Rewards Credit Cards for a Rewarding Experience
Rewards credit cards are a way to earn money back, points, or miles for your spending. You could get rewards for specific categories or you could get a flat rate for purchases. When shopping for a rewards card, you can see that the cards will vary widely in whether or not there are a sign-up bonus and annual fee, and the kind of rewards that are offered. Cash back cards may not have any annual fees but many travel cards will.
Different Types of Rewards Credit Cards
There are a number of different types of rewards credit cards, including airline loyalty cards, hotel, and cash back cards, along with gas and retail cards. About 60% of credit cards that are issued in the country are actually tied to a rewards program.
These can also be called fuel cards. This type of credit card started back in the 1920s for convenience. New rewards cards have pretty much replaced the gas credit card. However, there can still be some generous rewards for these types of cards and they only require a fair credit score to apply. If you are on the road a lot, this can be a good option for you.
There are different types of travel rewards cards, including general purpose, hotel, and airline. Some cards will reward you with an extra boost in your points through a redemption portal. This is a good option if you are okay with not traveling with a particular brand. If you choose a hotel or airline card that partners with specific brands, you can redeem your points for those brands. Since hotel partnerships are so large you are able to access hundreds of hotels in many different countries with just a single card.
Discover originally started the cash back program as a way to give money back at the end of the year based on the charges. This has since expanded to cards that give cash back in bank accounts, checks, and statement credits. Many cash back cards will give you a certain percentage for everything and there may be quarterly categories that give you more cash back.
This type of rewards card is tied to a department store or store brand. The cards can give high percentages of cash back for first purchases and can help you save when you shop at that store.
If you travel often then a luxury card can be a good choice since you get access to airport lounges and concierge services.
You can get cash back for business-related spending with this type of card. If you spend a lot on business items then this type of card might make sense.
Popular Credit Card Rewards Programs
There are many different types of credit card rewards programs and you are sure to find one that suits your needs.
Chase Ultimate Rewards
This is a travel portal that you can use. Chase offers two types of rewards cards for a total of six cards. There are some with an annual fee and some without an annual fee. You can earn points through travel and dining, and for rotating categories, such as groceries, gas, and more. With the portal, you can book all types of travel, as well as enjoy redemptions for merchandise and gift cards.
American Express Membership Rewards
You can use these rewards on eligible airfare, hotel stays, retail purchases, car rentals, and more. There are also eligible business purchases, such as office supplies, that can be used.
This includes other brands, such as Homewood Suites and Waldorf Astoria. You get the chance to earn points through partners for car rentals, cruises, and more. You can use the points as a gift by purchasing gift cards or treating yourself to a weekend away. Use the points toward flights, vehicle upgrades, and more.
Citi ThankYou Rewards
This program is offered through a handful of Citi cards with options to redeem for travel, gift cards, electronics, merchandise, and more. Depending on the product, you can earn 1.25x points when you book travel in the same way that some of the Chase cards are structured. There are about 15 different airline partners in this program.
Wells Fargo Go Far Rewards
There are two ways to earn rewards with this program. You can get them by spending with a Wells Fargo credit card or by shopping on the Earn More Mall site. Unlike other programs, these rewards can’t be transferred to an airline partner. Redemptions can come in the form of cash back, statement credits, gift cards, merchandise, or travel.
Bank of America Preferred Rewards
This program works a little differently from other card issuer programs. It also rewards you for how much you keep in your Bank of American bank accounts.
Ways of Earning Credit Card Rewards
If you want to understand credit card rewards better, you need to get how they work. Choosing a credit card is much easier if you know what you are looking for. And if you know what you can gain from it. So here we go.
Understanding How Rewards Credit Cards Work with Points
Points are one of three ways to earn rewards; the others are cash back or miles. Cardholders can receive points in different ways. With these cards, you usually get at least 1 point per $1 spent on purchases. Some cards offer the same amount of points across every purchase, while others have reward categories such as restaurants, groceries, or gas that offer extra points. You can usually redeem credit card points for merchandise, cash back, gift cards, or travel.
