Rewards credit cards allow consumers to earn valuable points, miles, or cash back on their spending. When used strategically, these cards can help travelers take free or discounted trips and maximize savings on everyday purchases. This comprehensive guide examines the best rewards credit cards landscape, strategies for maximizing earnings, and the best cards for travel and cash back.
The Different Types of Rewards Credit Cards
There are three main types of rewards credit cards:
Travel Rewards Cards
These cards earn users points or miles that can be redeemed for travel purchases like flights and hotel stays. Most travel cards are affiliated with an airline or hotel loyalty program. Examples include the Chase Sapphire Preferred and Capital One Venture cards.
Cash Back Cards
Cash back cards offer a certain percentage of cash back on purchases. Some provide flat-rate rewards, while others have bonus categories like groceries or dining for extra earnings. Popular cash back cards include the Citi Double Cash and Chase Freedom Flex.
Hybrid Cards
Hybrid cards combine the benefits of travel rewards and cash back cards. They earn flexible points that can be redeemed for travel or cash. Examples are the Wells Fargo Autograph and Bank of America Premium Rewards cards.
READ ALSO: The Best Airline and Travel Credit Cards for Miles in 2024
6 Strategies for Maximizing Rewards Card Earnings
Follow these tips to get the most value from your rewards credit cards:
1. Know Your Spending Habits
Analyze your monthly expenses to see where you spend the most. Then choose a card that aligns with your habits and offers the best rewards rate in those categories. If you spend heavily on groceries and gas, find a card with bonus earning potential there. Frequent travelers should look for a card that rewards flights and hotels.
2. Use the Right Card for Each Purchase
Once you have cards that match your spending profile, optimize by using the one that earns the highest rewards rate for each transaction. Track bonus categories and remember which card to use for groceries versus dining out, for example.
3. Meet Sign-Up Bonus Requirements
Most rewards cards offer lucrative sign-up bonuses for meeting minimum spend requirements within the first few months. These bonuses effectively boost your rewards earnings during the intro period. Make sure to spend enough to qualify.
4. Take Advantage of Additional Perks
Besides earning points or cash back, rewards cards offer statement credits, travel protections, shopping discounts, and other money-saving perks. Review your card benefits guide to maximize these extra savings.
5. Redeem Strategically
Points and miles are generally worth more when transferred to travel partners versus redeemed for cash back or gift cards. Cash in your rewards for maximum value when you have enough for a specific redemption goal.
6. Pay Your Balance in Full Each Month
To keep rewards earnings high, avoid interest charges by paying your bill on time and in full each month. Carrying a balance can negate the value of rewards through finance charges.
The Best Rewards Cards for Travel in 2023
Here are some top-rated travel rewards cards for 2023:
Chase Sapphire Preferred
The Chase Sapphire Preferred is one of the most popular travel cards. It earns 5x points on travel purchased through Chase Ultimate Rewards and 3x points on dining, streaming services, and online groceries. Points can be transferred to airline and hotel partners or redeemed for 25% more value when booking travel through Chase. There is a $95 annual fee.
Capital One Venture Rewards
The Capital One Venture Rewards card offers a strong 2x miles on all purchases with no foreign transaction fees. New cardholders can earn 75,000 bonus miles after spending $4,000 in the first 3 months. Miles can be redeemed as a statement credit against any travel purchase. The annual fee is $95.
Bank of America Premium Rewards
With the Bank of America Premium Rewards card, users earn unlimited 2 points per $1 on travel and dining and 1.5 points per $1 on other purchases. Points are worth 25-50% more when redeemed for travel through Bank of America. New applicants can earn 50,000 bonus points after spending $3,000 in the first 90 days. There is a $95 annual fee.
Hilton Honors American Express Surpass
This Hilton co-branded card lets you earn 12x points at Hilton properties, 6x points at U.S. restaurants, gas stations, and groceries, and 3x points on other purchases. There is a $95 annual fee but perks like complimentary Gold Elite status somewhat offset the cost for frequent Hilton guests.
United Explorer Card
For United Airlines flyers, the United Explorer card offers a free checked bag, priority boarding, 2x miles on United purchases, dining, gas, and select streaming services, and 25% back on in-flight United purchases. New cardholders can earn 60,000 bonus miles after spending $3,000 in 3 months. The annual fee is $0 intro for the first year, then $95.
The Best Cash Back Credit Cards for 2023
Cash back cards make it easy to earn rewards you can redeem as statement credits or direct deposits to your bank account. Here are some top options:
Citi Double Cash
This straightforward cash back card from Citi pays 2% back on all purchases – 1% when you make a purchase and 1% when you pay it off. There is no annual fee. For big spenders, the Citi Double Cash offers a hefty sign-up bonus: $200 cash back after spending $1,500 in the first 6 months.
