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- Rewards credit cards can help you earn points, miles or cash back on your purchases for use toward statement credits, travel bookings and more.
- Rewards cards come in all shapes and sizes, so it's important to assess your spending habits and choose a card tailored toward what you spend the most on (or are looking to earn rewards on).
- If you have more pressing needs, such as paying off credit card debt, for example, you might consider alternative cards that don't offer rewards but feature long intro APR offers.
A rewards credit card is exactly what it sounds like: a credit card that rewards you for your purchases. Used responsibly, a rewards credit card can help you save money on everything from travel bookings to Amazon purchases.
Not everybody knows how to maximize their credit card rewards, however — and not everybody knows what a good rewards card can do for them. How do you earn a sign-up bonus? What types of rewards cards can best suit your needs, and what are the best ways to redeem your rewards? These questions are especially worth investigating if your credit card charges an annual fee.
Are rewards credit cards worth it? In most cases, yes — as long as you’re not carrying a balance on which you will have to pay interest, and the annual fee (if the card charges one) is less than the value of the rewards you earn each year. Here’s what you need to consider when comparing your options.
The pros and cons of rewards credit cards
Is a rewards credit card worth it? It all depends on whether you’re able to use your rewards credit card responsibly — and that includes taking advantage of all of the rewards you earn. Here are some of the biggest benefits and drawbacks.
- You can earn cash back, points or miles on every purchase, and there are a lot of different cards and rewards programs to choose from.
- You can redeem rewards for money-saving opportunities like travel bookings, statement credits and online shopping credits.
- Many rewards credit cards don’t charge an annual fee.
- You may be tempted to spend more than you can afford in order to max out your rewards or sign-up bonuses.
- You must redeem your rewards to save money, and some redemption options give you less value for your rewards.
- The best rewards cards may charge an annual fee or require you to have good or excellent credit.
Should you get a rewards credit card?
Is it time to apply for a rewards credit card? If you don’t already have a good rewards card in your wallet, you may be leaving money on the table — especially if you travel frequently, buy a lot of groceries, pump a lot of gas or make a lot of retail purchases that could have earned you points.
If your budget matches the average household budget, you’re probably spending about $5,700 per year on groceries and a little more than $3,600 a year on restaurants. By applying for one of the best credit cards for groceries, you could earn as much as 6 percent cash back on eligible supermarket purchases — and if you add one of the best credit cards for dining out, you could earn 3 percent to 5 percent cash back on restaurants and takeout.
There are a lot of high-earning rewards credit cards with specialized bonus categories, so take the time to research your options and choose the rewards card that might be best for you. If you have travel expenses in your future, for example, you should definitely consider a travel rewards card.
When should you consider alternatives to rewards credit cards?
While most people will probably want a credit card that offers rewards, it’s worth noting that some non–rewards credit cards have their advantages.
Say you have existing credit card debt. In that case, you might be better off prioritizing a long o percent balance transfer offer over rewards. The Citi® Diamond Preferred® Card doesn’t earn rewards, for example, but it does offer a 0 percent intro APR for 12 months on purchases and 21 months on balance transfers. After that, the variable APR will be 18.24 percent to 28.99 percent, based on your creditworthiness. Balance transfers must be completed within four months of account opening to qualify for the promotional rate.
This makes the Citi Diamond Preferred one of the best balance transfer credit cards on the market — and a much better money-saver (for someone with credit card debt) than a cash back card.
The bottom line
Though credit card rewards have their pros and cons, applying for a credit card that offers rewards is generally better than applying for a card that doesn’t. If you aren’t maximizing your credit card rewards, you’re missing out on money you can put toward travel bookings, statement credits and more.