Are rewards credit cards worth it?

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Most major credit cards offer rewards—but are rewards credit cards worth it? In most cases, yes. When used responsibly, a rewards credit card can help you save money on everything from travel bookings to Amazon purchases. However, not everybody knows how to maximize their credit card rewards—and not everybody knows what a good rewards card can do for them.

What is a rewards credit card? How do credit card rewards work? Are credit card rewards worth it? Let’s take a close look at how rewards cards work, the difference between cash back and points cards and credit card rewards pros and cons. We’ll also show you how to choose the best rewards credit card for your financial needs.

What is a rewards credit card?

What is a rewards credit card? A rewards credit card is exactly what it sounds like—a credit card that rewards you when you use the card to make purchases.

There are two basic kinds of credit card rewards: cash back rewards and point-based rewards.

Cash back rewards cards

Cash back cards offer a percentage of cash back on every purchase. While some credit cards offer a flat cash back percentage on every purchase, other cards reward cardholders with higher cash back percentages when they spend in certain categories.

The Capital One Quicksilver Cash Rewards Credit Card, for example, is a flat-rate cash back card that offers 1.5 percent cash back on every purchase.

The Blue Cash Preferred® Card from American Express, on the other hand, offers 6 percent cash back on U.S. supermarket purchases (for up to $6,000 in purchases per year, then 1 percent) as well as 6 percent back on select U.S. streaming subscriptions, 3 percent cash back on transit, 3 percent back on U.S. gas station purchases and 1 percent back on all other purchases. This makes the Blue Cash Preferred Card one of the best credit cards for grocery shopping—and an excellent card for people who use a lot of streaming services.

Point-based rewards cards

Point-based rewards cards offer a certain number of points (or miles) on every purchase. These points are generally tied to the dollar amount you spend—one point per dollar, for example—and many point-based rewards cards increase your rewards when you spend in certain categories.

The Capital One Venture Rewards Credit Card, for example, is a flat-rate points card that offers 2 miles per dollar on every purchase.

The Chase Sapphire Preferred® Card, on the other hand, offers 2X points on dining (including eligible delivery services) and travel, with 1X points on all other purchases—plus, cardholders can earn 5X points on Lyft rides through March 2022 and 10X points on up to $500 of takeout orders and prepaid reservations via Chase Dining in the Ultimate Rewards portal through Jun. 30, 2021.

As you can see, points cards can occasionally be more complicated (in terms of their rewards structure) than cash back cards. However, both points and cash back cards offer plenty of opportunities to earn rewards—and once you have those credit card rewards in your account, you can redeem them for travel, Amazon purchases, statement credits and more.

How do credit card rewards work?

How do credit card rewards work? Rewards credit cards give cardholders the opportunity to earn rewards—generally in the form of cash back, points or miles—on every purchase. These credit card rewards can then be redeemed for money-saving opportunities, including:

  • Travel bookings: Save money on flights and hotels, or earn enough rewards for a free flight
  • Statement credits: Reduce the amount of money you owe on your credit card
  • Online shopping credits: Reduce the amount you pay at checkout when you shop with popular online retailers

You can also redeem your credit card rewards for gift cards, charitable donations and—in some cases—paper checks.

If you want to maximize your credit card rewards, try to earn as many rewards as possible on every purchase. Then make sure you redeem those rewards for the highest value possible. Believe it or not, many people forget to redeem the credit card rewards they’ve earned—so make sure you know exactly how many rewards you’ve earned and have a plan for how you’re going to use them.

How to maximize your credit card rewards

  • Pick a flat-rate rewards card that offers the same amount of cash back or points/miles on every purchase
  • Add a bonus category rewards credit card that offers a high percentage of cash back or points/miles on the purchases you make most often
  • Use the bonus category card when making purchases that earn higher-level rewards; use the flat-rate rewards card on all other purchases
  • Take advantage of credit card sign-up bonuses, which offer significant rewards (often worth hundreds of dollars) if you make a certain amount of purchases within a specific time frame
  • Understand which rewards redemption options are the most valuable; if you have a travel credit card, for example, your rewards are often worth more when you use them to book travel through your credit card issuer’s online booking portal
  • Understand which rewards redemption options are the least valuable; exchanging your rewards for gift cards is generally a lower-value option, compared to travel purchases, statement credits or online shopping credits
  • When you choose your rewards credit cards, consider cards that use the same redemption system (Chase Ultimate Rewards, American Express Membership Rewards, Citi ThankYou Points) so that you can combine the rewards you earn on multiple credit cards and use them for bigger purchases or redemption options
  • If your credit card issuer allows you to pool your rewards with a spouse or family member, make sure everyone in your household has a credit card that can earn rewards within that issuer’s redemption system

