Short Review of Best Credit Cards for Rewards
| Name | Best for | Reward Rate | Intro Offer | Annual Fee | Apply |
|---|
Capital One SavorOne Cash Rewards Credit Card | Cash Back, 0 APR, No Annual Fee, Restaurants, Entertainment, Daily use | 5% Cash Back on hotels and rental cars booked through Capital One Travel.1% Cash Back on all other purchases.3% Cash Back on dining, entertainment, popular streaming services and at grocery stores. | $200 Cash bonus once you spend $500 on purchases within the first 3 months from account opening. | $0 | Learn more on our partner’s site |
Capital One Venture X Rewards Credit Card | Car rental | 10,000x 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary.10x Miles on hotels & rental cars booked through Capital One Travel.5x Miles on flights and vacation rentals booked through Capital One Travel.2x Miles on all other purchases. | 75,000x Bonus miles once you spend $4,000 on purchases within the first 3 months from account opening. | $395 | Learn more on our partner’s site |
Capital One Venture Rewards Credit Card | Travel, Daily use | 5x Miles on hotels, vacation rentals, and rental cars booked through Capital One Travel.2x Unlimited 2X miles on every purchase, every day. | 75,000x Bonus miles once you spend $4,000 on purchases within the first 3 months from account opening - that’s equal to $1,000 in travel. | $95 | Learn more on our partner’s site |
Capital One Quicksilver Cash Rewards Credit Card | Cash Back, No Annual Fee, Daily use | 5% Cash Back on hotels and rental cars booked through Capital One Travel.1.5% Cash Back on every purchase. | $200 Cash Bonus once you spend $500 on purchases within 3 months from account opening. | $0 | Learn more on our partner’s site |
Capital One QuicksilverOne Cash Rewards Credit Card | Fair credit | 1.5% Cash Back on every purchase. | No current offer. | $39 | Learn more on our partner’s site |
Capital One Quicksilver Secured Cash Rewards Credit Card | | 5% Cash Back on hotel and rental car purchases through Capital One Travel.1.5% Cash Back on every purchase. | No current offer. | $0 | Learn more on our partner’s site |
Capital One Quicksilver Student Cash Rewards Credit Card | International students | 1.5% Cash Back on all purchases. | $50 Cash bonus once you spend $100 on purchases within 3 months from account opening. | $0 | Learn more on our partner’s site |
Upgrade Cash Rewards Visa® | Good credit score | 1.5% Cash Back on payments. | $200 Bonus after opening a Rewards Checking Plus account and making 3 debit card transactions* | $0 | Apply now On Upgrade‘s website |
Capital One SavorOne Student Cash Rewards Credit Card | International students | 8% Cash Back on Capital One entertainment purchases.5% Cash Back on hotels and rental cars booked through Capital One Travel.3% Cash Back on dining, entertainment, popular streaming services & at grocery stores (excluding superstores like Walmart® and Target®).1% Cash Back on all other purchases. | $50 Cash bonus once you spend $100 on purchases within 3 months from account opening. | $0 | Learn more on our partner’s site |
Upgrade Triple Cash Rewards Visa® | Low income | 3% Cash Back on Home, Auto and Health categories.1% Cash Back on everything else. | $200 Bonus after opening a Rewards Checking Plus account and making 3 debit card transactions* | $0 | Apply now On Upgrade‘s website |
| Low income | 1% Earn 1% cash back rewards on payments made to your First Access Credit Card. | No current offer. | $75.00 for the 1st year, $48.00 after | Apply now On the First Access Visa® Card secure website |
First Progress Platinum Prestige Mastercard® Secured Credit Card | | 1% Cash Back rewards on payments. | No current offer. | $49 | Apply now On First Progress’s site |
First Progress Platinum Select Mastercard® Secured Credit Card | | 1% Cash Back on payments made to your First Progress Secured credit card account. | No current offer. | $39 | Apply now On First Progress’s site |
Celtic Bank The Owner’s Rewards Card by M1 | | 10% You’ll get up to 10% Cash Back with select brands you hold in an eligible portfolio.1.5% Cash Back on everything else. | No current offer. | $95 | Apply now On Celtic Bank‘s site |
