Rewards

(Last updated: September 2021)

On average, the best rewards cards are worth over $1,200 more than the worst rewards cards in just the first 2 years of use.

And that's just taking into account credit card signup bonuses, intro rewards rates, and ongoing rewards rates. On top of all that, there's also a plethora of lesser-known issuer perks, network perks, and other rewards that can save you even more money and/or offer you exclusive and better experiences.

In this article, we'll explore several facets of credit card rewards and perks, so that you'll be better-prepared to compare credit cards and find the one that's right for you.

Contents:

1. Types of credit card rewards and perks
2. Spend-based rewards
3. Bonuses
4. Perks
5. Reward details and examples by category
6. Redeeming rewards
7. All things considered, which issuers typically offer the best rewards programs?
8. Tips

Types of credit card rewards and perks

There are two different ways to classify rewards and perks at a high-level:

1. Introductory vs. ongoing
2. Spend-based rewards (rewards earn rates) vs. bonuses vs. perks

And within each of the categories for #2 above, there are sub-categories, as described below.

Sub-categories of spend-based rewards:

• Cash Back: You'll earn a certain percentage of your purchases as a cash amount (e.g., "2% cash back"), which is typically then applied as a statement credit on your next credit card bill.
• Points: You'll earn a certain number of points per dollar that you spend (e.g., "2 points per dollar spent"), which you can then redeem for any number of things.
• Miles: You'll earn a certain number of airline miles per dollar that you spend (e.g., "2 miles per dollar spent"), which you can then redeem for airline flights.

Another set of sub-categories of spend-based rewards:

• Fixed earn rate for all purchases: The same rewards earn rate applies to all purchases (e.g., "2% cash back on all purchases").
• Category-specific: Certain spending categories have higher earn rates than other spending categories (e.g., "3 points per dollar for travel purchases and 1 point per dollar for all other spending").

Sub-categories of bonuses:

• Signup bonus (a.k.a. welcome bonus, early spend bonus, intro bonus): This is typically in the form of a statement credit (e.g., $200), points (e.g., 50,000 points), or miles (e.g., 50,000 miles). Almost all signup bonuses require you to spend more than a certain amount (known as the "spend threshold") within a certain number of days or months (usually within the first 90 days of having the card).
• Anniversary bonus: This is more typical of cards with annual fees. The card issuers will "reward" you with some type of bonus on the anniversary of your account origination. This may be cash back, a number of points or miles, or a perk, such as a free hotel night or flight.
• Ongoing spend-level bonus: This refers to bonuses that are awarded every time you spend more than some specified amount within a 12-month span (e.g., "25,000 bonus points in each year that you spend at least $10,000").

Sub-categories of perks:

• Issuer perks: These are special benefits offered to cardholders by the card issuer (e.g., Chase, Capital One). Some of these benefits are only given to cardholders of a particular credit card, while others are given to cardholders of multiple credit cards offered by that issuer.
• Network perks: Not only do card issuers have a set of benefits offered to cardholders, but so do the payment networks (e.g., Visa and Mastercard) that those credit cards are associated with.

In this article, we'll explore each of these categories and sub-categories in detail.

Spend-based rewards

Cash back, points, and miles

There are three main types of spend-based rewards that credit cards offer (as ongoing rewards and/or signup/intro rewards):

• Cash Back: You'll earn a certain percentage of your purchases as a cash amount. This money is most frequently returned to you as a credit on your credit card statement, though some card issuers will send you a check. The industry standard is 1% cash back on all of your purchases, but many cards offer higher percentages on particular spend categories.
• Points: You'll earn a certain number of points per dollar that you spend, which you can then redeem for any number of things (e.g., different types of merchandise, gift cards, hotel stays, etc.) The number of points that can be redeemed and applied is dependent upon the card issuer and participating vendors. Unlike cash back rewards, points may be devalued by some card issuers over time.
• Miles: You'll earn a certain number of airline miles per dollar that you spend. They are either generic miles that you can use for any travel-related expense at a number of airlines, or miles that you can only use for a specific airline. Many cards also now allow you to use your miles to acquire merchandise. (But this is usually a bad idea, since the value of items that you could redeem for are typically lower-value on a per-mile basis, i.e., far less than one cent per mile, than the value you could've otherwise gotten.)

