Best Rewards Credit Cards

Whether it's points, miles or cash back, a great rewards card puts extra money in your pocket. Keep in mind that these cards generally require a good to excellent credit rating for approval and often come with a higher interest rate. If you carry a balance month-to-month, you'll probably end up paying many times over in interest what you get back in rewards.

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Best Rewards Credit Cards (6)

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What is a rewards credit card?

Points, sometimes called miles, on a credit card are designed to reward you for using the card or for loyalty to a brand. You can earn points through different types of spending, including general spending, restaurants and world travel, or shopping with a hotel or airline brand.

Many rewards cards, particularly travel rewards cards, offer generous sign-up bonuses. Used correctly, cards' sign-up bonuses can reward in the thousands of dollars. For example, at one point in 2016, Chase Sapphire Reserve rewarded up to $1,500 worth of points through a 100,000-point sign-up bonus and use of the Chase Ultimate Rewards travel portal.

Often, you can get boosted points for specific types of spending, 3X points and more. Points can be valued at below $0.01 and above $0.02 upon redemption, depending on the card. They can be redeemed for travel, shopping and more.

You probably have a points chaser in your life, whether it's your office mate or roommate. This person loves to build rewards to be redeemed on trips across the country or around the world. Now, you're wondering: "How do I get in on this?"

How do rewards credit cards work?

With a rewards credit card, you earn points or cash back for each dollar you spend. Your points can be used to redeem rewards for gas, travel, gift cards or other options. Cash back is usually offered as a statement credit or a check, or even as a direct deposit to your bank account.

Credit card companies have offered rewards credit cards since the early 1980s when airlines developed credit card loyalty programs for frequent flyers. Rewards programs are an incentive for those who might otherwise not be interested in credit to sign up for a card and earn rewards on their regular purchases.

Rewards also encourage cardholders to spend more on their accounts. With branded rewards cards such as airline and store cards, customers have an incentive to spend more with that brand.

Earning Points

With most cards, you'll earn one point for every dollar spent. But some rewards credit cards offer a higher rate of points for specific categories or merchants or larger earnings after you spend a certain amount of money. Many cards entice new customers with sign-up bonuses.

Redeeming Points

Rewards programs typically redeem at a valuation of one cent for one point, but it varies between programs and the type of card. Points can be redeemed for a variety of rewards depending on the credit card you choose. Redemption options may include:

Merchandise

Gift cards

Travel (flights, hotel stays, car rentals)

Cash back

Statement credit

Is a rewards credit card right for you?

If you choose carefully and take care to avoid potential pitfalls, you can benefit greatly from rewards credit cards, and even use them to help improve your credit scores.

Rewards credit cards might be right for you if:Rewards credit cards might NOT be for you if:
You have good or excellent credit scoresYou have lower credit scores (you may not get approved)
You travel frequentlyYou carry a balance regularly on your credit cards
You don't carry a balance or carry a low balanceYou don't travel much and/or you fly different airlines and stay at different hotel chains when you do travel
You spend in categories such as restaurants, gas and groceries

Selection criteria: what makes a great reward credit card?

Opportunities for use – You want to make sure that you’ll be using the card enough to justify owning it, as well as paying for any fees or interest. Take your spending habits into consideration – how often will you make purchases eligible for rewards?

A reasonable annual fee – Some rewards cards have annual fees, while others don’t. There’s no reason to avoid a card just because it has an annual fee; in fact, many of the better rewards cards, especially the travel credit cards, have a fee. If you get a card with an annual fee, just make sure that you’ll be profiting every year.

High cash-back levels – Some great cards will give a lot of cash back on specific rotating categories, up to 5%. Others will give a smaller amount, like 1.5, for more frequent purchases.

A strong sign-up bonus – It’s not the most important feature, but getting $100 just for buying things is icing on the cake. Usually you have to reach several hundred dollars in a few months, which is easy if you use the card fairly frequently.

A low introductory APR – Having a year or so to make interest-free purchases lets you quickly rack up rewards points, but don’t think that points will help you spend beyond your means. A low APR will also enable you to get to the sign-up bonus without having to pay interest on your purchases.

How to make the most of your reward credit card?

To take full advantage of your points, you need to look at the rewards card from all angles, including how much you'll spend and what you'll buy. Here's a quick guide on how to maximize your points:

Check your credit. Before you apply, make sure you know your credit score and that you have a high likelihood of getting the card you want before you apply.

Choose carefully. To use a rewards card successfully – and the points or miles – you'll need to find the right card for your lifestyle. For example, if you travel frequently, then focus on travel rewards cards; if you buy a lot of groceries, then get a card that earns high rewards on groceries.

Calculate. Calculate how much you'll spend, making sure you will at least recoup the annual fee.

Take advantage of the sign-up bonus. Make sure that you will be able to spend the required amount within the required time for the sign-up bonus, but avoid the temptation of making extra purchases just for the sake of reaching the required spend. Stick to sign-up bonuses that you know are attainable from your regular or pre-planned purchases.

Make it your go-to card. See if you can pay your rent, insurance and utilities with it, but make sure there are no convenience fees. Buy your groceries with it, and pull it out at restaurants.

Pay in full and pay on time. If you can't pay it off in full each month, there's no point in acquiring it. The interest fees will overshadow any cash back or points you've earned. Never go over the limit or pay late; these are wasted dollars.

Use shopping portals. Frequently check for deals. Just make sure you are fully rewarded for using points or miles. Some cards don't reward you for the full amount with their shopping portals or gift cards.

Take full advantage of the benefits. Make full use of the benefits, such as price protection and auto rental insurance.

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