What are 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 credit card rewards pros and cons:

Credit card rewards pros

  • Earn cash back, points or miles on every purchase
  • Redeem those rewards for money-saving opportunities like travel bookings, statement credits and online shopping credits
  • Maximize your credit card rewards by choosing cards that offer bonus cash back, points or miles in the shopping categories where you spend the most money

Credit card rewards cons

  • May be tempted to spend more than you can afford in order to max out your rewards or sign-up bonuses
  • Must redeem your rewards to save money
  • Some redemption options give you less value for your rewards

Should you get a rewards credit card?

If you’re going to get a credit card—which is a smart move, since taking out a credit card can help you build good credit and receive better terms on other financial products like mortgages—it’s a good idea to apply for a rewards credit card.

Why? Because when it comes down to the choice between a credit card that offers rewards and a credit card that doesn’t offer rewards, choosing a credit card that doesn’t come with rewards is like leaving money on the table.

Yes, some non-rewards credit cards have their advantages. The Citi® Diamond Preferred® Card, for example, doesn’t offer rewards on purchases—but it does offer 18 months of 0 percent intro APR on purchases and balance transfers (followed by 13.74 percent to 23.74 percent variable APR thereafter). If you want to use a balance transfer credit card to pay off debt, the Citi Diamond Preferred Card might be a good option.

Likewise, most secured credit cards don’t offer rewards—but they can be excellent tools to help you rebuild your credit.

That said, it’s worth applying for a rewards credit card whenever possible. Start with our list of the best rewards credit cards, or consider one of these top picks:

Capital One Quicksilver Cash Rewards Credit Card: Best for flat-rate cash back

  • Unlimited 1.5 percent cash back on all purchases
  • $200 cash bonus after spending $500 on purchases within the first three months
  • $0 annual fee
  • 0 percent intro APR for 15 months on purchases, then 15.49 percent to 25.49 percent variable APR

Blue Cash Preferred® Card from American Express: Best for everyday family purchases

  • Earn 20% back on Amazon.com purchases on the Card within the first 6 months of Card Membership, up to $200 back. Plus, earn $150 back after you spend $3,000 in purchases on the Card within the first 6 months of Card Membership. You will receive cash back in the form of statement credits.
  • 6 percent cash back on U.S. supermarket purchases (up to $6,000 in purchases per year, then 1 percent); 6 percent back on select U.S. streaming subscriptions ; 3 percent cash back on transit; 3 percent back on U.S. gas station purchases; 1 percent back on all other purchases
  • $0 annual fee for one year, then $95
  • 0 percent intro APR for 12 months on purchases, then 13.99 percent to 23.99 percent variable APR

Citi Premier® Card: Best for travel rewards on everyday purchases

  • 3X points per dollar on restaurant, supermarket, gas station, hotel and air travel purchases; 1X points per dollar on all other purchases
  • 80,000 points after spending $4,000 in purchases within first three months
  • $95 annual fee
  • 15.99 percent to 23.99 percent variable APR

Discover it® Cash Back: Best for rotating cash back rewards

  • 5 percent cash back after activation on rotating categories each quarter (up to $1,500 in purchases, then 1 percent), 1 percent for all other purchases
  • Automatic Cashback Match for the first year
  • $0 annual fee
  • 0 percent intro APR for 14 months on purchases and balance transfers, then 11.99 percent to 22.99 percent variable APR

The bottom line

Are credit card rewards worth it? In most cases, yes. 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 offer rewards—because if you aren’t earning rewards on every purchase you make, you’re losing the opportunity to redeem those rewards for travel bookings, statement credits and more.