If you are going to use a credit card, you might as well use one that has a rewards program that gives you a little something in return. There are literally hundreds of credit cards out there that offer rewards.
Knowing which rewards credit card to choose with so many choices out there can be a challenge to navigate. It also depends on what types of purchases you want to make and the rewards you want to earn for them.
Let’s discuss credit card points and which cards are the best for the type of rewards you wish to reap.
What are Credit Card Points?
Credit card points are offered by rewards credit cards that give you the opportunity to earn additional benefits by using the credit card.
Rewards credit cards typically offer at least 1 point for every dollar spent on purchases. Some rewards credit cards offer more for certain purchases.
These points can be redeemed for travel, cashback, gift card, events, donations, and more through your online account. When redeemed, in most cases one point is worth at least 1 cent. Some credit card issuers will offer different redemption prices when you select a different option.
For example, you might have a rewards credit card that offers you 1.5 cents if you redeem for a hotel night versus 1 cent for cashback.
These rewards credit cards fall into three main categories: Credit card points, cashback, and miles. When you make purchases (also may require that you meet other spending requirements), refer friends, etc. you earn these points.
Points-based credit cards provide points. These credit card points can be redeemed for miles, cashback, etc.
Cash Back cards allow you to earn a certain percentage of cash based on how much you spend. For example, the Citi Double Cash Card allows you to earn 1% on all purchases and an additional 1% after paying your credit card bill for a total of 2% cashback.
Other cashback cards will accrue points which can be later converted for a dollar value.
Finally, rewards credit cards that offer miles are typically offered by co-branded airline cards. The miles are a part of the unique membership rewards program. Due to the high earning potential, these credit cards typically have an annual fee associated with them.
How do Credit Card Points Work?
The way that a rewards credit card works are different, depending on the program. But there are some basic rules to understanding how they work.
How much your rewards are worth will vary by the program. Generally speaking, the most straightforward type of reward is cashback cards. You receive a percentage of your spending back. For example, on a 2% cashback card, you’re effectively earning $2 for every $200 you spend.
On a point-based credit card or miles card, earning 2X points doesn’t necessarily mean you’ll get $2 back in rewards. It typically will depend on the credit card and what you redeem the points for.
Make sure you at least strive to get a 1:1 value on your points. That means each point is worth a penny. You can calculate the value by dividing the cost of the redemption (i.e. gift card) by how many points are needed.
How to earn Credit Card Reward Points?
There are several ways that you can earn credit card points including:
- Purchases – all your day-to-day spending will earn you credit card reward points. Certain purchases may even get you additional rewards. For example, some credit cards offer you 3 points for each dollar you spend on dining and 1 point per dollar for other types of purchases.
- Initial bonus – Some credit cards offer a big sum of points when you get the card. This bonus is usually tied to making a certain amount of purchases within a few months or making your first purchase.
- Refer-a-friend – Some credit card issuers will offer a reward for bringing on new cardholders. By sharing a referral link with you friends and family, anyone who is approved for a card will earn you some points.
- Milestones – During the anniversary of when you opened your rewards credit card, some issuers may give you a bonus. Others may reward you for reaching a certain spending threshold in a year, etc.
- Adding an authorized user – When you add an authorized user to your account, some issuers will give you a reward bonus. That person may have to complete additional things like making a purchase or spending a certain amount within a specified timeframe as well.
This list is how you might be able to earn credit card reward points, but not all might be available with every card. Shopping around to find the right credit cards for you is important to maximize your earning potential.
Pros vs Cons of a Reward Points Credit Card
Getting a rewards card can be a great way to earn cashback, points, or miles with the purchases you’re already making. But that doesn’t mean there are no cons to applying for one. When you’re shopping for a rewards credit card, here are some things that you should keep in mind.
- Small or no annual fee – The majority of rewards credit cards don’t have an annual fee or waive your forest year.
- Initial, sign-up bonus – A nice incentive of signing up for a rewards card is that some offer an initial bonus.
- Extra perks, benefits – Some cards offer access to other perks and benefits that enhance the value of the credit card program. Airport lounge access, car rental insurance, cell phone protection, and shopping discounts are some examples.
