What are the Best Rewards Credit Cards?
Use a rewards credit card to make the most of your spending.
Laura Adams, MBA
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What are the Best Rewards Credit Cards?
Having a rewards credit card in your wallet can be a powerful tool to maximize your spending. But how do you know if you’re getting the most rewards possible? In this post I’ll tell you what the best rewards credit cards are and I’ll give you tips for using them to your advantage.
Why You Should Use Rewards Credit Cards
I’m a huge fan of rewards credits cards. I use one to pay for just about everything from everyday purchases to household bills. When you use a rewards card responsibly and pay off your balance in full and on time each month, you get to take full advantage of the rewards without having to pay any interest charges or late fees. The idea of using rewards credit cards is to get benefits for purchases that you’re going to make anyway—not to buy more than your budget allows or to buy extra stuff just for the rewards. So my advice is not to change your spending habits, just change your payment habits.
How to Get the Most Rewards from Your Credit Card
Want to know the real secret to getting the most out of a rewards credit card? It’s simple; get a card that matches your spending. Where you shop, what you buy, and how much you spend are all factors to consider when you’re choosing a rewards card. The more qualified purchases you rack up, the more cash or points you’ll get back to spend.
On average, you can expect to get a reward that’s about one to two percent of what you charge on a rewards credit card each year. For example, if you spend $1,000 a month, or $12,000 a year, you might get a total reward that’s worth $120 to $240. But it varies depending on the card program, how much you charge, and how savvy you are about redeeming your rewards. It’s really important to clearly understand all the benefits of a rewards program so you can work it!
What Are the Best Rewards Credit Cards?
There’s a huge selection of rewards cards to choose from—especially if you have good credit. You can do a search for the best rewards credit card offers at sites like creditcards.com, bankrate.com, and creditcardguide.com. Here are a few cards that offer the best cash-back rewards right now:
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Chase FreedomSM Card offers 5% cash back for purchases in categories like as gas, home improvement, and department stores, and 1% back on everything else, with no annual fee.
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Discover® More Card offers 5% back for purchases in categories that change each quarter, like travel, home, apparel, gas, restaurants, and movies, and 1% on all other purchases, with no annual fee.
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Blue Cash® American Express Card offers 5% back for purchases in categories like gas, supermarkets, and drugstores, and 1.25% back on everything else after you spend $6,500 in a calendar year. Before you spend $6,500, the reward is up to 1% cash back—so with this card the more you spend the better. It also comes with numerous buyer protection services and has no annual fee.
Here are two cards with great point-based rewards:
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Bank of America® Accelerated Rewards® American Express® Card offers 1.25 points for all purchases. You earn unlimited points for unrestricted travel, gift cards, merchandise, cash back, and more. This card comes with numerous buyer protection services and has no annual fee.
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Chase SapphireSM Card allows you to earn 2 points for airfare and one point for all other purchases. You earn unlimited points that never expire and can be redeemed for travel, gift cards, merchandise, cash back, and more, with no annual fee.
10 Tips to Get the Most Rewards from a Credit Card
To get the most from a rewards card, use the following 10 tips:
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Earn rewards where you spend the most money. Choose a card that will earn rewards at the stores where you shop or for the type of products that you buy frequently, like groceries, gas, or airline tickets.
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Earn rewards for items that you want or need. Cash rewards give you the most flexibility, however, some rewards cards allow you to earn points for a Disney vacation, hotel stays, discount retailers, or concerts, for instance.
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Get a card with no annual fee and the lowest interest rate possible. This will increase the value of your rewards and cost you less if you do have to carry a balance from month to month (but remember that’s not what I recommend). However, paying an annual fee can make sense if you’re a big spender and will earn more than enough rewards to offset the cost.
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Stay alert to rewards expiration dates. If you earn points that have to be redeemed by a certain date, be sure to put a reminder on your calendar so you don’t lose them.
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Limit the number of rewards cards you have. If you earn rewards on just one or two cards it’ll be easier to keep up with their benefits so you can maximize them.
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Read the rewards terms carefully before you apply for a card. There may be restrictions such as limitations on purchase categories, tiered rewards, caps on the amount of rewards, or time limits on when you can earn rewards.
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Consider a card’s additional free benefits. Extra offers like travel insurance, extended product warranties, and other buyer protections may make one card a better deal for you than another.
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Take advantage of bonus programs. Some rewards cards offer discounts or extra points or travel miles when you shop with their merchant partners or through their online shopping malls. Always review the partner offers before you make a big purchase so you don’t miss any discount opportunities.
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Stay up-to-date on program offers. Sign up to receive program e-mail notifications and limited-time offers. Getting the most out of your rewards program will mean spending a little time managing it—but it’s well worth it.
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Find the price of the reward you want. Redeeming points for merchandise or airline tickets may not be the most economical way to make those purchases. Be mindful of the real value of what you’re getting and don’t overpay for something just because you’re spending points (unless they’re about to expire, that is!).
A final quick and dirty tip is that rewards cards may not have the lowest interest rates. So if you carry a balance from month-to-month, use a low interest card instead. Paying an interest rate that’s higher-than-necessary would wipe out the value of your rewards and extend the time it’ll take you to pay off your balance.
For more on credit cards, see my episode about “Taking Charge of Your Credit Cards” and my Quick Tip for getting a credit card with bad credit.
Lastly, a new banking regulation is forcing banks to ask you whether or not you want to opt in for overdraft protection. Get my take on overdraft coverage, and whether or not you should risk the hefty fees, in my Quick Tip on overdraft coverage.
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More Resouces:
Federal Reserve Board Consumer’s Guide to Credit Cards
Credit Card image courtesy of Shutterstock
About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.