically exactly how it is advertised: just straight, cold cash.
Pros & Cons Of Fixed Value / Cashback Cards
While it is nice to essentially just earn straight cashback, fixed value cards have limits. They are ideal for people who value simplicity and don't plan on flying international significantly.
BRAND
Pros
Cons
- Buy what you see: When it comes to flights, you're essentially just buying the flight as if you were paying it with your hard-earned cash. There's no such thing as award availability or needing to worry about the number of seats available when the schedule releases more award seats
- Earn frequent flyer miles: Since using your cashback is the same thing as booking a flight using cash, you are eligible to earn points and miles on the flight
- Simplicity: You earn cashback, and then you spend cashback. Cannot be simpler than that!
- Limited upside: when it comes to cashback / fixed value points, you are quite literally getting 1 cent per point. That means 100,000 points is just simply worth $1,000. However, savvy fliers who understand transferable points might be able to squeeze out far more value out of their points than just $1,000—in some cases, you can get maybe $2,000 or even $5-10,000 out of those same 100,000 points
Are There Good Fixed Value Cards?
Yes, absolutely. I still think it's important to carry some high value fixed value cards that are proven to have significant benefit. In essence, it really comes down to an opportunity cost question when choosing between fixed value vs transferable point cards. Do you value transferable points high enough to forgo straight cashback?
The Capital One SavorOne Cash Rewards Credit Card offers a flavorful blend of cashback rewards for those who savor dining out, grocery shopping, and entertainment. With no annual fee and no foreign transaction fees to dilute its value, this card is perfectly seasoned for the spender who prefers a simple yet rewarding cashback structure.
It offers strong spending multipliers that easily make it a top-of-wallet card:
- 3x points on dining, entertainment, streaming services, and at grocery stores.
- 1x on all other purchases
The ability to earn 3x on dining + at grocery stores for a $0 annual fee card is an incredible combo in itself—Chase cards quiver at the sight of this (none of them offer this type of earning potential). This card can easily be a top choice for many, with strong categorical earnings for high frequency purchases.
This is another no annual fee card that has a lot to offer. Although it advertises as earning "cashback" you earn Ultimate Reward points that can be converted to higher value points later on with a premium Chase card.
The Freedom Unlimited also has a very simple to understand earning structure: get 1.5% cashback on all your purchases. You also get 3% cashback at restaurants and drugstores + 5% cashback on Lyft purchases.
This AMEX card is also an extraordinarily strong cashback card:
- 3% cashback at U.S. supermarkets on up to $6,000 per year in purchases, then 1%
- 3% cashback on U.S. online retail purchases, on up to $6,000 per year, then 1%
- 3% cashback at U.S. gas stations, on up to $6,000 per year, then 1%
- 1% cashback on all other purchases
Most people use this card as a catch all for day to day spend, as it earns well at supermarkets & gas stations for no annual fee.
How Should I Adapt My Card Strategy With Both Fixed Value & Transferable Point Cards?
With many excellent fixed value/cashback & transferable point cards on the market, deciding between the two can be difficult. However, the way I like to think about this is in terms of opportunity cost.
For example, let's say I'm looking at a gas station purchase and I only have the AMEX Blue Cash Everyday® and the Capital One Venture X Rewards Credit Card. While I might earn 3% cashback on that purchase using the former, I only earn 2x miles with the latter. Do I value miles at more than 1.5 cents per point here? I guess it depends on what you think of miles!
For a points/miles savvy individual like me, I think I'd generally be able to squeeze out more than 1.5 cents per mile here, so I'd likely use my C1VX. Others may prefer to earn straight, guaranteed cash. It really is a valuation based problem here.
In a more interesting debate, you might see a cashback card offering 5% on gas for a 3 month period. When compared to a Venture X, it's a lot harder to squeeze out 2.5 cents per mile—I would probably go with the straight cashback in this case.
Conclusion
Fixed value/cashback cards are the pinnacle of simplicity when it comes to the credit card game. You can make your life extraordinarily easy by just earning flat cashback, but you're missing out on a lot of value down the road when it comes to redeeming your points.
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