Some quick stats

(Source: WalletHub.com study)

Comparison: Which issuer's points or miles are typically the most valuable?

After doing a meta-analysis of multiple sources, combined with various other card usage and redemption data, we found that American Express has the highest typical value per point or mile, followed closely by Chase at #2.

Note: More details can be found in the article titled How much are points and miles worth?

Fixed earn rate vs. category-specific earn rates

As mentioned in an earlier section, spend-based rewards can be based on spending in one of two ways:

• Fixed earn rate for all purchases: The same rewards earn rate applies to all purchases (e.g., "2% cash back on all purchases").
• Category-specific: Certain spending categories have higher earn rates than other spending categories (e.g., "3 points per dollar for travel purchases and 1 point per dollar for all other spending").

Some quick stats

(Source: WalletHub.com study)

Examples of category-specific rewards

Many credit cards offer cash back, points, or miles on common (and also some less-common) spend categories that you're already regularly spending money on each month, such as:

• Travel (air travel, hotels, and other sub-categories)
• Shopping (online and/or in-person)
• Groceries
• Restaurants
• Gas
• Drugstores
• Utility, phone, cable, and internet bills
• (and others)

Many credit cards offer their higher earn rates in spend categories that are different from and/or more specific than the ones mentioned above. Here's just a very small list of some examples:

• Entertainment and leisure: Example sub-categories include streaming services, movie theaters, restaurants, book stores, and sporting events.
• Home improvement: Example sub-categories include home improvement stores, furniture, bedding, and home décor.

Because these are expenses that you're already paying for, if you use such a rewards card for these categories and you don't carry a balance, this is a thrifty way to easily rack up what are essentially free rewards.

Tip: If you use different cards for different spend categories, it can be easier to budget

A side benefit of using different rewards cards for different spend categories is that it can be easier to track, budget, and optimize your spending in these spend categories.

Bonuses

Signup bonuses

A signup bonus (a.k.a. "welcome bonus", "early spend bonus", or "intro bonus") is typically in the form of a statement credit (e.g., $200), points (e.g., 50,000 points), or miles (e.g., 50,000 miles).

Almost all signup bonuses require you to spend more than a certain amount (known as the "spend threshold") within a certain number of days or months (usually within the first 90 days of having the card).

Some quick stats

(Source: WalletHub.com study)

Signup bonus spend thresholds

Signup bonuses typically come with a "spend threshold" (a.k.a. "spend hurdle" and various other names), which is the amount you'll need to spend within some time period (usually the first 90 days) in order to actually earn that signup bonus.

Examples:

• "60,000 miles (after spending $3K within the first 3 months)"
• "$200 statement credit (after spending $500 within the first 3 months)"

Tip: Hold off on making large-ticket purchases until after you get a new credit card

Waiting until after you get a new credit card to make large-ticket purchases (e.g., home improvement/decorating/furniture purchases), or even various other non-time-sensitive purchases, is a particularly-effective way to meet your credit card's introductory bonus spend threshold without breaking the bank to do so.

Additionally, you can temporarily switch some of your monthly recurring bills to use your new credit card as the payment option, and then switch it back to your original payment after you've reached your spend threshold.

Perks

Issuer perks

With the vast number of ways card issuers are vying for your business, there are countless benefits and features tied to the many different card offers available -- especially to people with Excellent credit.

Examples from American Express

For example, here's a list of just some of the many perks offered by American Express for one or more of its credit cards. (Note: Many of the perks in this list are offered for multiple American Express credit cards, but some are currently only offered for one or a small handful of its cards.)

