A credit card rewards program is a system that enables a credit card company’s customers to earn and redeem cash back, miles or points for things like statement credits, travel expenses, gift cards and merchandise. Major credit card companies typically have at least one credit card rewards program. The exact number largely depends on how many different rewards currencies they offer.
In general, these rewards programs are meant to incentivize spending on credit cards. Each also has clearly defined rules for earning, redeeming and other procedures to help it run smoothly.
Types of Credit Card Rewards Programs
Cash back rewards are measured in percentages. For instance, if a credit card offers 1% cash back, the cardholder gets back 1 cent for each dollar spent on eligible purchases. Usually, cash back rewards can be redeemed as a statement credit, gift card, or a check. Some cards may also allow you to deposit the cash back into your bank account.
Rewards points can vary in value. Each credit card issuer assigns specific values to their points, and how much each point is worth can vary based on the redemption option you choose. For instance, a point redeemed to purchase airfare can be worth more than a point redeemed as a regular statement credit. Point rewards programs are often used on travel credit cards.
Mile rewards programs are typically offered by airline credit cards. The value of miles can also vary based on the redemption method. If the card is co-branded, miles are typically worth the most when redeemed for flights with the airline associated with the rewards program.
Key Things to Know About Credit Card Rewards Programs
- Credit card rewards programs often offer different rewards rates based on the type of purchases you make. Some typical bonus categories include travel, groceries, dining, and gas.
- Credit card rewards programs are available to people of all credit levels. However, rewards credit cards for above-average credit tend to offer the best rewards rates.
- Many rewards credit cards come with annual fees, though not all do. If you are using a rewards credit card with an annual fee, it’s worth making sure that you are earning enough rewards to at least break even.
- Credit card companies often have different redemption rules for cash back cards and cards with points or miles.
For more information, you can check out WalletHub’s picks for the best credit card rewards programs of 2022.
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