Best Rewards Credit Cards
Rewards credit cards have become one of the most popular ways that American consumers spend their money. Credit card companies are consistently upping their offers to encourage spenders to sign up for their lucrative rewards programs.
Retailers and various other companies have been teaming up with lenders to tailor-make rewards credit cards that can help cater to their customers. If you’re someone who loves to shop, and loves to get more out of your credit card, an awards card is probably your best option. You’ll want to make sure that you are very responsible with the credit card though, as rewards cards typically charge much high interest rates than traditional low interest credit cards.
Choosing which rewards card is best for you should largely depend on the types of goods that you value. If you value having extra cash in your pocket, a cash back rewards card is probably your best option. If you enjoy having miles to fly around the world with, a travel card is probably the most convenient option. If you prefer staying in high-end hotels when you go out of town, you might want to look into the various hotel partnership awards cards currently on offer. This article will delve into the various types of rewards cards available to consumers. It will outline what to look for and how to make sure that you get the most out of your rewards credit card.
Different Rewards Categories
There are four primary rewards categories to choose from if you decide to opt for a rewards card. These include: airline specific cards, hotel specific cards, cash back cards, and general rewards cards.
- Airline Specific Card – An airline specific card is simply a credit card that accumulate air miles for a specific airline. Say you have a frequent flyer account with United. If you have one of their credit cards, every time you spend $1 you will receive 1 mile towards Untied flights. This is a great way to couple your current frequent flyer program with additional credit card based points.
- Hotel Specific Card – Many hotels offer credit cards through partnership banks and lenders which help you accumulate points which can then be redeemable for upgrades or hotel rooms. Some of these cards also include automatic status upgrades which allow you hotel-specific perks and various other advantages if you choose to stay with the same accommodation provider whenever you travel out of town. This is another awesome rewards card choice for those who travel.
- Cash Back Card – People get cash back cards in order to recoup some of the money they spend on their credit card. Depending on the lender, various cash back credit cards offer different percentages in return. Make sure to check out what offers are currently available as some lenders periodically boost their cash back percentages.
- General Rewards Card – Some lenders offer general rewards cards in which you accumulate points that you can redeem for various things including travel, consumer items, and balance credits. This is a great option for those who don’t like being restricted to a single program. You can often redeem them for gift cards to certain stores, or for miles to most major airlines. You’ll need to be aware of the full terms and conditions prior to choosing which general rewards card to choose.
Cash Per Point
One of the ways to assess which card is best for you will be to analyze a cash per point figure. You should figure out exactly how much cash value that you can get for redeeming one of your rewards points. This will tell you the true value of what you are acquiring with your rewards card. Head to the website of a credit card provider and see what you can redeem points for.
For example, if you can redeem a thousand points for $10 in gift cards, you can see the value that you’re receiving from the points that you’re getting. Credit card companies like to get creative with their advertising. They offer huge sign-up bonuses and ways to multiply the points they give you. But they don’t operate on the same points scale, which means the amount of benefit you’re receiving can be slightly deceptive. Remember that each credit card lenders’ points operate on different value systems – you can’t assume that one point from a lender is equal to another’s.
Never fall for an initial point offer – always check exactly how much you’re receiving. Creative marketing techniques shouldn’t dictate the credit card you choose. The best rewards credit card is the one that gives you the most value.
Look for Insurance
The best rewards cards will have hidden benefits that don’t appear at first glance. You’ll find that there are often extra advantages hidden in the terms and conditions of your card. Some will offer purchase insurance on certain items that you buy with your card. This is great for people who don’t want to pay to insure some of their more expensive possessions.
In addition, travel insurance is another bonus that many rewards cards offer. This is especially true for travel based rewards cards. Lenders understand that borrowers want a fully comprehensive travel card that takes the pain out of every aspect of their travel plans. Check the fine print!
There are tons of different advantages to using a rewards card if you do so correctly. We’ve listed out the most common advantages associated with rewards cards that are currently on the market.
- Benefit from Your Spending – The reality is that you’re going to spend money with a credit or debit card either way – why not benefit from your spending? Using a rewards card allows you to get money back whenever you decide to make a purchase.
