Best Rewards Credit Cards

Rewards credit cards are worth it if they will save you more than they cost you, all things considered. The best rewards credit cards are worth more than $1,000 in savings for the average person over the first two years of use, after annual fees. But you need good or excellent credit to get the most worthwhile rewards cards. Things aren’t as clear-cut for people with lower scores. In addition, rewards credit cards are only worth it for purchases that you can afford to pay off fully by the due date each month. Credit card interest rates are much higher than credit card rewards rates, so it’s best to use a low interest card for balances that you’ll carry from month to month.

When determining if a rewards credit card is worth it or not, you have to weigh the worth of the rewards against the cost of the card. If the card has no annual fee and you plan to pay the bill in full every month, it’s pretty easy to decide the card is worth it. However, you’ll often get the best rewards and biggest signup bonuses from cards that do have annual fees. In that case, you just have to crunch the numbers to make sure you’ll get your money’s worth.

Regardless of which rewards card you choose, be sure to understand how you can earn rewards most efficiently. Some cards have higher rewards rates for specific categories, and some give a flat rewards rate that you earn on all purchases. The fastest way to earn credit card rewards is through signup bonuses. Many of the top rewards cards come with signup bonuses that you can get for meeting a minimum spending requirement in the first three months. The signup bonuses are usually worth several hundred dollars, enough to cover the cards’ annual fees for years. And you can get them for spending money you were already planning on spending.

Credit card points are worth an average of 1 cent apiece, though credit card point values usually range from 0.5 cents to 1.5 cents per point, depending on the card and the redemption method. For example, you might spend 2,500 points on a $25 gift card, but the same number of points might only get you $15 when redeemed for merchandise.

More credit cards reward users with points than you might think, too. For instance, some so-called “cash back” cards actually give points, which cardholders can redeem at a rate of 1 cent per 1 point.

Average Credit Card Point Values by Issuer:

High Credit Card Point Values:

• U.S. Bank FlexPerks Gold: 1.5 cents per point when redeemed for plane tickets, hotels, and rental cars.
• Chase Sapphire Reserve: 1.5 cents per point when redeemed for travel through Chase Ultimate Rewards; 1 cent per point for other redemption methods.
• J.P. Morgan Reserve: 1.5 cents per point when redeemed for travel through Chase Ultimate Rewards; 1 cent per point for other redemption methods.
• Chase Sapphire Preferred: 1.25 cents per point when redeemed for travel through Chase Ultimate Rewards; 1 cent per point for other redemption methods.
• Citi Premier: 1.25 cents per point when redeemed for travel through Citi ThankYou; 1 cent per point for gift card redemptions; 0.5 cent per point for cash back redemptions.

It’s important to note that credit card points can get devalued at any time by the card issuer. That means the point values listed above can change. Usually, card issuers will reserve the right to change rewards programs - including point values - in the card’s terms and conditions.

For example, a card issuer can decide that a $300 plane ticket should cost 1,000 more points than it does currently, which in turn lowers the redemption value of the reward point. That’s why cash back is usually a better value than points - $1 in cash back will always be worth $1.

This information is accurate as of the day this answer was posted.

Cash back is the most versatile type of credit card rewards, as it can be redeemed for anything, and there’s never any doubt about how much it’s worth. Points have a value set by the credit card company and tend to be worth the most when redeemed for travel. Credit card companies won’t always clearly disclose points values, and those values can change over time. It’s possible that points could be worth 1 cent apiece one day and 0.8 cents each the next.

You can spend points for many different things. Usually, you can trade them for travel, gift cards, unique experiences, charitable donations or even cash. There are no restrictions on what you can use cash for. You can typically redeem cash back for a statement credit, paper check, or direct deposit to a bank account.

One thing credit card shoppers should watch out for are cards advertised as offering cash back that really provide points. For example, the Chase Freedom card offers “5% cash back” in certain bonus categories. But what it actually gives is 5 Chase Ultimate Rewards points per $1, which cardholders can then trade for cash back at a rate of 1 cent each.

Cash Back vs Points:

• Best cards: Citi Double Cash for cash back. Chase Sapphire Preferred for points.
• Best initial bonus: Bank of America Cash Rewards for cash back - $200 for spending $500 in the first 90 days. Marriott Premier Plus Credit Card for points - 75,000 points for spending $3,000 in the first 3 months.
• Earning rate: Usually at least 1% cash back or 1 point per $1 spent.
• Devaluation: Points can be devalued by the issuer, while cash back can’t.
• Redemption options: Statement credit, check or deposit for cash. Travel, merchandise, gift cards, cash and more for points.
• When it’s the best choice: Points for frequent travelers. Cash back for everyone else.