Capital One Spark Miles for Business | Walmart purchases | 5x Miles on hotels, vacation rentals, and rental cars booked through Capital One Travel.2x Miles on every purchase for your business with no blackouts or seat restrictions and no minimum to redeem. | 50,000x Miles once you spend $4,500 on purchases within the first 3 months of account opening. | $95 | Learn more on our partner’s site |
Capital One Spark Cash Plus | | 5% Cash Back on hotels and rental cars booked through Capital One Travel.2% Cash Back for your business on every purchase. | $2,000 Cash Bonus once you spend $30,000 in the first 3 months.$2,000 Earn an additional $2,000 bonus for every $500,000 spent in the first year. | $150 | Learn more on our partner’s site |
Capital One Spark Cash Select for Excellent Credit | | 5% Cash Back on hotels and rental cars booked through Capital One Travel.1.5% Cash Back for your business on every purchase, everywhere, no limits or category restrictions. | $500 Cash bonus once you spend $4,500 on purchases within the first 3 months from account opening. | $0 | Learn more on our partner’s site |
| | 2x - 7x:Points on restaurants.2x - 5x:Points on hotels.1.5x - 2x:Points on recurring software subscriptions.1x - 1.5x:Points on everything else. | No current offer. | $0 | Apply now On Cross River Bank‘s site |
| Cash Back, No Annual Fee, Daily use | 2% Cash Back on every purchase with unlimited 1% Cash Back when you buy, plus an additional 1% as you pay for purchases. | $200 Cash Back after you spend $1,500 on purchases in the first 6 months of your Citi Double Cash® card account opening. | $0 | Learn more |
American Express Blue Cash Preferred | Gas, Groceries, Streaming services, Daily use | 6% Cash Back at U.S. Supermarkets on up to $6,000 per year in purchases (then 1%).6% Cash Back on streaming (select U.S. streaming subscriptions).3% Cash Back on transit. Transit includes taxis, rideshare, parking, tolls, trains, buses, and more.3% Cash Back at U.S. Gas Stations.1% Cash Back on other purchases. | $300 Back after you spend $3,000 in purchases on the Card within the first 6 months of Card Membership. You will receive the $250 back in the form of a statement credit. | $95 | Learn more |
| Cash Back, 0 APR, No Annual Fee, Daily use | 5% Cash Back on up to $1,500 on combined purchases in bonus categories each quarter you activate.5% Cash Back on travel purchased through Chase Ultimate Rewards.3% Cash Back on dining at restaurants, including takeout and eligible delivery services.3% Cash Back on drugstore purchases.1% Cash Back on all other purchases. | $200 Bonus after you spend $500 on purchases in the first 3 months from account opening. | $0 | Learn more |
| Cash Back, 0 APR, No Annual Fee, Daily use | 5% Cash Back on travel purchased through Chase Ultimate Rewards.3% Cash back on dining at restaurants, including takeout and eligible delivery services.3% Cash Back on drugstore purchases.1.5% Cash Back on all other purchases. | $200 Earn a $200 bonus after you spend $500 on purchases in the first 3 months from account opening. | $0 | Learn more |
American Express® Gold Card | Cash Back | 4x Points on dining at restaurants worldwide, plus takeout and delivery in the U.S.4x Points on groceries at U.S. supermarkets on up to $25,000 in purchases per year.3x Points on flights booked directly with airlines or on amextravel.com.1x Points on other eligible purchases. | 100,000x Membership Rewards® Points after you spend $6,000 on purchases on your new Card in your first 6 months of Card Membership.20% Receive 20% Back in Statement Credits on eligible purchases made at restaurants worldwide within the first 6 months of Card Membership, up to $100 back. | $250 | Learn more |
