When used wisely, credit cards are a great way to get the most out of everyday spending. Rewards credit cards allow you to earn points, miles and cash back when you use your card to make purchases—all of which can add up over time if you use your card regularly.
These cards are a great opportunity to earn rewards on purchases that you would have made anyway, and rewards cards also tend to come with extra perks for travel and more. The best credit cards offer rewards with a high earning potential, competitive rates and few fees. Here’s what we’ll go through so you can take full advantage:
Types of credit card rewards
When it comes to credit card rewards, the most common types include cash back, points and miles.
Cash back credit card rewards are fairly straightforward: you earn a certain percentage of what you spend back in cash. Some cash back cards come with a flat rate (usually somewhere between 1 percent and 2 percent), while others offer cash back in a variety of fixed or rotating categories, such as travel, groceries and gas. Cash back credit cards are some of the most attractive rewards credit cards and are favored both for their simplicity and the promise of rewards in the form of cold, hard cash.
Some credit cards reward purchases with points, which can then be redeemed for travel reservations, online shopping, gift cards, statement credits and more. Like cash back rewards cards, many cards that earn points offer a flat earning rate on all purchases, in addition to bonus rewards in categories like travel and dining. Points are generally worth about 1 cent each but can be worth more or less depending on the specific card issuer and how you redeem them.
Many credit card issuers offer airline mile credit cards, which allow cardholders to earn miles on their purchases. These miles can then be redeemed for discounts on airfare or even the entire cost of a plane ticket. Rewards credit cards that earn miles are a great fit if you travel frequently and are looking to save money on flights.
How to maximize credit card rewards
As long as you use them responsibly, credit cards are a great tool to help you maximize rewards and make the most out of your everyday expenses. Here are our top tips for maximizing credit card rewards and taking advantage of all the benefits that rewards cards have to offer.
Identify your spending habits
In order to select and apply for the best rewards credit card for your situation, you first need to identify your spending habits. Because different credit cards reward different types of spending, you should have a clear understanding of what you spend your money on in order to maximize your earnings.
For example, if you travel frequently, you might want to select a credit card that rewards cardholders with extra points or cash back for travel expenses. If you spend a lot on groceries and gas, you might want to choose a card that has higher earning potential in those categories. If your spending habits are generally mixed and you don’t tend to spend a lot in any one category, a straightforward cash back credit card could be a good fit for you.
Pick a card to use for everyday spending
While some rewards credit cards feature categories in which you can earn bonus points or cash back, many also offer a flat rewards rate across the board in addition to any bonus categories they may offer. This means that you can earn rewards on everyday spending, no matter what you’re purchasing.
It’s a good idea to choose a rewards credit card for your day-to-day spending in order to ensure that you earn rewards for everything you purchase using a credit card. Cash back cards and cards that feature additional rewards for common purchases like gas and groceries are often great fits for everyday cards. They make it easy to earn rewards on everything you buy without having to think too much about which card to use. You can also pair the card you use for everyday spending with additional rewards cards that offer perks in specific categories, like travel or online spending, in order to maximize your rewards.
Claim your sign-up bonus
Many credit cards come with lucrative sign-up bonuses that can earn cardholders hundreds of dollars in rewards if they meet certain requirements after opening a card. In most cases, credit card issuers require cardholders to spend a certain amount of money during the first few months after opening a card in order to be eligible for the sign-up bonus.
In order to make sure you qualify, it’s important to read the terms of the bonus offer carefully and structure your spending accordingly. While you should always practice responsible borrowing and refrain from spending more than you can afford, the end of the qualifying period for the welcome bonus is a great time to make any significant purchases you’ve been saving up for.
Activate your quarterly rotating rewards
If your credit card comes with a quarterly rotating rewards structure, you should pay attention to the bonus category schedule. These can include common spending categories like groceries and gas, as well as more niche categories like wholesale clubs and streaming services. No matter the category, it’s essential you remember to activate the heightened rewards each quarter to maximize rewards.
Depending on your card, you may have some flexibility in choosing categories, or your issuer will assign the schedule themselves. In either case, take advantage of the bonus rewards by using your card on the rotating categories and pay attention to any spending limits on rewards rates.
Take advantage of all your card’s perks
In addition to earning rewards like points, miles or cash back, most rewards credit cards also come with a whole host of additional perks. Travel credit card perks can include benefits like airport lounge access, credits for hotel stays and insurance for lost or delayed luggage. Cardholders can often also take advantage of discounts on Global Entry or TSA PreCheck and insurance covering your trip’s interruption, cancellation or delay.
