Points are an IOU dressed up as money.
When a card gives me cash back, money arrives this month. It sits in my account, earns interest and buys anything. When a card gives me points, I get a promise: someday, if the program still exists on the same terms, if award space opens up, if the trip I want lines up with the seats they’re releasing, I can trade them for something. Maybe.
That gap has a price. Cash now beats a promise later for the same reason a dollar today beats a dollar next year. While I wait, my points don’t earn interest. They sit in a program that can reprice them at will, and programs reprice in one direction. Every “we’re updating our award chart” email has meant the same thing: your balance buys less than it did.
Then there are the points that never get spent at all. The industry calls it breakage - balances stranded below a useful threshold, orphaned in a merger, forgotten when life gets busy. Cash back doesn’t strand. It doesn’t need award availability. It doesn’t ask for a Tuesday departure and a connection through Denver to get the good rate.
The last cost is the quietest: flexibility. Cash lets me pick any hotel, any airline - whatever is best value for this trip. Points flip the question from “what’s the best option?” to “what can my points get me?” You book the hotel your program covers instead of the better one across the street. You fly the connection your miles allow instead of the cheaper nonstop. Shopping the whole market is where the deals are. A points balance shops one store.
For the very few people who happily pay full retail for the luxury hotel or the business-class seat, the points game can still pay. Everyone else should run the test from The Points Value Fallacy : take the trip you’d actually buy - the real cash alternative, not the sticker - subtract the taxes and fees the award still charges, and divide by the points. If that honest number beats your cashback rate, take the points. Just run it on what you can actually book, not what the chart promises.
What this looks like on my actual cards: 5% at Amazon and Whole Foods with the Prime Visa. 6% on groceries and streaming with Amex Blue Cash Preferred (groceries capped at $6,000 a year, $95 annual fee). 3% on everything with the Robinhood Gold card ($50 a year membership). 5% in one category you pick each month with the PayPal debit card (capped at $1,000 of spend). And 4% on everything with the Coinbase card - if you park a large crypto balance there to earn the tier.
Notice the fine print creeping back in: three of the five carry a membership fee or a balance requirement, and a rotating monthly category is exactly the kind of hoop the points game makes you jump through. That’s the honest tension - a flat 3% on one card is the sane default, and everything past it is a hobby. A cheap, transparent one, but a hobby.
I ran it on my own life. Most of my travel is economy seats on school-break dates - redemptions where the honest value lands near or below what a flat cashback card pays, before you count the delay, the devaluations and the mental overhead. So my spend earns cash now. The point is only worth what it buys you, and cash buys everything.
Assumptions
Cash back should win on net dollars you can actually use, not on the biggest advertised rate.
- Rates and costs: The article’s 5% Prime Visa, 6% Blue Cash Preferred, 3% Robinhood Gold, 5% PayPal category and 4% Coinbase tier are dated card examples, not fresh offers or a promise every purchase qualifies. Each needs the current issuer terms, category definitions, exclusions and eligibility. The stated $6,000 grocery cap, $95 annual fee, $50 membership and $1,000 monthly spend cap are inputs to the example; verify them against your actual account before choosing a card.
- Cap arithmetic: 6% x $6,000 = $360 gross grocery rewards before fees and other categories. A $95 annual fee would leave $265 if charged in full and allocated entirely to groceries. At 5% on $1,000 eligible monthly spending, gross rewards cap at $50 a month under that assumed cap. These are not incremental benefits over another card: subtract what the alternative pays.
- Net comparison: Use eligible spend x reward rate, less fees, membership costs and any required-balance opportunity cost. Crypto collateral/balances add price and custody risk; a quoted 4% reward is not a return on that balance. The article does not supply the required Coinbase balance or a risk-adjusted comparison.
- Points: Honest value per point = (cash value you would actually pay - award cash charges) / points redeemed. Compare points earned per dollar x that value with net cash back per dollar. Include redemption delay, devaluation, unusable balances and availability. “Five cards” counts the examples, not an optimized portfolio, and a flat 3% is a preference in this example, not a universal current best offer.
Have better inputs, a missing cost or evidence that changes the result? Share it . We will update our assumptions and conclusions to reflect the most accurate representation.