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.

The biggest pros and cons of rewards credit cards are savings with every purchase and extra secondary benefits, on the positive side; and the potential for devaluation and earning caps, on the negative side. Rewards credit cards can be lucrative when used with precision. But they can also end up costing more than they benefit you if you pick the wrong card or carry a balance from month to month.

Rewards credit cards are known for offering 1% to 5% back on most purchases, often supplemented by an initial rewards bonus potentially worth hundreds of dollars. Many rewards credit cards also have $0 annual fees, and some even provide the opportunity to save on finance charges with 0% APR periods.

But rewards cards have their pitfalls, too. Although cash back is straightforward to redeem, there can be a minimum redemption amount, depending on the card. Points and miles, on the other hand, have different redemption values from card to card. To add to the general confusion surrounding rewards programs, credit card companies can change the value of a point or a mile anytime they wish - and usually they don’t increase the value.

Credit card rewards can also expire based on any criteria the card issuer decides, including account inactivity, a missed payment, or simply after a certain period of time. That’s why it’s important to read the card’s terms and conditions before applying.

Biggest pros and cons of rewards credit cards:

Overall, rewards credit cards are mostly a good deal, as long as you use them responsibly by not spending more than you can afford to pay each month. It’s important to pay your bill in full every month, because any money saved in rewards can be negated easily by paying interest.

Devaluation is a problem with points and miles, too, so redeem your rewards often to decrease the chance of having them become less valuable. And if you get a rewards card with an annual fee, make sure the perks outweigh the fee.

The best way to choose a rewards credit card is to narrow down your choices to what your credit score qualifies you for, then compare the rewards rates and costs of the remaining options. Next, pick the credit card with the highest expected rewards earnings, based on your spending habits, minus any annual fees.

In addition to net rewards value, there are many secondary features that might influence you to pick one card over another when choosing a rewards credit card. For example, you may want a card that gives a certain type of rewards, whether cash back, points or miles. You may also want qualities like no annual fee, no foreign transaction fee, introductory financing on purchases, or perks with certain airlines or hotels. How long you want to keep the card and where you want to use it will factor into your decision as well.

How to Choose a Rewards Credit Card

1. Eliminate cards you can’t qualify for. Check your credit score, then narrow down your options to the cards you can qualify for with that score.
2. Decide what kind of rewards you want. It’s clear how much cash back rewards are worth. Cash back can’t be devalued, either, unlike points or miles. But many points and miles cards offer increased redemption value toward travel.
3. Think about where you want to use the card. Some credit cards give extra rewards at certain merchants or types of merchants, so you might look for a card that caters to your biggest purchase categories. Or you might want a card with a good flat earning rate on everything.
4. Consider how long you want to keep the card. If you’re only planning to keep the card for a year, initial bonuses and promotional financing will probably factor heavily into your decision. If you’re looking for a card for the long haul, terms like fees and ongoing rewards rates are more important.
5. Compare offers based on expected net value. Calculate the amount of rewards you expect to earn in a year or two with each card you’re considering, based on your spending habits. Then, subtract the cards’ annual fees to see which one provides the most value.
6. Compare perks. There are all kinds of features that might sway you to pick one rewards card over another. Some examples are $0 foreign transaction fees, big initial bonuses, 0% introductory APRs, credits for certain types of purchases, and airport lounge access.

At the end of the day, the best way to choose a rewards credit card is to figure out what you want out of a card and then pick the credit card offer that most closely matches that description. And you can use WalletHub’s editors’ picks for the best rewards credit cards as a starting point to do just that.

In addition, you can use WalletHub’s CardAdvisor tool to get credit card suggestions based on your answers to a few simple, anonymous questions. Or, you can create a free WalletHub account to get access to personalized credit card recommendations based on your WalletHub profile and credit report info.

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:

Points

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.

Miles

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.

Cash Back

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.