Many cards come with perks related to shopping and entertainment, including extended warranties on items purchased with your card and discounts and special offers for shopping with certain retailers. Cards also usually come with additional features like fraud protection and purchase protection.
While many cardholders are understandably focused on the earnings potential of rewards credit cards, it’s definitely worth taking other related perks and benefits into consideration when choosing a card. These benefits can often save you money on things you would buy anyway.
Avoid carrying a revolving balance
Putting all of your purchases on a credit card can help you to maximize your rewards, but the earning potential of a rewards credit card is typically negated if you carry a revolving balance from month to month. This is because cards with a revolving balance accumulate interest, which you’ll have to pay off in addition to paying off your existing purchases.
Over time, using a credit card to spend above your means can result in a mountain of debt that is difficult to climb out from under. While many people understandably turn to credit cards when times are tight, we recommend paying off your entire balance each month whenever possible. If you avoid carrying a revolving balance, you can take advantage of credit card rewards and benefits without paying unnecessary interest.
Read the rewards program fine print
Earning rewards with your credit card can be as simple as making purchases in the right category, but oftentimes there are stipulations. Your earnings in a high-rate rewards category may be limited to a certain amount in purchases per year, hindering a card’s value.
You should also be aware of how your credit card issuer defines their bonus categories. Otherwise, you could make purchases that you’d expect to fit your card’s reward structure, but your issuer has ruled them out. For example, even though you can buy groceries at Walmart or Target, many credit cards won’t reward you for those purchases at superstore locations.
In addition to spending caps and rewards categories, there is value in understanding your card’s rewards redemption process. Some issuers, such as Chase, can add extra value to your rewards points when you redeem them a certain way. Some cards have difficult processes for redeeming rewards, or even limits on how much cash back or points you can accumulate at once. Knowing how your spending turns into rewards is important, and an easy-to-understand and flexible redemption structure can go a long way.
Plan large purchases strategically
While it may be a little scary to have a large credit card bill, you’re missing out on immediate savings by not taking advantage of available rewards. To take full advantage of the rewards opportunity before a large purchase, you could strategize ahead of time and sign up for a new credit card. One with a lucrative sign-up bonus that gives generous rewards in your purchase’s spend category offers a lot of value—you could make your high-priced buy, hit the spending requirement of the sign-up bonus and earn cash back, miles or points along the way.
If opening a new card account isn’t in your near future, the lesson is still the same. For any upcoming large purchase, you should be certain that you use a card that gets rewarded in the purchase category. For example, if you carry a card that earns 2 percent cash back and use it to make a $1,000 purchase, you immediately get a $20 discount on your buy. If you’re consistently making purchases in this range, one of the best credit cards for high spenders might be in your best interest.
How to choose the best rewards card
Which rewards credit card is best for you depends on your specific situation, including your spending habits, credit score and personal preferences. Here are some things to consider when choosing a rewards credit card:
- What you spend money on: If there’s a particular category, like travel or groceries, you spend a significant amount in each month, you should consider getting a card that earns extra on purchases in these categories.
- Earnings limits: Some cards place limits on monthly or annual earnings in bonus categories. Read the fine print and estimate how much you’ll actually earn from a card when comparing your options.
- Rates and fees: Consider the rates and fees that come with a rewards credit card before you open an account. While some cards have high annual fees that are offset by the significant earning potential of the card, this isn’t always the case—especially if you’re not a big spender.
- Redemption options: Before you decide on a particular card, be sure you understand how to redeem its rewards. Redemption options vary and can include cash deposits, statement credits, gift cards, travel discounts and more.
- Personal preferences: Maybe you’re determined to squeeze every penny out of a lucrative rewards card, or maybe you prefer the ease and simplicity of a cash back credit card with a flat rate. Which card is best for you often ultimately boils down to a matter of personal preference.
The bottom line
Rewards credit cards can be a great tool to earn rewards on purchases as long as you use them responsibly and don’t borrow more than you can afford. In addition to rewarding you with points, cash back or miles on purchases, rewards credit cards also come with plenty of additional perks when it comes to travel, shopping and more. While the world of rewards credit cards can seem intimidating, these tips can help get you the most value out of your rewards card.