The use of credit cards is very common among most peoples because of the credit convenience it provides, as well as instant access to “cash” when needed. But not all credit cards are created equal. There are so many credit card companies offering their products and the variety makes it quite challenging to choose. But one of the considerable factors most users find relevant in making their selection is the credit card rewards.

What Are Credit Card Rewards and How Do They Work?

Credit card rewards programs are designed by card companies to provide incentives to your continued use of their card, encourage you to keep on using their card, and promote or lure more people to apply for their card. The reward scheme varies from card to card; some have built-in programs that you can instantly benefit from once you start using the card, and some are created during special marketing events. Generally speaking, credit card rewards are structured in 2 ways — Flat and Tiered. In the flat rewards structure, you earn a fixed reward that is usually a percentage figure on every dollar that you spend on your credit card purchase. Most cards have flat rewards of 2%. In the tiered structure, you earn rewards in different amounts and levels based on different purchase categories such as dining, travel, and special promotional sales, among others.

What are the 3 main Categories of Credit Card Rewards?

Credit card rewards generally fall into three main categories: Cash, points, and travel.

Cash Rewards

These are the most common and straightforward types of rewards.  A lot of credit card users prefer this type because of its flexibility. Some card programs allow you to redeem your rewards as actual cash that you can use how you want or credit the cash equivalent in your account. Other redemption options also include gift cards or discount cards with your card issuer’s merchant partners. 

Points Rewards

These are earned as points for every dollar spent on your card. Your accumulated points have corresponding rewards in the form of cash credits, gift cards, actual products, or even travel funds. 

Travel Rewards

These are most convenient for those who frequently travel as their continuous card spending earns them miles for airline tickets.  best credit cards to have

Cashback, Points, and Travel Rewards: Which is Better?

It would be painstaking to choose credit cards on the basis of their rewards programs alone. It is because all rewards programs are excellent come-ons that make you think you’ll be using all your earned rewards at some point.  The best way to determine which type of rewards is best for you is that you need to determine what is practical based on what your current lifestyle needs. Likewise, if a specific type of reward appeals to you, know how you will use them once redeemed. Here’s a short rundown of the pros and cons of each type of reward to help you better decide which one is best for you.

Cashback Rewards

What most users of cashback rewards cards love about them is its straightforward convenience. Most cards with cashback rewards do not charge an annual fee. And because the cash value of rewards is credited to your account, it gives you the ultimate flexibility on how to best use it. Cashback rewards cards, however, have limited travel perks — you can’t even transfer points to airline or hotel partners. As for earning rewards, it comes with a cap that limits just how much you can earn in a given year. They also don’t come with exciting sign-up bonuses. 

Points Rewards

Some card users find points rewards to be more flexible because the redemption comes with a variety of options that they can use for travel, merchandise purchase, and even cash credits. The points transfer option across all hotel and airline partners gives you added convenience when booking for travel. The cons include charging annual fees and generally complicated terms on points redemption, especially when you opt for the points transfer.

Travel Rewards credit cards with rewards

If traveling is a natural part of the way you work or how you live, then travel rewards will prove highly beneficial for you. The program is designed to enhance your travel experience along with the attractive perks from a long list of travel merchant partners. Users of this type of reward card also enjoy zero foreign transaction fees. However, travel rewards cards tend to have the highest annual fees. But they often waive the first year’s annual fee to give you some time to see if you’ll use the card enough to keep it long term. 

Are Credit Card Rewards Worth It?

Rewards on credit cards typically come with higher costs of keeping it, such as higher annual fees and interest rates. Likewise, the stipulations for earning the rewards often come with restrictions, making it impractical to keep up with. What you want to avoid is spending more money than you need to earn more points. When you carry a balance, it builds up fast because of interest charges. You just might as well pay for the rewards you are eyeing on, and with cash. Here are four situations that tell credit card rewards are worth it.
  • You pay off your balance each month.
  • You stay within the limits of your regular spending plan.
  • You use a credit card with no or reasonably low annual fees.
  • You understand how the rewards program works at the onset.

What are the Best Credit Cards for Rewards?

Here is a shortlist of the 10 best rewards credit cards of 2020 that are good to consider. 
Card Rewards Rate Annual Fee / APR

Discover it® Cash Back

 
Earn 5% cashback on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations, and when you pay using PayPal, up to the quarterly maximum when you activate.  Earn 1% unlimited cash back on all other purchases – automatically.  Intro Bonus Cashback Match™ Annual Fee: $0 Regular APR: 11.99% – 22.99% variable  

Blue Cash Preferred® Card from American Express

 
6% Cash Back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%)  6% Cash Back on select U.S. streaming subscriptions  3% Cash Back on transit including taxis/rideshare, parking, tolls, trains, buses and more  3% Cash Back at U.S. gas stations  1% Cash Back on other purchases  Intro Bonus: $250  Annual Fee: $95 Regular APR: 13.99% – 23.99% variable  

Southwest Rapid Rewards® Plus Credit Card

 
2 points per $1 spent on Southwest® purchases and Rapid Rewards® hotel and car rental partner purchases.  1 point per $1 spent on all other purchases.  Intro Bonus 40,000 points  Annual Fee: $69  Regular APR: 15.99% – 22.99% variable  

Marriott Bonvoy Bold™ Credit Card

 
Earn 3X Bonvoy points per $1 spent at over 7,000 hotels participating in Marriott Bonvoy™.  2X Bonvoy points for every $1 spent on other travel purchases (from airfare to taxis and trains).  1X point for every $1 spent on all other purchases.  Intro Bonus 30,000 Points  Annual Fee: $0 Regular APR: 15.99% – 22.99% variable  

Blue Cash Everyday® Card from American Express

 
3% Cash Back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%).  2% Cash Back at U.S. gas stations and at select U.S. department stores.  1% back on other purchases  Intro Bonus $150  Annual Fee: $0 Regular APR: 13.99% – 23.99% variable  

American Express® Green Card

 
Earn 3X Membership Rewards® Points on Restaurants worldwide, including takeout and delivery.  Earn 3X Membership Rewards® points on all eligible travel, from subway swipes and window seats to hotel stays and city tours.  Intro Bonus 30,000 points  Annual Fee: $150 Regular APR: See Rates & Fees

Citi Rewards+ Card

 
Earn 2X ThankYou® Points at Supermarkets and Gas Stations for the first $6,000 per year and then 1X Points thereafter.  Earn 1X Points on All Other Purchases.  Intro Bonus 15,000 points  Annual Fee: $0 Regular APR: 13.49% – 23.49% (Variable)  

American Express Cash Magnet® Card

 

Unlimited 1.5% Cash Back on your purchases.  Intro Bonus $150  Annual Fee: $0 Regular APR: 13.99% – 23.99% variable  

Discover it® Miles

 

Earn unlimited 1.5x Miles for every dollar spent on all purchases – with no annual fee.  Intro Bonus Discover Match® Annual Fee: $0 Regular APR: 11.99% – 22.99% variable

American Express® Gold Card

 

Earn 4X Membership Rewards® Points on Restaurants worldwide, including takeout and delivery.  Earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).  Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.  Intro Bonus 35,000 points Annual Fee $250 Regular APR See Rates & Fees  
  You must exercise caution in appropriately selecting the best credit card rewards for your credit needs. The rewards are practical and worth it only when you do not spend extra money for it by raising your spending habits on your cards. If you keep on chasing rewards and bonuses, you may end up with a card balance that you can’t afford to pay.

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