Chase Sapphire Preferred® | Travel, Restaurants, Daily use | $50 Earn up to $50 in statement credits each account anniversary year for hotel stays purchased through Chase Ultimate Rewards®.5x Points on travel purchased through Chase Ultimate Rewards®, excluding hotel purchases that qualify for the $50 Anniversary Hotel Credit.3x Points on dining, including eligible delivery services, takeout and dining out.3x Points on online grocery purchases (excluding Target, Walmart and wholesale clubs).3x Points on select streaming services.2x Points on other travel purchases.1x Point per dollar spent on all other purchases. | 60,000x Bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when redeemed through Chase Ultimate Rewards®. | $95 | Learn more |
| Travel, Restaurants, Daily use | 10x Points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® after the first $300 is spent on travel purchases annually.10x Total points on Chase Dining purchases with Ultimate Rewards®.5x Total points on flights when you purchase travel through Chase Ultimate Rewards® after the first $300 is spent on travel purchases annually.3x Points on other travel worldwide after the first $300 is spent on travel purchases annually.3x Points on other dining at restaurants, including eligible delivery services, takeout and dining out.1x Point per dollar spent on all other purchases. | 60,000x Bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $900 toward travel when you redeem through Chase Ultimate Rewards®. | $550 | Learn more |
Blue Cash Everyday® Card from American Express | Cash Back, Gas, 0 APR, No Annual Fee, Families, Shopping, Groceries | 3% Cash Back on groceries at U.S. supermarkets, on up to $6,000 per year in purchases (then 1%).3% Cash Back on U.S. online retail purchases on up to $6,000 per year in purchases (then 1%).2% Cash Back on gas at U.S. gas stations on up to $6,000 per year in purchases (then 1%).1% Cash Back on other purchases. Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit. | $250 After you spend $2,000 in purchases on your new Card within the first 6 months of Card Membership. You will receive the $200 back in the form of a statement credit. | $0 | Learn more |
Citi Costco Anywhere Visa® | Cash Back, Young couples | 4% Cash Back on eligible gas, including gas at Costco for the first $7,000 per year and then 1% thereafter.3% Cash Back on restaurants and eligible travel purchase worldwide.2% Cash Back on all other purchases from Costco and Costco.com.1% Cash Back on all other purchases. | No current offer. | $0 | Learn more |
American Express® Marriott Bonvoy Brilliant™ | Hotel | 6x Points on hotels. For eligible purchases at participating Marriott Bonvoy hotels.3x Points on dining at U.S. restaurants, including takeout and delivery.3x Points on flights.2x Points on all other purchases. | 95,000x Bonus Marriott Bonvoy Points after you use your new Card to make $6,000 in purchases within the first 6 months of Card Membership. | $650 | Learn more |
| Hotel | 9x Points for Hyatt stays.2x Points for dining out.2x Points for flights.2x Points for gym memberships.2x Points for getting around.1x Points on all other purchases. | 30,000x Bonus Points after you spend $3,000 on purchases in your first 3 months from account opening.30,000x Bonus Points by earning 2 Bonus Points total per $1 spent in the first 6 months from account opening on purchases that normally earn 1 Bonus Point, on up to $15,000 spent.2x Points per $1 spent on purchases that earn 1 Bonus Point, up to $15,000 spent in the first 6 months of account opening. | $95 | Learn more |
Capital One Venture Rewards Credit Card
If you like to travel then you’ll like the Capital One Venture Rewards Credit Card. You earn 2 miles per dollar spent on all purchases and new cardholders can expect to get an attractive sign-up bonus. There’s no limit to the rewards you can earn and no minimum redemption amount. You’ll have several redemption options to choose from. One mile is worth 1 cent and it’s valid for any travel purchase. Also, you don’t have to commit to particular airlines or hotel brands. All of this comes with a $95 annual cost.
Read more about Capital One Venture Rewards Credit Card
Capital One QuicksilverOne Cash Rewards Credit Card
The Capital One QuicksilverOne is for those with average credit who’d like a taste of excellent credit rewards. The 1.5% unlimited cash back on all purchases is rarely found on cards with this target group. So, it’s certainly worth the $39 annual fee.