How to Earn Points
The best way to earn credit card points is to spend responsibly for everyday purchases. While you want to utilize your credit card every month, you don’t want to exceed 30% of your credit line. Don’t overspend as a way to just get more rewards. It’s not worth the extra few points if you end up going into debt.
Day-to-Day Spending: For every dollar you spend, you get rewards. Pay attention to any special categories that could be offering you more rewards.
Initial Bonuses: Many cards allow you to get a large sum of points when you first get the card. You either have to make your first purchase or spend a certain amount of money within a certain timeframe.
Milestones: Some cards will give you some bonus points every year on the anniversary of you opening the card as a way to thank you for your continued use. Others reward you for making certain purchases per month or spending so much in a year.
Adding an Authorized User: Cards may offer you some extra points if you add an authored user. That person usually has to make a purchase or spend a certain amount before you actually get the bonus.
Referring a Friend: Some credit card issuers will reward you for bringing on new customers. You create a referral link to share with your family and friends and if those people are approved for the card then you get more points.
How to Redeem Credit Card Points
The points redemption process will differ by the credit card issuer. You would normally start by logging into your online account and then from there navigate to the rewards area. Some issuers have a separate website dedicated to reward redemption, in order to make things easier for you. You may also be able to redeem rewards through third-party sites, such as Amazon. Once you know how to redeem your rewards, you then need to decide what to spend them on.
Travel: Cards that are marketed as travel rewards cards will give you the best value for travel redemption. You will be able to trade points for hotel stays, airfare, and more. Depending on the card, you may use your points immediately when you book or you might be able to redeem points to help with your purchases after the fact.
Gift Cards: Many credit cards allow you to trade points for gift cards to various retailers.
Merchandise: You may be able to spend your points in an online shopping mall to buy products ranging from kitchenware to electronics to clothes.
Cash Back: You may also able to trade in your points for a statement credit or check in the mail. If the cards aren’t meant for cash back redemption then sometimes you won’t get as good of a value.
Loyalty Programs: Some cards let you transfer points from the card to the loyalty programs of hotels or airlines. Doing it this way can give you a better value on your redemption.
Third-Party Sites: This includes things like shopping with points on Amazon or using your points for different services, such as Uber.
Charitable Donations: You can also donate your points to charity. Usually, your points aren’t worth very much with this method and it may be better to redeem them for cash back and then handle a donation on your own.
How Do Credit Card Miles Work?
Credit card miles are a type of loyalty benefit that some credit cards give customers. The more you spend, the more miles you accumulate. The credit card issuer and airline partner define the value for each credit card mile. Once you have enough miles then you can redeem them for a seat on the partner airline. The airlines and not the credit card issuer will set the miles required for a flight. Depending on how many miles you have, you may get the flight for free or you can purchase additional miles to make up the difference. If the credit card miles are tied to the frequent flier program then you can also use the rewards to qualify for things such as free companion tickets, priority boarding and seat upgrades.
If you are a member of an airline frequent flyer program then you typically only get miles on your flights so it can take years to build up enough miles for a flight. This is why many people turn to travel rewards cards since you don’t have to fly in order to earn miles. You just have to use the card. Credit card miles can be taken away even after added to an account. For example, if you return a purchase then the miles for that purchase will be deducted from the account. You can also lose miles if you fall behind on payments or your account isn’t in good standing. And you won’t get the forfeited miles back once you bring your account back to good standing so it’s even more important to stay on top of credit card payments.
You can check how many miles you have on your recent statement or by logging into your credit card account. It can take a few days from the transaction you made for the credit to show in your account. It helps to keep track of your miles so you can protect them from theft. Thieves can gain access to your account and can also redeem your miles. If you aren’t paying attention then it can be months before you notice they are gone. Protect your miles with strong passwords, check your miles often, and notify the credit card issuer if you think there is something suspicious.