Let’s take a look at two high-profile cards in a battle of cash back vs. points.

Citi Double Cash tops the cash back offerings with 2% cash back on all purchases and an introductory APR of 0% for 18 months on balance transfers. It also chases a $0 annual fee and requires good credit to get.

But if you have excellent credit and you’re a frequent traveler, Chase Sapphire Preferred is a more attractive option. It gives 2 points per $1 spent on travel purchases and 1 on everything else. It has an initial bonus of 50,000 points for spending $4,000 in the first 3 months. Preferred’s points are worth 1 cent each toward cash back or gift cards or 1.25 cents each toward travel. There’s a $95 annual fee, which is waived the first year. The card requires excellent credit.

For both cash back and points cards, you can expect to lose your rewards if your account closes for any reason. Most cards don’t let your rewards expire over time. But Citi Double Cash’s cash back expires if you don’t use your card for 12 months. And on points cards alone, your points can be devalued if the issuer decides to charge more points for its rewards. So frequent redemption is essential.

So the bottom line is that frequent travelers should check out points cards. Otherwise, cash is king.

Credit card rewards are not taxable in most cases. The IRS views credit card rewards the same way they view discounts, and discounts aren’t taxable. Rewards credit cards give points, cash back, or miles on purchases, which you can then redeem for statement credits, gift cards, merchandise, and travel expenses. Because of that, it’s like you’re getting a small discount every time you make a purchase.

There are some situations in which credit card rewards may be considered taxable income. Many credit cards offer a signup bonus for new cardholders that is rewarded once they meet a minimum spending requirement. For example, you might get $150 for spending $500 within the first three months. If you receive a signup bonus for meeting a spending requirement, that bonus is not taxable. However, if you receive a bonus without meeting any spending requirement, then it is considered taxable income. To make it simple, if you’ve done nothing in exchange for the rewards, they’re considered taxable.

Currently, though, there aren’t any credit cards offering bonuses for nothing in return – at least any you have to worry about tax-wise. Even credit cards that don’t have a high minimum spending requirement usually require that you make a purchase before receiving the bonus. Others just give you a gift card, which isn’t considered taxable income, either.

When it comes to anniversary and referral bonuses, lines aren’t as clearly drawn. Some anniversary bonuses require that you spend a certain amount each year to receive the bonus, or renew the card by paying the annual fee. In these cases, an anniversary bonus clearly falls into the “not taxable” category. Referral bonuses, on the other hand, likely will be considered taxable income. American Express and Chase even send out a Form 1099-MISC to file with the IRS after cardholders earn referral bonuses.

Business credit card rewards differ slightly in terms of whether they’re taxable or not. While the actual rewards you get from your business credit card aren’t taxable, the IRS will expect you to subtract them from the business expenses you report. You’ll have to consider the rewards as discounts on your business expenses, which will reduce the amount you’re able to deduct on your taxes.

To sum things up, the only times you have to be concerned about credit card rewards and taxes are if you have a business credit card or you receive a bonus without doing anything to get it. Other than that, you can enjoy the rewards you earn without a second thought.

To maximize credit card rewards, keep it simple. Stick with rewards you know you will use. Understand the terms your rewards program. Spread expenses across best rewards cards. And above all else, pay your balance in full every month.

The purpose of a rewards credit card is to get the most out of the benefits the card offers. Otherwise, it’s just a regular credit card; and not a cost-effective credit card, to boot. The best rewards cards on the market often come with an annual fee to help defray the cost of the rewards – rewards you may not be taking full advantage of. So rather than throwing away money on your rewards card, follow a few simple steps, and let your rewards card pay you for responsible usage.

Here’s how to maximize credit card rewards:

• Stick with rewards you’ll use. There’s no point in investing in an airlines credit card with a hefty annual fee if you fly only once a year. If you’re a frequent commuter, dine out regularly, or spend a lot on groceries, find a rewards card that will pay you for those purchases. If you want something less complicated, get a card that pays a flat cash back rate on all of your purchases. You should have a card with a rate of least 1.5% per $1 spent.
• Know the card’s rewards terms. Make sure any spending requirements for sign up bonuses are attainable. Familiarize yourself with the card’s redemption rates. Rewards points and miles are often worth less when redeemed for one category over another.
• Use multiple cards to get the best rewards. This is known as the Island Approach. If you have a card that earns 5 points on gas purchases, make that your gas-only card. If your airline card has a minimum spending requirement for 50,000 bonus points, put all of your expenses on that card.
• Pay your balance in full. When you keep a balance on a rewards card, interest charges may cancel out any rewards earned. And avoid any late or missed payments. Not only will a late fee further eat into your rewards, but you could end up forfeiting any rewards earned altogether.

