What is a rewards credit card?

Rewards credit cards help you maximize your purchases with cash back, points or miles.

Depending on the card you choose, you can earn a return on everything you buy or at different rates in certain bonus categories. These cards can also differ in terms of redemption options and the value you get from the rewards you earn.

Here’s what to know about rewards cards so you can start saving on your most frequent expenses

Learn more about the high-income rewards credit cards you may qualify for today

Types of Credit Card Rewards

There are usually three types of rewards you can earn with credit cards: cash back, points, or miles. Your most frequent spending categories and the redemptions you’re looking for can help you decide which one is best for you.

Cash Back Rewards

one with cash back Rewards credit card, you get a percentage of your spending back on qualifying purchases. Some cash back rewards cards offer a flat rate of cash back on every purchase. For example, you can get 2% back on all your spending with no limit. Others offer different cash back rates (up to 3%, 5% or even 6%) on different spending categories. Common cash back bonus categories include groceries, gas stations, restaurants and more — making cash back rewards cards great for everyday spending.

Points awarded

A point-earning rewards credit card works just like cash back. Every time you make a qualifying purchase, you’ll earn a certain amount of reward points. If you have a rewards card that earns 4X points per dollar spent at restaurants and you spend $30 dining out, for example, you can earn 120 points on that meal alone.

Points are fundamentally different from cash back in their redemption value. While a good baseline redemption is 1 cent per point, rewards programs often have more lucrative options that can help you maximize the points you earn. Common options for redeeming point rewards include statement credits, gift cards, travel, transfers to partner airlines or hotels, and more.

Miles Award

Rewards credit cards that earn miles are usually noticed traveling. As with other rewards cards, you’ll earn a certain number of miles for every dollar you spend in eligible bonus categories.

Points and Miles rewards cards may be co-branded with a travel company (often an airline or hotel chain). If you prefer to fly with a specific airline, like Delta Air Lines, a co-branded Delta card can help you earn rewards with Delta’s SkyMiles loyalty program. Other rewards cards earn points or miles toward more flexible rewards programs, like Chase Ultimate Rewards or American Express Membership Rewards, which let you split rewards for travel with several brands or transfer them to different travel partners.

Compare rewards cards you may qualify for now to find the right card and rewards type for your spending

How to use a rewards credit card

To start, make sure your rewards card’s bonus categories align with where and how you spend the most.

If you spend a lot of money at the supermarket and primarily cook at home, a card with grocery rewards will give you much more value over time than higher rewards at restaurants. Or, if you live in a city and take public transportation often, you might not get much use out of a card with great rewards at gas stations.

You’ll also want to consider how much effort you want to put into maximizing your redemption. Cash back rewards credit cards may be the most straightforward type to use and redeem. Points and miles can offer more reward value, though — especially if you travel a lot. But they also need to do some research to choose the best redemption.

Finally, rewards credit cards only add value to your spending if you use them responsibly. Credit card interest rates far outweigh the cash back or points value you’ll get with even the best rewards cards, so carry a balance The rewards you earn can quickly negate. Use your rewards credit card like a debit card — you know how much you can pay when your monthly statement is due.

Bottom line

A rewards credit card can help you save on your most common purchases. Choosing the right rewards card — the combination of earning categories and rewards that best fits your spending habits — can be a great way to put some money back in your wallet in the long run.

Before you choose a rewards card, compare your spending to the rewards offered and make sure you have a plan to pay off your purchases in full each month. Get started by exploring rewards cards you may qualify for today

The views expressed herein are solely those of the author and not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, endorsed or otherwise approved by any entity included in the post.