Read more about Capital One QuicksilverOne Cash Rewards Credit Card
Citi Double Cash
The 2% cash back rate and the $0 annual fee make Citi Double Cash Card hard to top. You earn 1% cash back when you make a purchase and 1% when you pay for it. Although it lacks some standard rewards card benefits like an introductory 0% APR period for purchases, we believe the generous cash back rate compensates for it. There is no cap to the cash back you can earn.
Read more about Citi Double Cash
American Express Blue Cash Preferred
The outstanding 6% cash back rate on groceries (up to $6,000 per year in purchases at U.S. supermarkets) and streaming services (U.S. streaming subscriptions) make Blue Cash Preferred® Credit Card perfect for family people who often shop at traditional supermarkets. Commuters will appreciate the 3% rate on transit and gas purchases. During the first year, there is a 0% APR period (for 12 months from the date of account opening, then a variable APR, 18.74% - 29.74%) and a $0 intro annual fee. Throw in the welcome bonus and you have a card that stands out from the crowd. Still, there are some minor drawbacks like the $95 annual fee after the first year and the $6,000 cap on grocery rewards.
Read more about American Express Blue Cash Preferred
Chase Freedom Flex℠
The Chase Freedom Flex℠ earns you a generous 5% cash back rate on rotating quarterly categories and travel purchased through Chase Ultimate Rewards. There is also a 3% cash back on dining and drugstore purchases and 1% on all other purchases. It has a nice bonus offer and a 0% APR intro period for the first 15 months (20.49% - 29.24% variable after that). This is great, considering it’s a no-annual-fee card. However, if you go for this card, you’ll have to activate the bonus categories each period. This won’t be much of a stretch, as you’ll get an activation notification.
Read more about Chase Freedom Flex℠
Chase Freedom Unlimited®
If you want a card with no annual fee, but with worthwhile rewards, the Chase Freedom Unlimited® is a great choice. It will earn you a 5% cash back on travel purchases made through Chase, 3% on dining and drugstores, and 1.5% on all other purchases. A 0% APR intro period for the first 15 months (20.49% - 29.24% variable after that) is part of the deal too and new cardholders can get a $200 bonus.
Read more about Chase Freedom Unlimited®
American Express® Gold Card
The American Express® Gold Card Card offers 4 points for every dollar spent at restaurants (worldwide, plus takeout and delivery in the U.S) and U.S. supermarkets (on up to $25,000 in purchases per year) and 3 points per dollar on flights. Along with the $120 dining credit it can be of great value to foodies. However, it should only be considered by those, whose spending on dining and groceries is on the high end. This is because of the hefty $250 annual fee.
Read more about American Express® Gold Card
Chase Sapphire Preferred®
With the Chase Sapphire Preferred® Card, you’ll earn 5x points on travel, 3x points on dining, streaming and grocery. You have several ways to redeem your rewards, but if you redeem them through Chase, they’ll be worth 25% more. There is also a dazzling welcome bonus. You can get all that for a relatively low $95 annual fee.
Read more about Chase Sapphire Preferred®
Chase Sapphire Reserve®
The Chase Sapphire Reserve® is probably the best premium rewards card. That is because of the unmatched combination of the $300 annual travel credit, excellent additional benefits, and its 3X points on travel and dining, which are worth 50% more if redeemed through Chase. If you are a frequent traveler, outweighing the $550 annual fee will be an easy target.
Read more about Chase Sapphire Reserve®
Blue Cash Everyday® Card from American Express
The American Express® Blue Cash Everyday® Card is Blue Cash Preferred® Card’s little brother. It offers a 3% rewards rate on the first $6,000 purchases at U.S. supermarkets, U.S. online stores and 2% at U.S. gas stations and selected department stores. A great choice for the more modest spenders in those categories, who are not fans of annual fees.
Read more about Blue Cash Everyday® Card from American Express
Citi Costco Anywhere Visa®
This is a card for Costco members and it offers them generous cash back rewards in several categories. These include 4% on gas (for the first $7,000 spend), 3% on restaurants and travel, 2% on Costco purchases, and 1% on everything else. There is no annual fee, but the Costco yearly membership costs $60 or $120, depending on the membership type. You get your rewards certificate once a year, in February, which can be redeemed only at Costco, in the same year, by December 31st.