- High annual fees – The credit cards that have the most generous rewards also tend to have the highest annual fees. If you don’t maximize the reward earnings, it can actually be more expensive for you.
- Must have good credit scores – A rewards credit card that has a great program will generally also require a good to excellent credit score to qualify.
- Capped rewards – On some travel cards, there is a cap on how much you can earn. This reduces the value of the card.
Who should get a Rewards Credit Card?
There are certain types of people who will benefit from getting rewards credit cards more than others. See if you fit into one of these categories below:
- Everyday shoppers – Among the most common reward categories are gas and groceries. These are categories that almost anyone will benefit from having a rewards card. There are some cards that offer additional reward point earnings in these categories. Or you can get a flat-rate card where you’ll be assured to always be earning on every swipe.
- Foodies – Do you prefer eating out to cooking at home? There are many cash back or travel point-based rewards credit cards that can help you maximize these purchases. The cards that reward you for dining typically into delivery, takeout, and in-person experiences.
- Travelers – Whether you are a frequent traveler for personal or business, you could benefit from earning free flights and hotel nights with a travel rewards credit card. When you make travel purchases with these types of credit cards, you’ll typically earn a higher reward that can go towards a trip. Or you can use it on your everyday purchase so that each swipe is getting you closer to your next destination. Another advantage of these travel rewards credit cards is that they typically offer sign-up bonuses that are worth a few hundred dollars.
- Small business owners – It doesn’t matter if you run a brick-and-mortar coffee shop or offer legal services, you can earn valuable rewards with business credit cards. It’s also common for business credit cards to have their reward categories specific to small business needs. Travel, dining, office supplies, and internet services are among the categories that small business owners could boost their bottom lines.
- Students – Establishing a solid history of credit early on will make it easier for students after they graduate. You may need credit for things like renting an apartment, getting a lower rate on auto insurance, and not having to pay a deposit on a cell phone plan or utilities. Making small purchases and using a credit card responsibly will help you establish good habits early on. This is all while earning points, cash back, or miles with a rewards card.
How to Choose the Right Card for you
To choose the right rewards card, you need to spend some time thinking about what goals you wish to achieve with one. Some questions that you should ask yourself include:
- What types of purchases do I spend the most on? The type of purchases you make should reflect the rewards credit card you pick by offering you the highest in those categories. So if you find that you spend the most on your groceries, identify rewards cards that would maximize your reward potential there. Or if you aren’t that focused on a certain purchase category, you might opt for a flat-rate card where you earn on all eligible purchases.
- What level of effort are you willing to put towards maximizing your rewards? You need to think strategically and identify the categories where you spend the most money to get the most out of your rewards cards. You’ll also want to make sure that the credit card issuer doesn’t have any exceptions, such as a limit on how much you can earn in certain categories that could affect your earning potential. If you want to get the most value of your rewards, you might opt for a rewards card that has rotating bonus categories and allows you to transfer your points, etc.
- What rewards do I want? Ultimately, the choice of a cash back, points, or miles card depends on what you prefer. Frequent travelers may want to enhance their travel experience by getting a travel credit card that has benefits like room upgrades. Others may just want a straightforward cash back card that they can earn rewards on everyday purchases.
- What cards do I meet pre-qualifications for? Most rewards credit cards require that you have good to excellent credit for approval. Check out research and card issuers’ websites to see if they offer the option to prequalify or review what their minimum credit score requirements are before applying.
Best Credit Cards for Amazon
If you are big on shopping with Amazon, you could benefit from a rewards credit card that has benefits using it on the website. Here are our picks for the top credit cards for Amazon:
- Amazon Credit Card – The Amazon credit card offers a $50 Amazon.com gift card ($100 for Prime members) that is loaded on your Amazon account instantly after being approved. There is no annual fee and you’ll earn 3 points for every $1 spent on Amazon.com and Whole Foods Market. Prime members are eligible to earn more on their Amazon purchases. You’ll earn 2 points for every $1 spent at restaurants, drugstores, and gas stations and 1 point everywhere else.