Chase Freedom Unlimited
The Chase Freedom Unlimited earns 1.5% cash back on every purchase without any bonus categories to track. New cardholders can earn $200 bonus cash after spending $500 within 3 months of account opening. There is no annual fee.
Blue Cash Preferred Card from American Express
One of the highest-earning cash back cards, the Blue Cash Preferred offers 6% back at U.S. supermarkets on up to $6,000 per year (1% after), 3% back on U.S. gas stations and transit, and 1% back on other purchases. There is a $95 annual fee. New cardholders can earn a $250 statement credit after spending $3,000 in the first 6 months.
Wells Fargo Active Cash Card
For flat-rate cash rewards on everything, it’s hard to beat the Wells Fargo Active Cash Card. Cardholders earn unlimited 2% cash rewards on purchases with no annual fee. New applicants also receive a $200 cash rewards bonus after spending $1,000 in the first 3 months.
Capital One SavorOne Cash Rewards
The Capital One SavorOne card earns generous rewards on dining, groceries, and entertainment with 3% cash back in those categories. All other purchases earn 1% back. There are no foreign transaction fees and the annual fee is waived the first year then $95.
The Best Hybrid Travel and Cash Back Cards
Hybrid cards allow users to redeem rewards for travel or cash back. Here are some top options:
Citi Premier Card
The Citi Premier grants 3x points on travel, gas stations, restaurants, supermarkets, and entertainment. All other spending earns 1 point per dollar. Points can be redeemed for travel through Citi or as cash. There is a $95 annual fee and 60,000 point sign-up bonus after spending $4,000 in the first 3 months.
Capital One VentureOne Rewards
VentureOne from Capital One earns 1.25x miles on every purchase. Miles can be redeemed for travel statement credits or as cash back. New cardholders can earn 20,000 bonus miles, equal to $200 in travel, after spending $500 within 3 months of account opening. There is no annual fee.
U.S. Bank Altitude Connect
The Altitude Connect Visa earns 4x points on travel and at gas stations, 2x points on streaming services and groceries, and 1x point per dollar elsewhere. Points can be redeemed for travel, gift cards, cash back, and more. New applicants earn 50,000 bonus points worth $500 in travel after spending $2,000 within 120 days.
Navy Federal Rewards Visa Signature Card
With no annual fee, the Navy Federal Rewards Visa offers 3x points on travel, 2x points at gas stations, and 1x point on other purchases. Points can be redeemed for travel via Navy Federal’s rewards center, merchandise, cash, and more. New accounts receive 50,000 bonus points after spending $3,000 within 90 days.
PenFed Pathfinder Rewards Visa
The PenFed Pathfinder Rewards card provides 4x points on travel and gas, 3x points on dining and groceries, and 1x point everywhere else. Points are worth 1 cent each when redeemed for travel. There is a $100 annual fee that is waived the first year for new cardholders.
To Recap
Rewards credit cards offer ample opportunities to earn points, miles, and cash back on your daily spending. Travel cards help users earn free flights and hotel rooms, while cash back cards effectively give money back on all purchases. With the right redemption strategy, users can maximize the value of card rewards.
Picking rewards cards that match your spending profile and using them strategically is key to success. Take advantage of bonus categories, sign-up bonuses, and card perks for amplified earnings. Always pay your balance on time and in full to avoid negating rewards value with interest charges.
Compare the top travel, cash back, and hybrid card offerings to find ones that best fit your lifestyle and needs. A little research upfront can lead to big rewards over the long run and keep more money in your wallet.
Frequently Asked Questions About Maximizing Rewards
Should I redeem points for cash back or travel?
In most cases, travel redemptions offer more value per point than cash back. Transferrable points are typically best redeemed for high-value airline and hotel awards. Cash back is better suited for fixed-value points earned on no-annual fee cards with less flexibility.
What credit score do I need for a rewards card?
A credit score in the 670-680 range is generally recommended for most rewards cards. Excellent scores above 740 will qualify you for almost any rewards card, while scores under 630 will make approval more challenging. Building your credit and income can help boost approval odds.
Can I earn rewards and redeem for travel if I carry a balance?
Carrying a balance leads to interest charges that usually negate rewards earnings. It is best to pay off rewards cards in full each month. Only use the card for purchases you can afford to pay off right away. Using rewards to offset the cost of a big purchase is fine if you immediately pay the rest of the balance.
How do I keep track of multiple rewards credit cards?
Monitoring spending across several rewards cards takes organization. Use a spreadsheet to track bonus categories, annual fees, and point values and balances for each card. Set up online accounts to easily check your rewards activity and get alerts about new offers or when annual fees are due.
Are rewards taxable income?
Generally, credit card reward points and miles received from signup bonuses or earned through regular spending are not considered taxable income. However, if you receive a particularly valuable redemption exceeding $600 in value, you may need to report it on your tax return. Check with your tax advisor about reward redemptions.
In another related article, The Best Cash Back Credit Cards with No Annual Fee