Try redeeming reward miles or points periodically rather than stockpiling them. Rewards generally don’t expire, but in some cases, you could lose points if there’s no activity on your rewards account. And if you close your account, you will lose all of your earned rewards.

Credit card reward redemption works a little differently for every issuer. But generally, you can redeem your rewards online or by calling your issuer’s customer service. Depending on your card, you may be able to redeem for travel, statement credits, paper checks, gift cards, merchandise and more. And you may get more value when redeeming for some things than others. The Chase Sapphire Reserve card, for example, gives you 25% more value for your points when you redeem for travel.

Some credit card companies also have special rules and restrictions for reward redemption. For example, you might be required to earn a certain amount of rewards before you can redeem. Or you might have to redeem rewards in certain increments. In rare cases, like with the Costco Anywhere Visa, you might even receive your earnings just once per year.

Given how much reward redemption procedures can vary from credit card to credit card, it’s good to read a card’s terms and conditions carefully before applying.

Here are the basics of credit card reward redemption:

• Credit card users can usually redeem rewards for travel, cash back (check or statement credit), gift cards, merchandise and more.
• Most credit card companies let customers redeem rewards online or over the phone.
• Each credit card company has its own reward redemption rules. Rules may dictate when you can redeem rewards, for example.
• Your credit card’s terms and conditions will include information about reward redemption. Be sure to read them in detail.
• Some scammers attempt to pose as a credit card “reward redemption center” to get your credit card details. Don’t give personal information to unsolicited callers.

There is a common phone scam where someone claims to be from the “Reward Redemption Center.” If you get this call, hang up right away and block the number. Don’t give them any personal information. The caller is trying to commit fraud, not to give you any real reward. Here’s how the scam works: they say you have won a free gift card, but you need to pay for shipping to get it. They do this to get your credit card number, then use it for fraudulent purposes.

So the bottom line is don’t trust anyone who calls saying they’re from the “Reward Redemption Center.” Your credit card issuer will never call you like this. And if you’ve earned rewards on your card, you can take care of reward redemption on your own. The only true way to redeem rewards you’ve earned is directly through your credit card company.

Exactly how you redeem credit card reward points varies by credit card company, but most credit card users can redeem reward points online through their account summary page. Some credit card issuers also let you redeem rewards over the phone. Credit card reward points may be redeemable for cash back, travel purchases, gift cards, and more, depending on the card.

Once you redeem your credit card reward points, they’ll be subtracted from your rewards balance immediately and your account will be credited within 1-3 weeks, if applicable. In some cases, reward points will expire if you do not use them by a certain time.

How to Redeem Credit Card Reward Points:

1. Log in to your online account and head to “Account Summary.” Specifics will vary by issuer, but your rewards will usually be featured on a main account page.
2. Click on “Rewards Balance.” The exact wording may differ depending on the issuer. Once you click on your rewards balance, you’ll be taken to a page with your total amount of unredeemed rewards, and information about your redemption options.
3. Select how you’d like to redeem your rewards. You may be able to redeem reward points for travel purchases, cash back in the form of a check or statement credit, merchandise, or gift cards, depending on the rewards card.
4. Redeem your rewards. Once you redeem your credit card reward points, the points will be deducted from your rewards balance immediately. If you’re redeeming for statement credits or covering past purchases, your account will usually be credited within a week. If you redeem your points for gift cards or merchandise, you can expect them to arrive in the mail within 2-3 weeks.

While many rewards cards will let you choose from multiple redemption options, you’ll usually get the most value with one in particular. For example, travel reward credit cards will often give you the most bang-for-your-buck when you redeem your points for travel purchases, and your rewards may be worth less if you redeem them for cash back or gift cards.

On average, credit card reward points are worth 1 cent each. Most major credit card issuers, like Chase, Capital One and American Express, advertise that your points will not expire as long as your account remains open. But you should check the exact terms and conditions of your specific credit card to make sure you don’t lose any rewards you’ve earned.