- Amazon Store Card – This rewards credit card can only be used for Amazon purchases. Prime members can earn 5% on all purchases made with the card. Since you can only use it for Amazon purchases, it would make sense to be a Prime member and use it for the 5% off. There is a $10 sign-up bonus and no annual fee. Depending on what you buy and its cost, you could get a 0% financing for 6 to 24 months. But tread carefully, as the feature uses deferred interest which you don’t want to get stuck having to pay if you go beyond the financing terms.
- Discover IT(R) Cash Back – Discover IT(R) offers rotating categories in purchases like Amazon, groceries, restaurants, gas stations, and when you use PayPal. There is a maximum amount of cash back you can earn in those special categories during the quarter (up to $1,500). You’ll earn 1% cash back on all your other purchases. Plus at the end of your first year, Discover will receive a 2X cash back match all the cash back you’ve earned. Amazon shoppers can also access their Discover cashback at checkout.
Best Credit Cards for Cash Back
Searching for the top credit cards that offer straight cashback? Check out our list below:
- Citi(R) Double Cash Card – You earn 1% cash back on all your purchases and 1% when you pay your bill, for an everyday purchase reward of 2%. There is no annual fee either. This card is great for using on purchases where you’re not receiving a bonus in other categories from your other rewards cards.
- Wells Fargo Active Cash Card – This card offers unlimited 2% cash rewards on all purchases. Plus you can receive a $200 cash rewards bonus by spending at least $1,000 in the first 3 months. There is no annual fee and you get a 0% intro APR for 15 months on purchases and qualifying balance transfers. There are extra perks like Visa Signature Concierge that give you access to some of the most prestigious hotel properties and the $600 cell phone protection against covered damages and theft (must pay your cell phone bill with your Wells Fargo Active Cash Card).
- Bank of America(R) Unlimited Cash Rewards credit card – The $0 annual fee Cash Rewards credit card with Bank of America allows you to earn a straightforward 1.5% on all purchases. If you’re eligible for the Bank of America(R) Preferred Rewards program, you can even get an extra boost. Currently, you can also take advantage of a $200 online cash rewards bonus if you make at least $1,000 in purchases in the first 90 days of opening an account.
Best Credit Cards for Hotel Points
Staying at hotels is expensive. So getting a rewards credit card that can help offset those costs might be the right option for you. Here are our top credit cards for hotels:
- Hotels.com(R) Rewards Visa(R) Credit Card – Deal hunters and those who don’t mind staying across different hotel brands and properties could find this credit card to be an ideal match. You earn 1 stamp for each night you stay at an eligible property through Hotels.com and another 1 stamp each time you spend $500 in purchases. There is no annual fee that you have to worry about. In addition, you get some extra perks like cell phone protection, trip cancellation, and interruption insurance, and no foreign transaction fees.
- Marriott Bonvoy Brilliant American Express(R) Card – If you’re loyal to the Marriott brand, this card is geared towards you. Earn 6X points for every dollar spent on eligible purchases at hotels that participate in the Marriott Bonvoy program. Flights booked directly with airlines and purchases at U.S. restaurants will earn 3X points. All other eligible purchases will earn 2X points. There’s a $450 annual fee, although you have the opportunity to earn 75,000 Marriott Bonvoy bonus points if you make $3,000 in purchases within the first three months.
- IHG(R) Rewards Club Premier Credit Card – Hoteliers who like the IHG brand can earn up to 25X points on every $1 they spend at an IHG hotel. 2X points are earned on gas station, grocery store, and restaurant purchases and 1X points everywhere else. Your annual fee is waived the first year, then it’s $89. The intro bonus on the card is 150,000 points plus you get up to a $100 statement credit for the Global Entry/TSA Precheck application every four years.
Best Credit Cards for Travel Points
For cardholders seeking more adventure in their life, a credit card that earns the best travel rewards might be the answer. Consider the following:
- Chase Sapphire Reserve(R) – This travel rewards card allows you to earn 3X points on travel immediately after you earn your $300 travel credit. You also earn 3X points on dining at restaurants that include takeout, dining out, and eligible delivery services. Now through March 2022, you earn 10X points on Lyft rides and $120 in DoorDash credits through December 2021. The annual fee is $550 however, which some travelers may have a hard time justifying the benefits.