Read more about Citi Costco Anywhere Visa®
American Express® Marriott Bonvoy Brilliant™
The American Express® Marriott Bonvoy Brilliant™ Credit Card is for the elite who enjoy spending their time at the Marriott Bonvoy. This card offers many attractive perks, like a free night for every cardholder’s anniversary year and up to $300 annual statement credits for eligible Marriott purchases. The rewards include 6 points per dollar spent at Marriott and 3 points per dollar at U.S. restaurants, 3 points on flights. All these lux treats come at a $650 annual fee cost.
Read more about American Express® Marriott Bonvoy Brilliant™
Chase World of Hyatt
This is the card for those who frequent the Hyatt Hotels. They’ll love the many premium benefits, which go from an automatic elite status and free anniversary night to high earning rewards and welcome bonuses. These perks make the $95 annual fee negligible. However, in order to get them you’ll have to do all your bookings with the Hyatt.
Read more about Chase World of Hyatt
How do rewards credit cards work?
How does cash back work?
Simply put - with a cash back credit card you get some cash back from every purchase. The cash back rate is given in percentages, for example, if the cash back rate is 1.5%, you get $1.5 for every $100 you spend.
The most straightforward credit cards within this type are the ones with flat-rate cash back on every purchase. There are also cards with tiered rates for several spending categories, and some rotate different categories throughout the year. For example, during the first quarter of the year, you get a higher cash back rate on grocery purchases, during the second quarter it’s applied on entertainment purchases and so on.
As for the categories, they are usually defined according to the merchant category code, which is used to identify the type of business. This is important because it determines the cash back rate you’ll get if your credit card’s program has categories. So, if you buy milk at the gas station this purchase won’t be recognized as a grocery purchase, but as a gas station one. While some cards recognize only gas as a purchase at gas stations (for example PenFed Platinum Rewards Visa Signature® Card) - there is no common rule for this type of spendings so it’s always better to clarify it separately for each card while applying.
When redeeming your rewards, you’ll typically have several options to
choose from. These can include checks, direct deposit, a statement
credit, miles, gift cards, merchandise, or even a donation. With most
credit cards you can redeem your rewards through your account on their
website or app. Some of them allow you to set an automatic redemption at
a specific period of time or when you reach a certain threshold. You
should pay attention to whether and when the rewards expire, so you know
when to use them.
Another type of cash back rewards card is a store card. They usually offer an attractive rewards rate on purchases made at the store, although they might offer rewards for other purchases too. Rewards are typically redeemable at the same store. These cards are targeted for store’s loyalists who are most likely to benefit from them. A great store card is the Costco Anywhere Visa® Card , which besides a 2% cash back for Costco purchases, offers you 3% and 4% cash back in the travel, dining and gas categories.
See our top picks for cash back credit cards.
How do travel rewards work?
Most travel rewards function on a points-based system. Basically, you earn a point (or a mile) for each dollar spent. Depending on what credit card you have, you can also earn extra points on some purchases. You can then use those points or miles to rent a car, purchase flights, hotel stays, cruises, etc.
Travel rewards programs can be general or loyalty (co-branded). With general travel rewards programs, you usually have a wider range of options and a simple rewards system. They’re flexible because you don’t have to commit to a particular airline or a hotel brand.
If your card has a loyalty travel rewards program it means that you’ll earn your rewards by using it at the appropriate partner brands. So, you earn points at a specific airline or a hotel brand and that is where they are redeemable too.
Of course, not all points have the same value, they vary based on the credit card you have. If it’s stated that the card earns you 3x points on travel, that means you get 3 points for each dollar spent. Particular airlines or hotels value the points differently.
