There are three different types of credit card rewards: points, miles and cash back. Rewards credit cards are also targeted to three main groups: students, small business owners and people with above-average credit. Although there are differences between credit card rewards currencies, and the ways in which credit card companies dole them out to different groups, the major types of credit card rewards all work pretty much the same way. You’ll earn rewards for every purchase you charge to the card – sometimes at a flat rate on all purchases, and other times with earning rates that vary by spending category. It’s also possible to earn rewards for doing things like spending a certain amount in the first few months, referring a friend or adding an authorized user.
Most credit cards with rewards are “general-purpose” cards, which are not fundamentally linked to any particular company, other than the card issuer and card network. In addition, there are some “co-branded” rewards credit cards that offer extra points, miles or cash back and other incentives when you use the card with an affiliated retailer or organization. These cards are partnered with a card network such as Visa or Mastercard, which means cardholders can use them (and earn rewards) anywhere the network is accepted.
Co-branded cards are different from store cards, which are issued by banks but are not linked to any of the major card networks. This means store cards only let you make purchases and earn rewards with whichever retailer is associated with the card.
Here are the types of credit card rewards:
Credit cards with rewards points generally give at least 1 point per $1 spent. You can redeem points for hotel stays and other travel expenses, statement credits, gift cards or merchandise, depending on the card. Points cards are sometimes affiliated with hotel chains.
Credit cards with miles are travel oriented, often affiliated with a specific airline. Rewards typically start at 1 mile for every $1 you spend. Miles can be redeemed for airfare, other travel expenses, gift cards, cash or merchandise. Cards co-branded with a particular airline may reward you with seat or room upgrades, early boarding on flights, free checked bags and more.
Credit cards with cash back rewards return a portion of each purchase cardholders make, usually at least 1%. You can redeem cash rewards as a check, direct deposit to your bank account or statement credit, depending on the card. Some cash back rewards can also be redeemed for gift cards and merchandise through the issuer’s online rewards mall.
You’ll need good or excellent credit to qualify for the best rewards credit cards. Many also come with annual fees to offset the costs of their rewards programs. And some cards offer sign-up bonuses that require meeting a minimum initial spending requirement.
For more information, check out WalletHub’s Credit Card Rewards Guide.
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