• Events and experiences:
  • Early access to events (via American Express Experiences): Get access to concert, theater, and special event tickets before they go on sale to the public.
  • "By Invitation Only" Program: Specially-curated and customized once-in-a-lifetime events exclusively for American Express Platinum and Centurion Card Members, including Additional Centurion Cards.
  • Preferred seating at events: With Preferred seating, you will have access to premium seats for select cultural and sporting events, based on availability.
  • Global Dining Access by Resy: Unlock access to exclusive reservations and special dining experiences with Global Dining Access by Resy.
• Air travel:
  • International Airline Program: Lower fares on the best international seats in the house, up to 8 tickets per booking. There’s no need to shop around when you book the International Airline Program with American Express Travel. Enjoy savings on international First, Business, Premium Economy seats on more than 25 world-class airlines.
  • American Express Global Lounge Collection benefits: Unlocks access to more than 1,200 airport lounges across 130 countries and counting.
  • Priority Pass Select membership: Rest and revive before your flight at one of the 1,000+ VIP lounges in over 500 cities worldwide.
• Hotels:
  • American Express Fine Hotels & Resorts program: Provides the following elite-like benefits at over 1,000 luxury hotel locations: Room upgrade upon arrival (subject to availability), daily breakfast for 2 people, guaranteed 4pm late checkout, noon check-in (subject to availability), complimentary wi-fi, and a unique property amenity valued at $100 (spa or food and beverage credit).
  • The American Express Hotel Collection: When you book hotel stays of 2+ nights through American Express Travel, you'll receive a $100 hotel credit (to spend on qualifying dining, spa, and resort activities) and a room upgrade upon arrival (when available).
• Traveling by car:
  • Premium car rental benefits: Complimentary membership in premium car rental programs, including special upgrades and discounts.
  • Uber VIP status: Get matched with top-rated Uber drivers. Uber VIP connects you to drivers who have at least a 4.8 star rating, and "high quality cars."
• Other travel goodies:
  • Internet access: Free in-room internet.
  • American Express Departures Magazine: Published seven times a year for American Express Business Platinum Card® Members and Platinum Card® Members.
  • The American Express Travel Collection: Complimentary access to The Travel Collection by Travel Leaders Group, a membership which normally costs $295 per year. This program can help you get special discounts and amenities when you book eligible flights, hotels, cruises, tours, vacation packages, and car rentals.
• Special offers and discounts:
  • Special offers and discounts (via Amex Offers): Access to the Amex Offers portal, which has special offers for shopping, dining, travel, and more.
  • Special offers and discounts (via American Express Connect): Access to CONNECT from American Express, which has additional card member benefits like entertainment access, shopping deals, travel offers, and more.
• Convenience and concierge services:
  • Premium Global Assist hotline: When you travel more than 100 miles from home, we can provide you with 24/7 medical, legal, financial or other select emergency coordination and assistance services. Emergency medical transportation assistance may be provided at no cost, if authorized and arranged by Premium Global Assist Hotline.
  • Global Assist hotline: When you travel more than 100 miles from home, you have 24/7 access to medical, legal, financial or other select emergency coordination and assistance services, including medical and legal referrals, assistance with cash wires, passport replacement, missing luggage and more.
  • Personalized Travel Service: With Personalized Travel Service, book flights across the world, make hotel arrangements, and schedule ground transport when you touch down. It's just a phone call away with the Gold Card.

Network perks

Every credit card is not just associated with a credit card issuer (e.g., Chase, Capital One, etc), but also with a payment network (e.g., Visa, MasterCard). Here's the difference between the two:

• The issuer (a.k.a. issuing bank): The bank who gave you that nice shiny credit card (e.g., Chase, Capital One).
• The network (a.k.a. "payment network", "association", or "interchange"): The network that links everybody together (e.g., Visa, Mastercard).

And to get even more specific, not only is each credit card associated with a particular payment network (e.g., Visa or Mastercard), but also with a particular network status (a.k.a. "network level"), such as "World Elite Mastercard" vs "Gold Mastercard", and "Visa Signature" vs. Visa Infinite".

Each network status comes with its own set of network perks for cardholders. (But note: Even if a particular network status is associated with, for example, 10 network perks, the contract negotiated between a credit card issuer and network for a particular credit card might cut out some of those network perks for that credit card's cardholders, in order to decrease costs for the issuer.)

Here's a very small, summarized list of network perk examples.

