What Reward Credit Card is the Best Fit for Me?
Reward credit cards have a lot of potential, but some are better than others. Here are tips to help you benefit from the best credit card reward program there is.
June 2, 2022
A reward credit card is just a credit card with additional benefits for using it. Typically, this takes the form of either loyalty points or cash back.
Reward credit cards allow you to earn reward points for ordinary purchases. These points can be exchanged for a variety of products and services, including flights and gift cards. They can also be used for savings on restaurants, gasoline, hotel rooms and family outings.
While reward points might be a clever method to benefit from your typical spending, it’s crucial to always spend within your means and understand exactly how some of the best credit card reward programs work.
How do reward credit cards work?
The way reward credit cards work is simple. When you make purchases on your card, you collect points or incentives. The degree of compensation you receive per dollar spent can fluctuate; you may occasionally receive incentives and bonuses that allow you to earn more per dollar spent than typical. Some cards provide additional benefits, like sign-up bonus points and points awarded each year as long as the account is active.
The more you use your card for purchases, the more benefits you can earn. The trick is to choose the best program for your requirements. For example, if you don’t drive often, a card that offers gas points as its principal perk won’t be of much use to you.
There are several different types of rewards cards available. Choose one that makes it simple to earn stuff you'll actually use. Because the incentives don’t often apply to cash transactions such as credit card withdrawals or advances, it’s better to stick to making purchases on the card if you want to avoid costs and maximize the rewards.
How to get more points on your reward credit card
Some of the best credit card rewards include the opportunity to earn bonus points, particularly during the first few months of card ownership. For example, if you spend more than $3,000 in the first three months, you may be eligible for an additional 10,000 points.
Others may offer just one point for every dollar spent for the first three months. You may also gain more points when you purchase from select businesses.
Use your card
It's best to use your rewards credit card whenever you can to maximize the number of points you can earn on your card. However, this is subject to the shop accepting that specific card.
Although some cards, such as American Express, offer some great benefits, keep in mind that some stores don’t accept them.
You should also bear in mind that if you plan to use your card for everyday purchases, you must be able to pay off the monthly balance in full. A majority of reward credit cards have high interest rates; if you’re unable to pay off your balance each month, the amount of interest paid could surpass any benefits received.
Will all transactions be rewarded with points?
In general, you’ll earn rewards only on purchases made with the card. Transactions such as fees, cash withdrawals, balance and money transfers, paying interest or acquiring foreign currency won’t earn you any points.
Types of credit cards with reward programs
Customers can earn points from credit cards in three traditional ways:
For frequent travelers, this can be a very helpful perk. As you spend, you accumulate "miles" that may be used to book flights. For example, if you enjoy traveling with Virgin, you might want to consider getting a credit card that rewards you with points that can be used to lower the cost of your next flight with them.
Points are comparable to cash back, but instead of always being repaid in cash, points that accumulate over time (via purchases) can be redeemed in the form of products, cash back, gift cards or more.
When you use your credit card, you’ll receive a set amount of cash back. For example, you might get a flat 2% cash back across all transactions, or 4% on specific businesses and services. This is a terrific, straightforward way for folks who desire incentives without having to plan or think about it.
Advantages and disadvantages of rewards credit cards
The following are the most significant benefits and drawbacks of rewards credit cards:
Some reward cards include additional perks such as travel insurance and annual travel credits.
There are plenty of rewards cards that have no annual charge.
People with all credit levels can typically get rewards cards.
Many reward cards offer sign-up bonuses.
Cash back, points and miles essentially return a portion of your purchases to you.
You can profit if you pick the correct rewards cards for your spending habits.
High APRs are typical — and paying interest soon offsets the value of incentives.
Annual fees are frequently charged by cards with the most features.
The top rewards credit cards require strong or excellent credit.
Some cards have reward earning limits.
Account inactivity, late payments or account cancellation might cause rewards to expire or be forfeited.
Many loyalty programs have a minimum redemption amount.
Other aspects to consider
Before applying for a rewards credit card, find out the answers to the following questions:
How easy is it to earn the reward? Most programs automatically reward you as soon as you've spent the qualifying amount. Others allow you to redeem rewards by phone or online whenever you want. It’s a good idea to check out how user-friendly a card company’s website is before you apply.
Is there a caveat? Rewards credit cards may have an annual fee or higher interest rates than other types of cards. There may also be a price to redeem your points, as well as shipping costs to send item prizes. A fantastic program may be worth the extra money, but be sure you understand all of the facts ahead of time.
How do the benefits stack up? Think about how many points you get for a dollar, how many you need to get a reward, how many points you can earn each year and when those points will expire. It’s usually beneficial to conduct some research on your own.
Choosing the best rewards card for you is a big, yet worthwhile, decision. The appropriate credit card can help you earn cash back or other rewards on your purchases, save on interest and gain other perks like travel insurance. You can evaluate which type of reward program will work best for you by reviewing your spending habits and redemption preferences.
Compare cards based on their welcome bonus, earning potential, fees, rates and other characteristics, and you'll be in a good place to choose more easily from a shortlist of the best credit card reward options. Follow these steps and you’re likely to identify a card that’s a good fit for your needs.
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