Once you have enough miles then you can redeem them. You will need to keep your schedule flexible if redeeming miles for your flight since airlines only have a certain number of rewards seats for each flight. Be sure to pay attention to any fine print if you are going to combine or transfer miles. The exact method of redeeming your miles will depend on the credit card you are using. When you purchase your flight through the credit card’s booking tool, you have the option to use your miles directly for the flight. You may also have the option to buy credit card online miles to get a discounted ticket if you don’t have enough for a free one.
How to Choose a Rewards Credit Card
When choosing between different rewards credit cards, there are some things to keep in mind.
Travel or Cash Back Rewards: Determine if you prefer a cash back or travel rewards card.
How to Earn Rewards: See how to earn the rewards and if this would make sense with your current financial plans.
How Credits Are Redeemed: See how the rewards are redeemed with the card.
Minimum Spending: Make sure that you are able to meet any minimum spending requirements to actually earn the rewards.
When choosing a card, one credit card shopping trick is to pay attention to the sign-up bonus. See if there are any additional perks, such as access to airport lounges or tickets to some special events. Annual fees will vary from one credit card to another and can range from zero to several hundred dollars. You need to see if the annual fee is going to be worth the rewards you are getting. Some cards will also waive foreign transaction fees when using your card abroad. This may make sense for you if you travel abroad a lot.
Are Rewards Credit Cards Right for You?
In order to qualify for the best rewards credit cards, there will be certain qualifications that you must meet. Meeting these requirements can help you decide if rewards credit cards are right for you.
Good to Excellent Credit
You have an excellent or at least good credit score to qualify for the best rewards credit cards, including travel and cash back cards. The one exception is a secured credit card, which can be used to build credit and may still be able to earn rewards.
Using a Credit Card for Everyday Purchases
If you are regularly using your credit card for everyday purchases then you might as well start earning points and other benefits for every dollar you are spending.
You Pay Your Balance in Full
It makes good financial sense to pay off your credit card balance in full every month. This is especially important for rewards credit cards that may have higher interest costs and can potentially negate the benefits of rewards cards.
You Are Loyal to a Particular Airline or Hotel
If cash back isn’t your preference you can find great travel cards with a certain airline or hotel. This can help you get points even faster by concentrating your spending with just one hotel or airline.
You Travel Regularly
If you travel frequently then you can use your regular spending to help give you points toward your next trip when you have a credit card.
Which Is Better for You?
One of the main decisions you have to make is whether or not to choose a card with miles or with cash back. When you compare credit cards online, note that comparing cash back and mile rewards can be difficult. A dollar is a dollar no matter which cash back credit card you have. However, the number of miles required for redemption will vary by credit card or frequent flier program.
Many cash back cards are simple. Even those with tiered rewards systems can be easier to navigate than the travel rewards card. In order to get the most out of a travel rewards card, you need to understand and know the difference in the rewards programs. Not only will you have to learn how to maximize the rewards and take advantage of the other perks but you also must know how to redeem rewards, including booking instructions and blackout dates.
If you are a big traveler then you can find value in travel rewards cards. If you aren’t a big traveler then many consumers find value from the versatility of cash rewards cards.
— Loanry.com | Loan Shop 🏪 (@LoanryStore) 17. август 2019.
Pros and Cons of Rewards Credit Cards
If you are going to have a credit card, it makes sense to use a rewards credit card or else you could be leaving money on the table. There can be great benefits, including waived fees, accrued points, and cash back. However, if you have trouble meeting the budget and tend to overspend with a credit card then these cards may not be the best option for you.
One of the main pros is you get points, miles, or cash back. Rewards cards can offer extended warranties, shopping and travel benefits, and rental car insurance. Just with other credit cards, rewards cards can be used as a way to build your credit, as long as you pay your bill on time each month. Another benefit is the fees waived on some of the best travel cards. Many of these cards don’t have any foreign transaction fees and some even waive the annual fee for the first year.
