A rewards card is a credit card that gives points, miles or cash back, either for making purchases with the card or as a bonus for meeting a spending threshold in a certain time period. People with any level of credit can qualify for a rewards card, but you’ll need at least “good” credit to be approved for the best credit cards with rewards. Rewards cards also have a wide range of annual fees. Some of the best rewards cards have no annual fee, while others charge hundreds of dollars per year.
Reward card bonuses are usually a set amount of money or rewards units, and are given as a signup gift to new cardholders who meet an initial spending threshold within a few months to a year after opening the account. Some rewards cards also give bonuses for adding authorized users or as an anniversary perk.
The value of the ongoing rewards given for using the card - also called spending-based rewards - will depend on the credit card issuer and, to some degree, the type of rewards given. But the average rewards credit card will give 1% back on purchases. And most points and miles are worth 1 cent each. In general, credit card rewards can be redeemed for travel, merchandise, statement credits, and other things, depending on the card issuer.
That said, your mileage may vary on both miles and points. Unlike cash back, miles and points are subject to devaluation at any time. That means, for example, your card issuer could decide that your points are worth less than they were when you got your card, or that you need 2,500 more miles to start redeeming them. Most, if not all, credit card terms state that the card issuer has this right, and they can do it whenever they want.
Other Types of Rewards Cards
In addition to paying for purchases with rewards credit cards, consumers can save money using a loyalty rewards card when shopping. Many resorts, hotels, and retailers have loyalty programs, and they’ll often have a corresponding loyalty card or number that you can present when you make a purchase.
CVS and Office Depot are two retailers with good loyalty card programs. The loyalty card keeps track of your eligible purchases and any rewards you’ve earned. Loyalty cards aren’t credit cards, but they are a good way to rack up rewards for hotels or retailers you visit often.
Store credit cards and co-branded credit cards – which are affiliated with specific retailers and organizations – can also be used in conjunction with loyalty rewards cards to help you save as much as possible with your favorite brands.
Finally, you might hear gift cards referred to as reward cards, especially those awarded as a prize or incentive, or as credit in lieu of a refund.
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