Rewards credit cards offer a way to earn valuable perks simply by using your card for everyday purchases. Whether it’s travel miles, cash back, or points toward your favorite retailers, the best rewards credit cards can help you make your money work harder for you.
But to get the most value, it pays to understand how rewards credit cards work and what to look for when choosing one. In this guide, we’ll explore different types of rewards cards, how to use them wisely, and what pitfalls to avoid.
What is a rewards credit card?
A rewards credit card gives you something back every time you make eligible purchases. These rewards typically come in the form of:
- Cash back
- Points
- Travel miles
Some cards offer flat-rate rewards (like 1% or 1.5% cash back on everything), while others have tiered or rotating categories that reward specific types of spending. For example:
- 2X points at gas stations
- 3X miles on travel bookings
- 5% cash back on groceries (rotating monthly)
How do rewards credit cards work?
Using a rewards card is much like using any other credit card. You apply, get approved based on your credit score and income, and then start using your card. With every eligible purchase, you rack up rewards based on your card’s specific program.
Common features of rewards credit cards:
- Sign-up bonuses: Many top rewards cards offer large bonuses (such as 50,000+ points or $300 cash back) when you spend a certain amount within the first few months.
- Ongoing rewards: Earn rewards on everyday purchases in set or rotating categories.
- Redemption options: Use rewards for travel, cash back, gift cards, statement credits, or even purchases.
- Annual fees: Some cards have no annual fee, while others may charge $95 or more in exchange for premium perks.
Tips for choosing the best rewards card
To find the right card for your needs, ask yourself a few key questions:
1. What are your spending habits?
Choose a card that matches how you spend. If you spend heavily on travel, a travel rewards card may offer the most value. If you prefer simplicity, a flat-rate cash back card might be a better fit.
2. Do you want to pay an annual fee?
Some cards charge annual fees but offer bigger rewards or travel perks. If you won’t use the card enough to offset the fee, look for one with no annual fee.
3. How do you want to redeem rewards?
Make sure your preferred redemption method is available. Some cards allow you to convert points into gift cards, while others offer direct cash back or travel redemptions.
4. Can you meet bonus requirements?
Signup bonuses can be valuable, but only if you can meet the minimum spending requirement without overspending.
Maximizing your rewards potential
Here are some smart strategies to get more from your rewards card:
- Use the card for everyday spending in bonus categories
- Combine cards to take advantage of different rewards (e.g., one for travel, another for groceries)
- Track bonus categories if your card offers rotating rewards
- Redeem rewards wisely, like using miles for flights or points for high-value gift cards
Some advanced users pair cards to maximize rewards. For example, you might use one card to earn 5X on travel and another to redeem those points for gift cards or statement credits.
Watch out for these common pitfalls
Rewards cards come with perks, but also a few potential downsides:
- High APRs: Carrying a balance on a rewards card can cancel out the value of your rewards due to interest charges.
- Complex redemption rules: Some cards have restrictions, such as minimum redemption thresholds or blackout dates.
- Overspending: Don’t buy more than you need just to earn rewards.
- Annual fees: Make sure the rewards you earn justify any fees.
- Foreign transaction fees: If you travel internationally, choose a card with no foreign transaction fees.
So, is a rewards credit card worth it?
A rewards card can absolutely be worth it if you:
- Pay your balance in full each month
- Use the card in high-reward categories
- Redeem rewards regularly
But the key is to choose the right card for your lifestyle. Don’t be dazzled by flashy perks if you won’t use them. The best rewards credit card is the one that aligns with your everyday spending and financial goals. Rewards credit cards can be a smart way to earn extra value from your purchases—but only if you use them responsibly. Match your card to your lifestyle, understand the terms, and avoid common pitfalls.
This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.