Even with so many positives of rewards credit cards, it helps to be aware of the cons. There may be a higher credit score required in order to qualify. While it’s possible to qualify with a lower score, the cards with better rewards tend to need a higher credit score. Be sure to check the required score of a card you are interested in before you apply. Some rewards cards can cost you in time since you have to spend some time to maximize cash or points. Some travel cards also have blackout dates that can limit your choices.
If you don’t want to invest any time then there are some rewards cards with flat rates. While it’s easy to improve your score each month with on-time payments, if you aren’t careful, the cards can destroy your score if you carry high balances. You also don’t want to destroy your budget if you aren’t paying attention to your spending and are only focusing on the rewards. Interest rates on some rewards cards may be higher. If you are going to pay off your card each month then it’s not a problem but that’s not always the case.
How to Maximize Credit Card Rewards
If you are spending wisely then you can earn a lot of cash back or points when you take advantage of rewards credit cards.
Choose a Card That Gives Rewards for Your Type of Spending
If you are loyal to a certain airline then their co-branded credit card can be a good option for you. When you choose a card that rewards where you spend the most money then you can get the most rewards possible. If you don’t travel much then you won’t benefit from a travel rewards credit card. In order to figure out what you spend the most money on, go through your credit card statements from the past few years to help you pick a card that lets you maximize your rewards.
Look at the Sign-Up Bonus
Cards offer a sign-up bonus as a way to get new customers. It’s a good way to be able to quickly get lots of rewards. If a sign-up bonus looks good to you, make sure you know the terms of the bonus. To earn the bonus, you likely need to spend a specific amount of money in a specified time frame. Be sure you are able to pay off what you spend with that sign-up bonus. If you don’t then the points you accumulate may not be worth the interest you are paying. Also, note what purchases qualify for the bonus offer. Things like balance transfers may not qualify.
Use the Card for Everyday Expenses
When you use your card for everyday expenses that you were going to purchase anyway, it’s a great way to get lots of rewards. Add utility bills, grocery shopping, gas, and streaming services to your card. Since these are things you are already paying for then they are likely to fit in your monthly budget. You may even get rewards for these spending categories.
Add Authorized Users to the Account
When you add an authorized user, it can help build up your rewards. People will usually like to add family members, such as a child or spouse. You are responsible for paying off the purchases that the authorized user makes so be sure it is someone you trust.
Look for Other Opportunities
Some credit cards have revolving quarterly categories that give you more cash back. These cash back categories can include restaurants, gas stations, and rideshares. If you have one of these credit cards then try planning your spending throughout the year to get more rewards. Some rewards portals let you get more cash back if you purchase through online retailers when you link the card to their sites.
Pick Just One or Two Store Cards
During the holidays, every store you visit tries to get you to apply for its store credit card. The key to getting the most rewards is to hold back and then just have one or two cards that offer the most rewards at the stores you shop at the most.
Pay in Full
If you can’t pay in full then you aren’t getting the most out of your rewards and will be paying more in interest.
There are plenty of different rewards credit cards to choose from that can help you earn miles, cash back, or points on purchases that you make. Choosing rewards credit cards will depend on your personal financial goals. If you travel often, you may find a travel rewards card is better suited for your needs. Keep in mind that there are pros and cons to rewards credit cards, just as there are to regular credit cards. Once you choose rewards credit cards, learn more about the program and some tips and tricks to maximize your rewards.
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Kevin Strauss is a personal finance writer and homeowner based in the Los Angeles area. Being in one of the most expensive markets in the country, he’s learned to maximize resources to plan for both his monthly expenses and future financial needs. Kevin has a passion for helping those in a similar situation navigate the complex world of personal finance so they can pay down debt, plan for the future and live out their dreams. In addition to covering personal finance in depth on Loanry.com, Cashry.com, Debtry.com, Budgetry.com, Billry.com, Creditry.com and Taxry.com. Kevin shares his expertise with readers who want to create budget-friendly habits across the web.