Cashback vs. Points: Which Rewards Are Better?

Credit card rewards have transformed how people shop, offering enticing benefits for using cards instead of cash.

Among these rewards, cashback and points programs are the most prominent. So when we talk about cashback vs points, which option is better?

Both have their strengths and appeal to different lifestyles and goals. But which option gives you more value for your spending? This guide breaks down their pros, cons, and suitability to help you choose.

Cashback: The Straightforward Saver

Cashback rewards offer a percentage of your spending back as cash. It’s a simple system where you earn real money instead of benefits you need to redeem. You can check out the various cashback cards with no annual fee if you are someone who wants to explore this benefit.

Advantages of Cashback

1. Immediate Value: Cashback provides tangible rewards without the need for conversions or calculations. For example, a card offering 2% cashback would return R$20 for every R$1,000 spent. This is particularly appealing to people who want quick, practical benefits rather than waiting to accumulate points.
2. Flexibility: Cashback doesn’t tie you to a specific store or service. You can use it for anything, including paying bills, groceries, or saving it for future needs. This makes it ideal for families or individuals focused on practical financial management.
3. Ease of Use: Cashback programs are simple to understand and use, even for those who are new to credit card rewards. There’s no need to worry about converting points or learning complex reward systems.

Disadvantages of Cashback

1. Lower Reward Rates: While cashback offers straightforward benefits, the reward percentage is often lower compared to points. For example, you might receive 1%-2% cashback, whereas points programs may yield higher returns on select purchases like travel or luxury items.
2. No Aspirational Value: Cashback lacks the excitement and exclusivity that comes with points. It’s purely practical, with no opportunity to indulge in luxury experiences like flights, hotels, or gadgets.

Points: The Reward Chaser

Points programs work by allowing you to earn points for every dollar spent. These points can be redeemed for various rewards, including flights, merchandise, hotel stays, and exclusive perks.

Advantages of Points

1. Higher Potential Value: Points can deliver significant value if used wisely. For instance, redeeming points for a long-haul flight might offer better returns than receiving cashback. Some programs also offer bonus points for specific categories like travel or dining, making them more lucrative for frequent travelers or big spenders.
2. Access to Exclusive Perks: Many points programs partner with airlines, hotels, and retailers to provide discounts, upgrades, and VIP experiences. For example, Brazilian programs like Smiles allow you to redeem points for discounted airline tickets or access to airport lounges.
3. Customizable Rewards: With points, you can choose how to use your rewards, tailoring them to suit your goals. Whether it’s saving for a dream vacation or upgrading your daily lifestyle, points programs can be highly versatile.

Disadvantages of Points

1. Complicated Redemption: Understanding redemption rates and maximizing value can be challenging. Points programs often have tiered systems where the same number of points can vary in value depending on how they’re used.
2. Expiry Dates: Many points have an expiration date, meaning you could lose them if not used in time. For example, some Brazilian card programs have a two-year validity period for accumulated points.
3. Fees and Restrictions: Some programs charge higher annual fees or impose conditions for earning points, such as minimum spending thresholds. Additionally, international purchases may incur currency conversion fees, reducing the value of points earned abroad.

Comparing Cashback and Points

Choosing between cashback and points depends on your spending habits, lifestyle, and goals. Here’s how they stack up:

 

Feature	Cashback	Points
Ease of Use	Simple and automatic	Requires planning and understanding
Reward Value	Fixed and predictable	Variable, potentially higher for big spenders
Flexibility	Usable for any expense	Limited to specific rewards or partners
Expiry/Restrictions	Rarely expires	Often subject to time limits or conditions

 

Example Comparison:

• Spending R$5,000 on groceries with a cashback card offering 2% returns would earn R$100 in cashback.
• The same R$5,000 with a points card offering 1 point per real could earn 5,000 points, which might be redeemable for a R$150 flight discount or other rewards.

What Do Brazilians Prefer?

In Brazil, the choice between cashback and points is influenced by spending patterns and economic realities. Inflation and fluctuating exchange rates have made cashback increasingly popular as it provides immediate relief for everyday expenses.

Statistics and Preferences

• A survey by a major Brazilian financial institution revealed that most card users prefer cashback for its simplicity , while others opt for points to enjoy aspirational benefits like travel and electronics.
• Digital payment platforms such as Nubank and PicPay have integrated cashback programs, further boosting their popularity.

Brazilians who frequently travel domestically or internationally often lean towards points programs due to partnerships with airlines like LATAM, Gol, and Azul. Meanwhile, those focused on saving for monthly expenses prefer cashback.

Choosing the Right Reward for You

The best choice depends on your spending habits and goals. Here are some tips to decide:

1. Analyze Your Spending Habits: If you spend heavily on groceries, fuel, and utilities, cashback provides consistent returns. On the other hand, if you spend on travel or luxury items, points may deliver higher value.
2. Consider Your Goals: Are you saving for a trip or looking for ways to reduce monthly expenses? Your answer can guide your decision.
3. Factor in Program Details: Check for annual fees, minimum spending requirements, and reward expiration policies. Some cards in Brazil offer hybrid options, allowing you to earn both cashback and points.
4. Think Long-Term: Points may take time to accumulate but can offer substantial rewards, while cashback provides immediate benefits.

Conclusion: It’s About What Works for You

Both cashback and points have their merits. Cashback rewards offer simplicity, immediacy, and flexibility, making them ideal for practical spenders. Points, on the other hand, cater to those who enjoy maximizing value through strategic redemptions and access to exclusive perks.

Take a moment to reflect on your spending patterns and financial goals. Whether you prefer the instant gratification of cashback or the aspirational appeal of points, the right choice will depend on what aligns with your needs.

Not sure which reward type suits you best? Review your current credit card’s rewards program or explore the many options available in Brazil. By choosing wisely, you can turn your everyday spending into tangible rewards.