Usually, points can be converted into some kind of service. For example,
Delta allows using miles in order to reduce the price of the flight you
book, Hilton Honors program’s points are a convenient instrument for
paying for your Hilton hotel room. It’s almost impossible to find out
the real price of the points, as card issuers don’t indicate it
anywhere. But according to market experts and reliable sources Delta
values one point somewhere between 0.9 - 1.1 cents, and the Hilton Honors
hotels’ program values one point as 0.4 - 0.6 cents. Some credit card
issuers, like American Express, have a points calculator, which can be a
handy tool to help you manage your travel rewards.
There are several ways to redeem your travel rewards. You can transfer your points to your selected airline or hotel. This is usually the case with general-purpose travel rewards. Although they offer you flexibility, in most cases the rewards are not a 1:1 transfer. Instead, if you have 15,000 miles, they might become 10,000 miles once you convert them to a particular airline. While with co-branded, loyalty credit cards you can expect to get the full value of your miles. It’s also simpler to redeem your points or miles, you just need to go to the airline or hotel website, as your credit card is already connected to your loyalty account.
Other redemption options include statement credit or using a travel shopping portal. If you wish to use statement credit just make your travel purchases and then apply your points to them. Some credit cards allow you to use your points by purchasing through their travel shopping portal.
See our top picks for travel rewards credit cards.
Which rewards type is better for you?
First, you need to think about the structure of your spendings (you can even create a spending chart). If you are someone who enjoys fine dining or entertainment, you should look into credit cards that offer higher rates for these categories. If you have a big family so your grocery bills are high and you drive your kids to school every day, a credit card that offers a higher rewards rate for everyday purchases would give you the highest value. While a travel rewards credit card is a good choice for a travel addict.
If you don’t want to bother with keeping up with rotating categories or
you don’t have a favorite one, there are plenty of flat-rate credit
cards you can choose from.
Finally, if you feel like you’ll benefit from different types of rewards cards – just get a bigger wallet to fit them all! Once you’re set on the type of rewards card that suits your needs best, you can start looking into the other features and benefits.
How many credit card rewards points can you earn?
Normally, there isn’t a limit on how many points you can earn with your credit card. However, some of them have a threshold limit for spending in a bonus category.
For example, the Chase Freedom Flex℠
offers a 5% rewards rate on up to $1,500 total purchases in bonus
categories each activated quarter. After you spend $1,500, a 1% cash
back is applied. That means if you reach the threshold amount, every
quarter you’ll earn $75 in cash back, which totals $300 a year. And
that’s without the rewards you’ll earn with the 1% rate.
How to compare rewards credit cards?
The process of choosing the right card is very individual. As it was said before, the starting point is to examine your spending habits. Once you’ve narrowed your choice to a specific rewards category, it’s time to make a comparison of those credit cards based on their other perks. Here’s a guideline on things to take into account when comparing several credit cards:
- Annual fee – This is the cost that cardholders pay to keep their account open. Some credit cards with rewards have no annual fee, some might have a ridiculously high one. So, if a credit card has no annual fee you don’t have to worry whether you’ll earn enough rewards to justify it. If you have to pay an annual fee for a particular credit card, carefully analyze how much you spend yearly and in which categories. Check our top picks for credit cards with no annual fee to know more about them.
- Interest rates – You’ll find that many rewards cards have a promotional 0% APR period. However, after that, the interest rates can be quite high. This means if you’re not careful to pay off your balance on time, debt can quickly pile up and it will offset the rewards you’ve earned. In our blog you can learn how to calculate credit card interest.
- Sign-up bonus – Certain credit cards offer a sign-up bonus. Although some might sound like a sweet deal, make sure you check whether you can achieve the requirement for it, before you commit.
- Card benefits – You’ll encounter standard benefits, like no fraud liability, with almost all credit cards. While some of them have additional top perks, like a concierge service, travel insurance, or extended warranties. Some credit-building credit cards offer incentives for good spending habits. Look into their specific benefits and that’ll help you decide which one will be the most valuable for you.
What are the pros and cons of rewards credit cards?
Rewards cards sound like a great deal, but that doesn’t mean they’re a good fit for everyone. Let’s go through their pros and cons and see why.
