Reward points and cashback both give you something back, but points have a catch: they can run out. Say you earn points on 15 January 2026 and they expire after 24 months. They last until 15 January 2028, and a days calculator shows that is 730 days away, so you know how long you have to use them.

What points are

When you spend money, some programs give you points. For example, you might get 2 points for every $1. Points are not money. They only become useful when you spend them on something, like a gift card, a product, or a trip.

What cashback is

Cashback is simpler. You get money back, and a dollar is always worth a dollar. There is nothing to convert and nothing to guess.

The key idea: what is one point worth?

To compare points with cashback, you need to know the value of one point. Value is usually counted in cents. If one point is worth 0.7 cents, then 100 points are worth 70 cents.

Now use this simple rule:

Return on your spending = points per $1 × value of one point

With 2 points per $1 and a value of 0.7 cents, you get 2 × 0.7 = 1.4 cents for every dollar. That is a 1.4% return.

A worked example

Suppose you spend $2,400. Cashback pays 1.5%. Points pay 2 for every $1.

• Cashback: 2,400 × 0.015 = $36.00

• Points: 2,400 × 2 = 4,800 points. At 0.7 cents each, that is 4,800 × $0.007 = $33.60

Cashback wins by $2.40. But what if you can spend each point for 1.2 cents? Then 4,800 × $0.012 = $57.60, and the points win by $21.60. The same card can be a good deal or a poor one, depending on the value of a point.

Why point values change

A point is not always worth the same. It may be worth more when you spend it on one thing and less on another. For example, some programs give you a better deal on travel than on gift cards, and some need you to collect a minimum number of points first.

Programs can also change their rules. A point that is worth 1 cent today could be worth less next year. This is a good reason to be careful about saving points for a long time.

Find the value of your own points

The best way to know is to look at what you really got. Say you used your points three times, and the values were 0.8, 1.0 and 1.2 cents per point. Add them up to get 3.0, then divide by 3. You can calculate average value per point this way, and the answer is 1.0 cent.

Using your own number is better than trusting the advert, because it shows what you truly got when you spent the points. If you have not spent any points yet, start with a low guess and change it later.

Other things to check

Before you choose, look at these points:

• Expiry. Do the points run out? When?

• Minimum to spend. Do you need a certain number of points before you can use them?

• Fees. Does it cost anything to use the points?

• Limits. Is there a cap on how many points you can earn?

When each one makes sense

Cashback is a good choice if you want something simple. You know what you get, and you can use it however you like.

Points can be better if you will use them in a way that gives each point a high value, and if you do not mind spending a little time to work that out. If you are not sure, assume the lower value to be safe.

A simple way to decide

1. Find the points you get for each $1.

2. Find the value of one point, from your own past use if you can.

3. Multiply them to get your points return.

4. Work out the cashback return for the same spending.

5. Pick the higher number, then check the rules.

For the last step, try a full year of spending. If you spend $6,000 and want to calculate cash back at 1.5%, you get $6,000 × 0.015 = $90. The points option gives 12,000 points, and at 0.7 cents each that is 12,000 × $0.007 = $84. Cashback wins by $6 in this case.

Common mistakes

• Treating one point as one cent without checking.

• Forgetting that points can expire.

• Choosing points because the number looks big. A million points can still be worth very little.

• Not looking at what you really spent your points on.

Final thoughts

Points and cashback can both be good. The only way to compare them fairly is to turn points into money. Find what one point is worth, multiply by the points you earn, and then compare the result with cashback. Keep it simple, and trust your own numbers.