- Enhance Your Travel – Rewards cards often give you travel perks that you wouldn’t otherwise have. Being able to access business lounges and get free hotel upgrades is a great benefit that you would have to go without if you didn’t have certain rewards cards. If you want to upgrade the way that you’re able to travel, a rewards card is an affordable way to do so.
- Sign Up Bonuses – Many rewards cards have great sign up bonuses that give you extra points or benefits when you first sign up for the card. These benefits can be substantial – some recent benefit amounts have been close to $1,500. These offers are often seasonal and so you’ll have to keep your eye out for them.
While there are plenty of benefits associated with rewards cards, there are also a few disadvantages. These are discussed in further detail below.
- Interest Rates – As mentioned previously, rewards cards have notoriously high interest rates. If you carry a balance on your credit card, you can end up accumulating a lot of debt very quickly. Make sure that you keep control of your spending.
- Temptation – Some people end up getting tempted to spend more money than they normally would to acquire points. This is a bad idea considering they aren’t worth as much as you think they are. This is especially true if you spend to unlock a bonus – you shouldn’t spend more than you normally would. The best way to do it is to funnel all your spending onto your credit card.
Get Your Credit Score Ready
Rewards cards are typically the hardest types of cards to acquire. It’s very rare that you’ll be approved for one if you’ve never had a credit card before. This being said, if you have high-income levels and don’t have any negative issues on your credit report, you’ll find that you can probably get approved fairly easily. No matter what, you’ll need a solid credit score to get the best rewards cards. The reality is that you can’t expect an institution to give you a card with a lot of benefits if they don’t think that you can pay back what you owe.
But don’t worry if your score isn’t perfect, follow some of the steps below and you’ll be able to improve it quickly.
- Check Your Report – This may sound simple, but a lot of people go without checking their report for an extremely long time. This can create serious problems if you end up having a mistake on your credit report – it can drag your score down for years. Order a credit report from one of the major credit reporting bodies – they’re required to give you one free per year. Then make sure every issue on your report is correct – if not, ask for it to be removed. If you find you’re unsuccessful, ask a credit repair agency to help you speed up the process.
- Pay Off Debt – Make sure to pay off as much of your current debt as possible. The lower your amount of debt is, the higher your score will be. Your creditors will update your balance to the credit reporting bodies every month, so you can quickly increase your credit score in just four weeks.
Annual fees can be extremely high for some rewards cards. In fact, you’ll find that some card – like the American Express Platinum Card – have fees of over $500 per year. You should assess what kind of benefit you are getting from the annual fee.
Some cards will waive their annual fee for the first year, this can be a good way to save some money. You can also decide to cancel the card before the second-year annual fee is due. But this will also look slightly bad on your report. It may sound unfair, but cancelling a credit card does put a small dent your credit score. Lenders are looking for people who will keep the cards and pay the annual fees.
The process for applying for a card is now extremely easy. It won’t take you more than 20 minutes to fill in an online application and get a decision. Many card providers also offer instant decisions so you don’t have to wait to get a letter in the mail.
If you do receive a deferred decision, call up the customer support team and ask them what they have decided. This may sound a bit forward, but you can typically receive a decision over the phone if you call up and ask.
Also, remember not to apply for too many cards – it will damage your credit score. In fact, some providers have their own rules that are separate from your credit score. For example, many lenders will reject you if you have applied for more than five cards in 24 months, even if you have a really good credit score on file.
Rewards cards can be the perfect way to get more out of your credit card. But those who do opt for a rewards category should be certain that they can afford the interest rate on the cards, as they are typically higher than those without rewards. In addition, it is important to be wary of annual fees – rewards cards typically have large annual fees, which are often payable on the first credit card bill.
When deciding on which card is right for you, discern what you will get the most value out of. Don’t opt for a travel card if you don’t think you’ll be able to take advantage of all the perks included in the offer – in order to get the most out of a card you need to be utilizing almost every aspect of it (lenders expect you not to). Also, make sure that you qualify for the card prior to applying – if you get rejected it can hurt your credit score and prevent you from obtaining other rewards cards in the near future.
