Miles or Cash Back?

I've read a lot about getting free flights by collecting points with credit cards and am thinking of trying it out. I've looked over some of the airline miles credit cards available in Switzerland and some cash back cards. I'm having a hard time working out whether I get a better deal collecting frequent flyer miles or just getting cash back and using that money to buy airline tickets. Which will get me flying faster?

Hi there,

That is a good question. Currently the highest miles-earning rate offered by a Swiss credit card is 2.4 Miles & More miles per 2 Swiss francs charged (SWISS Miles & More American Express Platinum credit card).

The highest cash back delivered by a Swiss credit card is 1% (TCS Gold credit card - only for TCS members). If you don't have TCS membership, the next best cash back is offered by the Postfinance gold and platinum credit cards (0.5%).

There are many different possible scenarios, but this example could help answer your question:

If you charge CHF 1000 to your credit card every month and earn 1% cash back, you will earn a grand total of CHF 10 cash back per month - or CHF 120 per year.

If you charge CHF 1000 to your credit card every month and earn 2.4 miles per CHF 2 charged, you will earn a grand total of 1200 miles per month, or 12,000 miles per year.

It is very difficult to guage the exact value of frequent flyer miles because airlines sometimes run special offers. But just for the sake of comparison, lets take a look at the cost of flight within Europe on SWISS.

SWISS offers return economy "light" flights from Zurich to many European cities for as little as CHF 50 to CHF 100 - less than 1 year's worth of cash back earnings using the above example.

SWISS is currently promoting award flights to select European cities starting from 15,000 Miles & More miles - more than 1 year's earnings using the above example. Trips to other European cities start at 30,000 miles - almost 3 year's worth of miles earning using the above example.

Airlines do occassionally rund exceptionally good deals for specific award flights, so it is impossible to make a blanket statement. But as the above example shows, if you can earn a good rate of cash back on purchases charged to a credit card, you may well get better value than you would by earning and redeeming frequent flyer miles.

The unbiased credit card comparison on moneyland.ch makes it easy to find the best rewards credit cards based on the reward type. Remember that the costs of credit cards, such as annual fees, foreign transaction fees, cash withdrawal fees and others all affect the value of rewards because ultimately you will have to deduct costs from the value of rewards earned to determine your "profit".

Best regards from Moneyguru

More on this topic:
Using Credit Cards to Earn Free Flights
Frequent Flyer Programs: Making The Most Of Your Miles