Pros
- Rewards – pretty obvious, whether they come in cash back or points, rewards are the greatest benefit these cards offer. You go on with your regular daily spending, as usual, only now it earns you extra rewards that could be potentially worth hundreds of dollars.
- Bonus categories – you can easily find a credit card tailored for your specific needs.
- Additional perks – we’ve already mentioned some in the previous section. A variety of them are offered by different credit cards and they can make your shopping experience much more enjoyable.
- Introductory bonuses – no one would mind getting some extra cash with their new credit card. Still, remember to check the requirements, you don’t get it just by getting the card.
- Better lifestyle – with smart use and carefully following the most lucrative deals your card offers, you can get things that you cannot normally afford.
Cons
- Time-consuming – not everyone has that much time on their hand to research all the credit cards and always be on top with all the deals. To get the most out of a rewards credit card, you need to invest a considerable amount of time into it.
- Higher-than-average APRs – Watch out because rewards cards have a higher APR than other types of credit cards. It’s not a good idea to carry a balance on your rewards credit card.
- Higher credit score needed – rewards credit cards usually require a high credit score. Not that there aren’t some credit-building rewards cards targeted at those with poor credit. It’s just that they rarely pay off since they come with lower credit limits and higher annual fees.
Are rewards credit cards worth it?
Unfortunately, there is no simple answer to this question. When answering it, several factors like spending practices and annual fees, need to be taken into consideration. If you think you’ll likely carry a balance, it’s better to go for a low-interest, no-rewards credit card. Also, after getting it you need to continue to spend as you were before the rewards credit card. Be cautious not to overspend, and remember – it is still money gone.
Now, what about rewards cards with annual fees? Credit cards with the best rewards and benefits are also those with the highest annual fees. To answer this right away: they are worth it if the value of your rewards earnings plus any extra benefits is higher than the annual fee.
We’ll do an example to give you the idea behind this. Let’s take the Chase Sapphire Reserve® Credit Card which has a $550$ annual fee. This
probably seems like a lot, but don’t jump to any conclusions until you
carefully go through our calculations.
First, you automatically get a $300 annual travel credit on account
opening anniversary. According to the Bureau of Labor Statistics if
you’re part of an average U.S. household you spend around $3,000 a year
on dining out. With this card, you earn 3x points on dining out, which
means you can earn 9,000 points. An average domestic trip of 4 days
costs around $581 per person. If you are a family of four that takes
such a trip once a year, you’ll earn 6,072 points. Note that you’ll earn
3X on travel after earning the $300 travel credit (581 x 4 = 2324,
(2324 – 300) x 3 = 6072).
This makes in total 15,072 points earned with the Chase Sapphire Reserve® Credit Card in the travel and dining categories. Your points
are worth 1:1 if you redeem them for statement credit, but they’re worth
50% more if you redeem through Chase Ultimate Rewards. That amounts to
1.5 cents per point, which means your points will be worth $226 you can
use towards travel. Together with the travel credit, it sums to $526 a
year, which is very close to the $550 annual fee.
Take note that we didn’t take into account the rewards earned on other
purchases, nor the 50,000 bonus points you get if you spend $4,000 in
the first three months upon account opening. That’s $750 in travel
rewards through Chase Ultimate. Also, many other premium perks go with
this card. It’s a top card that only high-spending families or
individuals who travel frequently will consider. They will easily offset
the annual fee and will even gain much value from the card.
How to make the most of the rewards credit card?
There are several ways to maximize the rewards from your credit card. If you have a credit card with bonus categories, make certain you are taking advantage of them by following the rotating quarters or reaching the maximum limit. The sign-up bonuses usually have a deadline which is a few months after the account opening, so meet the threshold amount needed to get it.
Do not carry your balance on this card if it has a high APR. Use this one for your rewards and find another one with a lower interest for your debt. Unless your card offers an introductory 0% APR period, in which case it’s okay.
We’ll give you a list of a few more tips with examples on how to make the most out of your rewards credit card:
- Keep up with the offers by your credit card’s partners.