We have a comprehensive list of the best rewards cards available right here on our website. Researching the right card can take some serious time, but we’ve done all the legwork for you. Check out the cards we suggest and decide which one is best suited for your particular situation.
General Information on Rewards Credit Cards
Below are the most basic questions (and answers) on the nature of rewards credit card:
What is a rewards credit card?
A rewards credit card is a credit card which usually charges higher interest rates and offers a certain type of reward (gift certificates, miles, gas, etc.) for using the card.
What is a cash rewards credit card?
Also known as a cashback rewards credit card, it gives you back a certain percentage of your qualified purchases.
What is cash rewards on a credit card?
Cash rewards are cash incentives (a percentage of the amount you spent using the credit card) given as part of the rewards program
How do cash rewards credit cards work?
When you buy something on your credit card, you receive cash. How much cash that would be depends on the credit card provider.
What is a credit card rewards program?
A credit card rewards program is an incentive system put in place by the lender to encourage people to use their credit cards.
What are reward points on a credit card?
Mostly referred to simply as points, it is the reward you get for using your credit card.
What rewards do credit cards offer?
There are points which you can exchange for products or services, miles that may be used to avail of airline tickets, gas that may be obtained from specific gas stations, or simply cash.
What are non-bonus rewards points on credit card?
These are points earned from ‘everyday purchases’ or those that earn the lowest number of points per dollar spent on the credit card’s rewards program.
Are credit card rewards taxable?
No, because all forms of credit card rewards are regarded as discount, not income.
Are business credit card cash rewards taxable?
Like with your regular rewards credit card, whatever incentive you get as part of the rewards program (including cash) is not taxable.
Do credit card reward points expire?
Yes. When they expire would depend on where you got your rewards credit card.
How much is a credit card reward point worth?
There is no standardized measure on points to cash conversion. You’ll have to check with the issuing company to know what applies for their card.
How do credit card companies make money with rewards?
Rewards credit cards have higher APRs. And because not everyone pays the entire balance every month, these companies earn more.
Who pays for credit card rewards?
It is the revenue of credit card companies from stores that accept their credit card, annual fees charged to cardholders, and interest payments.
Can banks legally cancel credit card rewards?
If there is a breach of contract, they can cancel your credit card. Some other grounds that allow them to do so are going over the spending limit, filing for bankruptcy, and non-activity.
Choosing the Right Rewards Credit Card
Not all rewards credit cards are equal. Find out what may be the best for you through the questions below:
Should I get a rewards credit card?
If you are always behind payments, the higher interest rates despite the rewards may do you more harm than good. So if you get one, it is recommended that you always pay all the purchases made on a rewards card on time.
How do I choose a rewards credit card?
Consider the cost of obtaining one, what type of rewards it offers, what purchases are qualified for rewards, and how much incentive it gives. From that information, make your judgement.
How do I compare credit card rewards?
You can compare them by their monetary face value (as in for every $x,xxx purchase, you’ll get product Y worth $xx) or by how much of a ‘discount’ you’ll get by purchasing something with accumulated points instead of cash (say, you can get an economy ticket for 10 points and a first class for 20, but when you buy with cash, the latter costs five times as much).
Which credit card has the best rewards?
There’s no one best rewards credit card – it will depend on what you’re looking for. Refer to the proceeding questions for specific recommendations.
What is the best credit card for gas rewards?
Blue Cash Preferred from American Express is an excellent choice for gas rewards, earning you 3% on gas purchases. It also has no annual fee and 0% APR for the first twelve months.
What is the best cash rewards credit card?
Bank of America Cash Rewards is terrific because it gives 3% on a category spending of your choice, 2% on groceries, and 1% on other purchases. If you transfer your cashback to your Bank of America checking account, you’d earn 10% more.
What is the best credit card for mileage rewards?
The Bank of America Travel Rewards offers unlimited points at 1.5 points per $1 spent. It also has no restrictions on when you may use your travel miles.
What credit card gives the most rewards?
