This article was updated on June 19, 2018.

This article was updated April 14, 2017. REVIEW THE MOTLEY FOOL'S ADVERTISER DISCLOSURE.

With thousands of credit cards on the market, each with its own special perks, deciding which one to apply for is tough. Ultimately, you want to choose the card that earns you the highest return on your spending (after any annual fee), and that return can come in the form of cash or rewards points/miles.

Rewards cards usually get more attention because you can redeem the points for luxurious travel opportunities. Although cashback cards don't have as much hype behind them, in many cases they're the better value. Each type of card has its pros and cons, so you need to figure out which one better fits your lifestyle.

Man In Suit Handing Money Over to Another Person

Image Source: Getty Images

The case for cashback cards

Cashback cards are ideal if you're looking for something simple. All you need to do is use the card, and you'll earn a percentage back on everything you spend.

With rewards cards, it's more complicated. It takes time to shop around for redemption options, especially because there can be blackout dates, and you'll have to work around certain limitations when using points to book flights or hotel rooms.

The standard cashback rate is 1%, but many of the best cashback cards earn more. For example, the Discover it® Cash Back and the Chase Freedom both earn 5% back in rotating categories you activate each quarter, with Discover even matching all the cashback you earn after your first year. Worth noting as well, both cards cap 5% cashback rewards on up to $1,500 of bonus-category spending each quarter. The Citi Double Cash effectively earns 2% on all purchases (1% when you make the purchase and another 1% when you pay it off).

Most cashback cards don't have an annual fee, either. This is beneficial in and of itself, but it also means you could easily carry multiple cashback cards and use whichever one will earn you the best rate wherever you're shopping.

The allure of rewards cards

The two big advantages rewards cards have over cashback cards are their signup bonuses and the potential value of the points you'll earn.

While signup bonuses depend on the card and can change at a moment's notice, you tend to get bigger bonuses with rewards cards. To use two of the most popular card issuers as an example, American Express and Chase currently have multiple personal credit cards with signup bonuses of 50,000 points or more. Signup bonuses on their cashback cards, in comparison, range from $150 to $250.

But how much are points worth? With American Express and Chase points, you always have the option of redeeming them for cashback and getting 1 cent per point. That's $500 cashback on a 50,000-point bonus. If you use your points on travel, however, you can earn far more, especially when you book flights or hotel stays in higher travel classes.

Let's say you want to book a one-way flight from New York to Hong Kong on Singapore Airlines (a transfer partner of Chase). Booking that in economy would cost 48,000 points for a ticket that can cost $1,813, earning you 3.7 cents per point. Flying in the airline's first-class suite would cost 135,000 points for a $16,716 ticket, earning you an impressive 12.4 cents per point.

Certain rewards cards also have additional benefits that either save you money while traveling or improve your travel experience, such as free checked bags or complimentary airport lounge access.

Weighing your options

As you'd expect, how often you travel is a key factor in whether should you choose a cashback card or a rewards card.

If you travel domestically multiple times per year, or internationally at least once each year, then a rewards card will likely be worthwhile. If you don't travel that much, or if you find booking with points a bit confusing, then you may appreciate a cashback card more.

Then there's option three: Get a rewards card for the signup bonus and the travel benefits and then downgrade it to a cashback card once the perks no longer justify the annual fee.

Cashback and rewards cards are the best ways to make a return on the money you spend. With an honest appraisal of your travel habits, it's easy to figure out the type of card that will provide the most value for you.

The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. See our advertiser disclosure policy for additional details. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. The statements above are The Motley Fool's alone and have not been provided or endorsed by bank advertisers. Review The Motley Fool’s ratings methodology to uncover how we pick the best credit cards.