Credit Card Rewards Programs – Best of the Best
According to the 2015 Credit Card Rewards Report from CardHub.com, Americans are leaving roughly $4 billion dollars in credit card rewards on the table every year. Although excuses vary, the main reason people fail to maximize rewards is because they don’t understand the process. Others, on the other hand, understand the process perfectly yet don’t want to invest the time or effort.
Although that’s understandable, it’s important for consumers to realize what they’re giving up. In many cases, the sign-up bonus from a rewards credit card can be worth up to $400 or more on its own. Of course, not rewards programs are created equal, which is part of the reason it an be so confusing to begin with.
This post aims to clear up some of the mystery surrounding rewards credit cards while providing actionable advice for anyone who wants to find the perfect card for their own wallet.
Featured Rewards Credit Cards
Only a year or two ago credit card companies were throwing cash at people to obtain their business. Excellent rewards programs and sign up bonuses were easy to find. Unfortunately, the credit card industry was hit hard by the current financial crisis and credit card companies have scaled back their rewards and bonus programs.
Different Kinds of Rewards Credit Cards
Remember how we said that not all rewards cards are created equal? Part of the reason for that is the fact that each category or “type” of card offers a different rewards currency. Furthermore, how you much value you get out of your points depends heavily on how you redeem them.
There is a credit card for just about everyone out there, but it is impossible to list each of them on this site. The cards on this page are for people who are responsible credit cards users and are looking to take advantage of rewards points and cash back bonuses. Depending on your credit card usage, you may benefit most from a cash back card, a points rewards card, or a travel rewards credit card.
The following chart illustrates how each type of card works:
|Type of Rewards Credit Card||Type of Rewards Earned||How to Redeem Them|
|Airline Credit Cards||Earn airline miles (also called frequent flyer miles) based on your everyday spending||Redeem your miles for domestic or international flights, seat upgrades, other types of travel, or merchandise|
|Hotel Credit Cards||Earn hotel loyalty points or free hotel stays for your everyday spending||Redeem for free nights, room upgrades, and more.|
|Cash-Back Credit Cards||Earn cash-back as a percentage of your everyday spending||Redeem your points for statement credits, cash in the mail, gift cards, or merchandise|
|Flexible Rewards Cards||Earn points you can redeem for travel, gift cards, or merchandise||Redeem your points directly for travel, or for cash-back, merchandise, or gift cards. You can also transfer points out to participating hotel and airline loyalty programs|
|Fixed-Value Travel Rewards Cards||Earn points you can redeem for travel purchases as a percentage of your everyday spending||Redeem your points for travel through the use of fixed-value statement credits|
As you’ll notice, all rewards cards offer a distinct “currency” that is unique to their program or brand. In almost every case, the points you earn with any rewards card are based on a percentage of your spending. Although earning 5 points per $1 spent isn’t unheard of, most rewards credit cards offer between 1-2%.
With that being said, the cards with the biggest bang for your buck are travel rewards cards – airline cards, hotel cards, fixed-value travel cards, and flexible rewards cards. By redeeming your points for pricey hotel stays or flights, you can almost always extract the most value from them. The reason behind this is the fact that travel with hotels and airlines is usually based on a formula, not on how much a hotel stay or flight is actually worth.
But, what if you don’t want to travel? If that’s the case, you’ll do much better with a flexible rewards card or cash-back card that will let you redeem points for statement credits you can use to cover everything thing from bills to everyday purchases.
How to Find the Best Credit Cards
The best credit cards can be difficult to find if you don’t know what to look for. The first thing you want to look at when comparing credit card offers is to look at all the associated interest rates, fees, and other applicable charges. These should be spelled out clearly in the Schumer Box (example below), which is required to be disclosed by all credit card companies. Example:
Look beyond the Schumer Box. The Schumer Box only displays fees, but it does not disclose rewards programs and other benefits. For this you will need to search through the terms and conditions. In addition to the rewards, you want to consider other factors such as low introductory interest rates, 0% balance transfers, 0% interest credit cards, credit card sign up bonuses, and benefits.
How to Select a Rewards Credit Card
Since rewards credit cards can sometimes have little in common, it’s important to compare all of your options to see how they stack up. Since you can’t always compare apples-to-apples, consider these tips instead:
If you don’t want to be tied down…
If you’re not sure how you want to redeem your points in the future, it makes sense to get a flexible rewards card that offers as many options as possible. By getting a card in the Chase Ultimate Rewards family, for example, you can earn points that are redeemable for travel, cash-back, merchandise, or gift cards.
If you want to earn rewards specific to an airline or hotel chain, look for a co-branded credit card…
Credit cards that are co-branded with an airline or hotel loyalty program will allow you to earn points that are redeemable with that brand. If you are loyal to a specific chain, getting a card associated with that brand is usually your best bet.
If your average spending is low…
If you don’t spend a lot of money on credit, the rewards you rack up may not amount to much. When that’s the case, you’ll almost always be better off finding a cash-back rewards card that doesn’t charge an annual fee.
If you want to keep your costs low…
Although rewards credit cards are meant to provide value, there are costs associated with having one. Some cards charge an annual fee and all rewards cards charge higher interest rates than typical credit cards. If you want to keep costs low, choose a card with a reasonable annual fee and always pay your balance in full each month.
What to Look For in a Rewards Credit Card
No matter what you decide, it’s still important to find the best card within your desired category. As you begin your search, you should also look for cards that offer at least a few of these perks:
- A Sign-Up Bonus – Many rewards cards offer a sign-up bonus to customers who are able to meet a minimum spending requirement within a certain length of time, usually around 3 months.
- No Foreign Transaction Fees – The best travel credit cards don’t charge an extra fee when you make transactions overseas.
- Plenty of Redemption Options – Although many people find value in airline and hotel-specific rewards cards, it’s best to choose a card that will allow you to redeem your points in more than one way.
- Other Perks – Many of the best rewards credit cards offer “extras” such as trip cancellation/trip interruption insurance, extended warranties, and fraud protection.
Rewards credit cards come in all shapes and sizes. While some focus on offering cash back as a percentage of your spending, others come up with creative rewards programs that can be useful if you travel frequently or want to be able to redeem your points in a number of ways.
Other Credit Card Rewards Programs
There are other credit card rewards programs in addition to the cards listed above. Some of the best credit card offers aren’t heavily publicized and may be run through individual banks, credit unions, etc. It can be difficult to track down each offer, so check with your bank or credit union about their offers. Some of these offers may include a rewards system that works toward reducing your mortgage, saving money for college, such as a credit card sponsored by Upromise, or balance transfer credit cards to help you reduce your debt more quickly.
No matter what, the key to getting the most out of these offers is learning to maximize their benefits. Once you master that skill, you’ll be on your way to hundreds – or even thousands – of dollars in rewards over time.
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*Note: Credit card terms and conditions change frequently. These terms were correct as of the date of publication and we do our best to keep them current. Please read the application thoroughly before you apply for a credit card.