- Capital One Venture Rewards Credit Card – You get simplicity and a strong rewards program with the Capital One Venture Rewards card. Travelers will earn 2X miles on every purchase without having to remember bonus or rotating categories. By signing up, you could earn a bonus of 60,000 miles. The annual fee on the credit card is $95.
- Capital One VentureOne Rewards Credit Card – If you want to add a travel credit card, but are not so sure about paying an annual fee, this is a great card to try. You earn 1.25 miles on all your purchases. There are also no foreign transaction fees so you can take it on your trips overseas without a worry. After spending $500 within the first 3 months, you’re also eligible to earn 20,000 in bonus miles.
Overall Best Reward Credit Card
Here are the best overall reward credit cards that we’ve seen:
- Blue Cash Preferred(R) Card from American Express – You can earn up to a $350 intro bonus and have your first year’s annual fee waived ($95, thereafter) You get 6% cash back on U.S supermarkets on up to $6,000 per year (1% after), 6% on select U.S. streaming services, 3% on transit (taxis/rideshare, parking, trains, tolls, buses, etc.), 3% on U.S. gas stations and 1% on all other purchase.
- Chase Freedom Flex – There is a $200 intro bonus and no annual on this rewards credit card. You’ll earn 5% cash back on grocery store purchases (excludes Walmart and Target and on up to $12,000 in your first year). You’ll also earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter that you activate. 5% cash back can also be earned on Chase travel purchases through Ultimate Rewards(R), 3% on dining/drugstores, and 1% everywhere else.
- Chase Freedom Unlimited(R) – This no annual fee allows you to earn 1.5% cash on every purchase, 3% on dining/drugstores, and 5% on Chase travel purchased through Ultimate Rewards(R) For the first year, you also earn 5% cash back on grocery store purchases (excludes Walmart and Target).
- Citi Custom Cash Card – You’ll earn 5% cash back on purchases from your top eligible spend category each billing cycle, up to the first $500. After that, you’ll earn 1% cash back. All your other purchases will earn a straight unlimited 1% cash back.
- Capital One SavorOne Cash Rewards Credit Card – With no annual fee, you can earn a one-time $200 cash bonus when you spend $500 within the first 3 months of opening an account. You’ll earn unlimited 3% cash back on dining, entertainment, popular streaming services, and grocery stores (excludes Walmart and Target) and 1% cash back everywhere else.
How to redeem Credit Card Reward Points
The redemption options of various rewards credit cards are very similar to one another. You will generally find options that include:
- Direct deposit to a linked bank account – Your points are converted to cash and transferred to your checking account. This generally takes a few days to complete.
- Statement credit – Your points are converted to cash and then used to reduce the balance on your credit card account.
- Gift cards – Depending on the credit card issuer, you can trade your points for gift cards at participating retailers. Keep in mind that this option usually gives you less value.
- Pay with points on select online shopping sites – Certain credit card issuers allow cardholders to use their points to help pay for purchases at select online retailers. For example, Discover allows its cardholders to do this on Amazon’s website.
- Travel reservations – Use your credit card points to redeem for airfare, hotel stays, cruises, etc. You might be required to book through your issuer, use the points immediately or right after making the purchase.
- Merchandise – This isn’t as common nowadays but some issuers will allow you to convert your points into physical items like Bluetooth headphones, watches, etc. You generally won’t get a 1:1 value on these items, however.
- Charity – You may also have the option to donate your points to a charity. Card issuers may have certain charities that you can select from. The value of the point redemption is typically not very good on this option. You might be better offer redeeming it for cash back and making a direct donation.
Some credit card issuers will allow you to redeem your points at any amount. There are others that require you to reach a certain threshold, the most common being $25 or 2,500 points/miles before redeeming them.
Do Credit Card Reward Points Expire?
On certain programs, your rewards may expire after a certain amount of time. Others will allow you to have access to your rewards for as long as your account is open and in good standing.
What can you use your Credit Card Points on?
You can redeem your credit card points in many different ways including:
- Shop online
- Get cash back
- Get discounts on airfare and hotel
- Pay off your balance
Can I pay bills with my Credit Card Points?
You can use your rewards credit card to pay your bills in most cases, however, you might be charged a transaction fee. Your credit card points can be used to pay your credit card bill by converting it to a statement credit on your bill.