Chase Sapphire Preferred card. Aside from a rewards rate of 2 points per dollar spent on travel and restaurant dining purchases and 1 point per dollar spent on other purchases, it also has a 50,000 point intro bonus and a waived annual fee for the first year.
What's the best rewards credit card with no fees?
Chase Freedom Unlimited Card. While the 1.5x points on all purchases may not sound so great, you can combine this card with other Chase rewards credit cards to combine all your points.
Earning and Redeeming your Rewards
Find out how you can utilize your earned rewards through following questions:
How do I redeem credit card reward points?
Different companies have different specific steps on how you can do so, but the same process usually applies. It involves logging into your account with them and clicking redeem points.
How do I use credit card reward points?
This would largely depend on the type of rewards credit card you have. For example, cards offering mileage incentives would be for your airline travel. With cashback rewards, they would be in cash and thus may be used for anything.
How do I pay rent with credit card for rewards?
You may employ the help of third-party service providers which will charge a small fee in order for you to pay rent with your credit card. But before doing so, make sure that it will be counted for points accumulation.
How do I buy airline tickets with credit card reward miles?
You can book your flight directly from the credit card’s site after logging in. To avoid overhead fees, it may be better to go directly to a credit card-affiliated airline’s site and book your flight there.
How do I pay mortgage with credit card for rewards?
There’s actually no special way of paying your mortgage with credit card as most lenders allow that. However, make sure you pay your credit card bills on time or you might end up in financial ruin.
How do I pay credit card bill through reward points?
Normally, points cannot be converted into cash but are instead used for particular purchases. But if you have a cashback card, inquire if they allow the deduction of your existing cashback to your credit card bill or simply transfer your incentives to your checking account and go from there.
How do I calculate credit card reward points?
After knowing how many points are earned on purchases, multiply it by your amount spent.
How do I earn credit card rewards?
You earn credit card rewards by spending. With some cards, there may be restrictions on what purchases are eligible for rewards so check with the card issuer first.
How do I get more reward points on credit card?
Make more purchases. This doesn’t mean spending for things you don’t need; it’s a matter of being creative. For example, offer to pay for a friend’s purchase for the exact amount he’s going to spend in cash.
How do I get the most out of credit card rewards?
Choose a rewards card with benefits that are truly relevant to your lifestyle. Watch out for promos too where you’d earn more points for some purchases or you can redeem goods/services for a very small number of points.
How do I make money with credit card rewards?
Go for a cashback rewards credit card as you get a percentage of your cash back after buying something.
How do I maximize credit card rewards?
Pay everything with credit card, but keep track of quarterly spending limits (if any). However, make sure to set aside the cash you could have paid with instead so you don’t get into unmanageable debt.
Can you get credit card rewards for a balance transfer?
No. Unfortunately, rewards are always associated with buying something – and that doesn’t include balance transfers.
Can I sell my credit card reward points?
No. You will risk losing all your points and having your card cancelled by violating the rule against it.
When do I redeem credit card rewards?
Know the credit card company’s policy on rewards expiry first. If they only expire if you haven’t earned any after a certain amount of time, you can let your points accumulate to redeem for something you really like.
With getting a rewards credit card as well as earning and redeeming points covered, other questions you may have like cancelling credit cards and picking between a regular credit card and a rewards card are answered here.
Should I close out my credit card for a rewards card?
If you pay the entire balance on time, yes. You might want to rethink it if you only make the minimum payment as the rates on the rewards card are generally higher.
Why should I not collect as many credit card rewards as possible?
These rewards are incentives to purchase. Unless you can truly justify the need for every good/service you buy with the card, it is a bad idea to get stuff just for the rewards.
Can I cancel a credit card after using rewards?
Yes. Unless specified in the contract, you are in no obligation to hold the card for longer than you feel you should.
How do I account for credit card rewards?
You may list is as a discount on one of the goods purchased or divide it across all the purchases made during a certain period.
Financial Advisor - Best.CreditCard
Michelle is part of our expert team of financial advisors with a proven track record in the credit card industry. After graduating with an Economics Degree focusing on Personal Finance, she got involved with several credit and debt counseling startups.