Many credit cards let users shop with rewards, either on sites like Amazon or through the credit card company’s online rewards shopping mall. For example, you can shop on Amazon with Discover it rewards points. And you can shop both on Amazon and the Chase Ultimate Rewards center with Ultimate Rewards points. Plus, all credit cards with points, miles or cash back give you rewards when you shop.

There are other types of shopping rewards, too.

The Shop Your Way rewards program allows you to earn points when buying goods from popular brands. Some notable ones include Sephora, Brookstone, Cuisinart, Champion, Zipcar, Avis, Petco, Barnes & Noble and Expedia. And that’s just a few of the more than 11,000 companies on the site.

Shop Your Way rewards is free to join. All you have to do is make an account on the Shop Your Way site. Then, you can make purchases from the selection of products there. Or, present your account number when checking out at a participating retailer’s store or website, and your points will show up in your Shop Your Way account. You can use your points on future Shop Your Way purchases. Different retailers will offer different amounts of points. And through a partnership with Sears, you’ll get even more points any time you pay with a Sears Mastercard.

Airlines, hotel chains, supermarkets and gas stations often have their own shopping rewards programs. Anyone can join for free. You don’t need a certain credit card. But getting the merchant’s co-branded card will help you earn more rewards every time you shop.

Here are several ways to earn shop rewards:

• Credit card rewards: You can often use credit card rewards to pay for purchases. Chase, Discover, and Citi credit card users can Shop With Points on Amazon.com, for example. Many credit cards also let you shop with points on the issuer’s online shopping mall. Plus, you can always go shopping anywhere with cash back.

• Shop Your Way: You can earn points by shopping at more than 11,000 different brands, both online and in-store. Just create a free account at shopyourway.com to get started.
• Company loyalty programs: Airlines like Southwest have loyalty programs so you earn miles for flying with them. And stores like Stop & Shop or Game Stop may give you rewards back for shopping with them.

It’s generally free to join a shop rewards program, except when it comes to credit cards with annual fees. So when you’re shopping at your favorite retailer, it doesn’t hurt to ask if they have one you can join. And joining Shop Your Way for free gives you access to rewards at many retailers you may already visit.

Each credit card company has its own rewards program. And each credit card rewards program has a unique reputation. Some are known for good customer service. Others are notable for offering rewards cards to people with less-than-good credit. You can find the latest rankings in WalletHub’s annual Credit Card Rewards Study, which reviews major credit card rewards programs based on earning potential, eligibility, transparency and more. The study also includes scores and rankings for individual cards.

Given that your ultimate goal should be to find the single best rewards card for your needs, your focus should be more at the card level than the issuer or rewards program level. The quality of a rewards program matters in the sense that it impacts what you can redeem your earnings for and how much they’re worth when you do. But a credit card’s core terms – annual fee, rewards earning rates, etc. – are what matter most.

With that being said, the first step in choosing the right rewards program is asking yourself this question: Do I rack up 30,000+ airline miles or 20+ hotel nights per year?

If your answer is “yes,” get one of WalletHub’s best travel rewards credit cards. Most people will be better off with a card that’s equally rewarding no matter where you book travel accommodations. But if you always fly with the same airline or stay at the same hotel chain, it’s worth at least considering that company’s credit card.

If you answered “no,” we recommend getting the best cash back credit card for your spending habits. Credit card companies can easily devalue points/miles by increasing the number that you need to redeem for certain items. That makes saving them up for infrequent redemption a bit risky. But issuers can’t play the same games with cash. Cash back rewards also give you versatility in that you can redeem earnings for any type of expense by getting a statement credit.

The best reward card app is probably Stocard. Stocard is a free app that lets you input the information of all your store loyalty rewards cards, which allows you to use your app instead of carrying around a wallet full of cards. You can input each loyalty rewards card’s information manually or scan its barcode using the app (depends on the type of rewards card). Then, when it’s time to pay, you can have the cashier scan the barcode on the app or type in the card’s ID number to access your reward card.

Stocard is available for free on the Apple Store and Google Play store. One other thing to note – the app isn’t just for loyalty rewards cards. Stocard can also store gift cards, Passbook/Apple Wallet Passes and airline tickets. It doesn’t work with credit cards, though.

If you have a rewards credit card, the best reward card app is the app of your credit card issuer. Downloading it will let you manage every aspect of your credit card account on the go. You can do all kinds of things, from paying your bill to checking your rewards to adding an authorized user. And you’ll be able to log in using the same information as your online account.