Capital One Bank’s credit cards have usually valued miles as a 1 cent
for 1 mile. However, they have introduced a transferable points program.
This means you can transfer your miles directly to their partners,
which all value the miles differently. One of their most notable
partners is the Emirates, where 1 mile is worth 2 cents. The Capital One Venture Rewards Credit Card has an offer of 60,000 bonus miles if you
spend $3,000 on purchases during the first 3 months upon account
opening. That will earn you a $1,200 ticket if you redeem through the
Emirates Skywards. Also, they occasionally have great transfer bonuses.
- Make your purchases on an online shopping portal.
Online shopping portals enable you to earn miles, points, and other
rewards when you make a purchase through them. A great example here is
the AmEx Offers, available for American Express cardholders. It’s an
excellent program that lets users receive statement credits or bonus
rewards points for purchases at selected retailers. There is a wide
range of industries, including shopping, travel, restaurants, and
others. The list and the offers are changing all the time, but if you
keep up with them you could potentially earn hundreds of dollars in
rewards.
Also, Chase has the Ultimate Rewards travel portal which earns extra points on purchases made through it.
- Use your rewards credit card(s) smart and anytime you can.
Not only you should use your card for every eligible purchase, but you
should also be strategic about it. For example, assume you have two
rewards credit cards, the Citi Double Cash Card and the Blue Cash Preferred® Card from American Express®. The first one effectively earns
you a flat 2% cash back rate on all purchases. While the second one
earns you a high rewards rate of 6% on grocery and streaming services
purchases, 3% on transit and gas, but 1% on everything else. So, you’ll
maximize your rewards by using the Blue Cash Preferred® for grocery,
streaming services, transit, and gas purchases, and the Citi Double Cash Card for all purchases that are outside those categories.
- Carefully go through all the benefits your card offers to not miss out on anything.
For example, many cards, including Capital One Venture Rewards, Chase Sapphire Preferred® Card, Chase Freedom Unlimited®, and Citi Double Cash Card, have concierge services. Concierge service is a very
convenient credit card perk that allows you to get products, services or
information, by contacting the representatives. Some things they can do
for you include ticket purchases, hotel and restaurant reservations,
help with travel planning, and others.
What credit score do you need to get a rewards credit card?
This varies from card to card, as each has its distinct requirements. Commonly a good credit score of at least 670 is required. However, those with a credit score above 740 will probably get the best deals. For top cards like the Chase Sapphire, an excellent credit score of above 720 is usually recommended.
Yet, there are some, like the Milestone® Mastercard® that offer a
2% cash back and target people with bad credit. Some cards targeting
students or young adults, like the Discover it® Student chrome, won’t
require a FICO score for approval.
We’d advise you to check out your credit score before applying and don’t apply for a credit card that is out of your reach. Getting denied won’t hurt your credit, but your application might result in a hard inquiry and that’s what will take away a few credit points.
FAQ
What are other credit cards to consider?
Other rewards credit cards we’d recommend you consider are the U.S. Bank Altitude® Go Visa Signature® Card (great rewards rate on restaurants and grocery purchases for no annual fee), the Bank of America Travel Rewards Credit Card (easily obtainable sign-up bonus) and the Southwest Rapid Rewards® Priority Credit Card (great sign-up bonus).
Who should apply for a rewards card?
If you have a good credit score, meet all your payments when they are due and you’re okay with the terms and conditions of the card, we’d say – go for it! Rewards credit cards are a great way to earn extra cash with, basically, doing nothing. We’re not saying that those with lower credit scores shouldn’t apply, but they should definitely be more careful. They’ll need to take their time to decide which card would be worth it, considering their financial situation. If they decide to apply for a credit card, they should apply for those designed for people with bad credit, like the Discover it® Secured.
Do rewards credit cards build credit?
If you make all your payments on time and keep your balance low, rewards cards can help you improve your credit score.
Will applying for a rewards credit card affect my credit score?
It might have only a little effect on your credit score. Unless you apply for many credit cards, in which case many inquiries may be interpreted as financial struggles.