To maximize credit card rewards, keep it simple. Choose the right card by sticking 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. Many of the best rewards cards on the market often come with an annual fee to help cover 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 traveler, dine out regularly, or spend a lot on groceries, find a rewards card that will pay you for those purchases. And if your hotel expenses make up most of your spending, check out the best hotel credit cards. If you want something less complicated, get a card that pays a flat cash back rate on all of your purchases. Check out our editors’ picks for the best cash back credit cards.
• 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 come in three main currencies: cash back, points, and miles. While cash back rewards are straightforward as they consist of a dollar-value percentage of your purchases, miles and points are more diverse. Credit card points can be either hotel points or generic ones that can be redeemable towards various products and services. And miles are either tied to a specific airline or they’re generic miles that can be used for broader travel experiences. Common ways of redeeming rewards include statement credits, checks, gift cards, merchandise, charity and more. 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. If you’re after financing options, check out our editors’ picks for the best low interest credit cards. 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.

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.

Here's 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 rewards credit cards will often give you the most 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.

The best 2% cash back credit card is the Citi® Double Cash Card – 18 month BT offer. Citi Double Cash is the best 2% cash back credit card because it has a $0 annual fee and gives unlimited 1% cash back when buying something plus another 1% when paying for it, for a total of 2% cash back on all purchases.

For a rewards credit card, 2% cash back on everything is about the best you can aim for. That’s why Citi Double Cash is one of the best credit cards on the market right now. But there are a few other great 2%+ cash back credit cards to consider when shopping for the best deal.

Best 2% Cash Back Credit Cards

At the end of the day, Citi Double Cash is the best 2% cash back credit card because it offers an unlimited 2% cash back rate on all purchases. Most 2 percent cash back credit cards put a cap on the amount you can earn with a 2%+ rate. Or they only give the rate on certain categories of purchases.

The best credit cards for at least 4% cash back on some purchases are:

The best points credit card is Chase Sapphire Reserve® or U.S. Bank FlexPerks® Gold American Express® Card because both cards give points that are worth 1.5 cents each when redeemed for travel. These two cards’ points have more value than other points-earning credit cards currently on the market. The average credit card point has a redemption value of 1 cent.

Points earned on a Chase credit card are called Chase Ultimate Rewards points, and they redeem at different values depending on which credit card you have and what you redeem for. Overall, Chase Ultimate Rewards points are most valuable when redeemed for travel booked through the Chase travel portal. But points earned on the Chase Sapphire Reserve Credit Card are worth the most out of all the Chase credit cards. You’ll earn a total of 10 points per $1 spent on hotels and car rentals booked through Chase, a total of 10 points per $1 spent on prepaid restaurant reservations or takeout orders made through Chase, a total of 5 points per $1 spent on flights purchased through Chase, 3 points per $1 spent on all other travel and dining purchases, and 1 point per $1 on all other purchases. Plus, there is an initial bonus of 50,000 points (worth $750 in travel) after spending $4,000 in the first 3 months. The card’s annual fee is $550.

It’s not clear how much U.S. Bank FlexPerks points are worth for other redemption methods, but they have an exceptional redemption rate for travel booked through U.S. Bank. Airfare, hotels, and rental cars are considered travel to U.S. Bank. The U.S. Bank FlexPerks Gold Credit Card has great points-earning potential, too: 5 points / $1 spent at restaurants, 2 points at gas stations and airlines, and 1 point / $1 for everything else. Plus, the intro bonus of 30,000 points for $2,000 in the first 4 months is worth $450 in travel. The annual fee is $85.

When shopping around for a points credit card, it’s important to keep in mind that points (along with miles) are one of the credit card rewards currencies that can change in value at any time. Moreover, credit card companies reserve the right to change rewards programs at their leisure, or to cancel them altogether. There are lots of rules governing each credit card’s rewards system, so make sure you’re aware of those rules before you sign up for the card.

The best U.S. Bank rewards card is the U.S. Bank Cash+™ Visa Signature® Card because it has a $0 annual fee and rewards cardholders with 1 - 5% cash back on purchases. The U.S. Bank Cash+™ Visa Signature® Card also has a $200 initial rewards bonus for spending $1,000 in the first 120 days. Plus, U.S. Bank Cash+ is unique in that you’re able to pick the categories you earn 5% and 2% cash back on. You can select new categories every quarter, and you’ll earn 1% cash back on all other purchases. 

Best U.S. Bank Rewards Cards for 2021

All in all, U.S. Bank rewards cards offer some excellent rewards rates and signup bonuses, if you can get approved. Applicants generally need at least good credit to qualify.