• Legal, medical, and financial assistance/advice: Many cards offer these services (or sometimes just a discount on such services) as part of their rewards programs.
• Roadside assistance: If you're stranded by a flat tire or other vehicle problems, you can turn to the coverage provided by your credit card to get you out of a jam.
• Travel accident insurance: If you're injured or worse on a trip paid for with your credit card, you may be eligible for an insurance payout through your card's issuer.
• Baggage insurance: Protects valuables and other belongings in your carry-on and checked baggage.
• Car rental loss and damage: Don't shell out extra money for the rental company's plan; instead, you'd just use the coverage that automatically comes with your card.
• Extended product warranties: No need to purchase extended warranties on expensive electronics, since many cards have this covered.
• Dispute resolution: Most credit cards issuers will refund disputed charges. As an added benefit, some will do the heavy lifting for you by working with the retailer to resolve the dispute.
• Return protection: Many cards will reimburse you for a return long after the store is willing to take the product back. Save time, stress, and energy by allowing your credit card issuer to resolve disputes that arise from purchases you are unhappy with due to breakage, loss, or dissatisfaction.

This list of examples only begins to scratch the surface, though. For more examples, as well as comparison charts showing which perks are typically offered for each network status, head over to the article titled Network perks.

Reward details and examples by category

Travel

Do you enjoy traveling, or simply have to travel frequently for work? Whether by plane, train, or automobile, many rewards cards are tailored to travelers.

Air travel

Miles

Travel credit cards geared for air travel typically give you a certain number of miles for every dollar you spend. Sometimes it's a flat rate for all spending (e.g., "2 miles per dollar spent on all purchases"), and sometimes there are different earn rates for different spend categories and/or merchants (e.g., "5 miles per dollar spent on United Airlines purchases and 1 mile per dollar spent on all other purchases").

Note: Separate from travel credit cards, there are also some more-generic rewards credit cards that offer higher earn rates (cash back, points, or miles) for travel-related spending. The earn rate for travel spending won't typically be as high as what you'd get from a travel credit card, but would still be higher than many other types of credit cards.

Free flights

Some travel credit cards offer one or more free flights, sometimes as a signup bonus (e.g., "2 free flights to anywhere in the continental U.S. when you get approved for the card"), sometimes as an anniversary bonus (e.g., "1 free companion airline ticket each year on your account anniversary date"), and sometimes as a bonus for hitting some specified spend level (e.g., "1 free flight for every $25,000 spent in a calendar year").

Airport lounge memberships and passes

Some travel credit cards offer complimentary access to otherwise-costly airport lounges, while some others offer discounted 1-day access to airport lounges.

Some specific examples:

• American Express Global Lounge Collection benefits: Unlocks access to more than 1,200 airport lounges across 130 countries and counting.
• Priority Pass Select membership: Rest and revive before your flight at one of the 1,000+ VIP lounges in over 500 cities worldwide.
• United Club membership: Allows you (and up to 2 people you're traveling with) to access United Clubs and select Star Alliance lounges when flying United and its partners.

Elite status and airport conveniences

Many travel credit cards offer complimentary elite status and/or airport conveniences, such as priority (faster) check-in and boarding, complimentary baggage check, and more.

Some specific examples:

• Southwest Airlines A-List status: Includes Priority boarding, 25% earning bonus, Standby priority, Priority check-in and security line access, and Priority phone line.
• Delta Silver Medallion status: Includes unlimited complimentary first-class upgrades, unlimited complimentary Comfort+ upgrades, preferred seats, mileage bonus (7 miles per dollar spent on Delta), waived baggage fee, priority check-in and boarding, priority phone line, partner perks, and Hertz benefits.
• International Airline Program: Lower fares on the best international seats in the house, up to 8 tickets per booking. There’s no need to shop around when you book the International Airline Program with American Express Travel. Enjoy savings on international First, Business, Premium Economy seats on more than 25 world-class airlines.

Comparison: Which airline has the best airline rewards program?

After reviewing the most popular airline rewards programs, we found that United Airlines offers the best airline rewards program.

Here were the top 5 best airline rewards programs:

1. United Airlines (biggest strengths: number of destinations, booking process, award flights)
2. Frontier Airlines
3. American Airlines
4. Delta Airlines
5. Alaska Airlines

The factors that we considered:

• Earning: Value
• Status and other perks: Ease of achieving elite status, other membership perks
• Number of destinations: US
• Number of destinations: International
• Booking: Blackout dates, advance booking, and short-notice fees
• Award flights: Layovers and fees
• Fine print: Limits and expiration of miles

For the complete breakdown, check out the article titled Comparison of airline mile programs.

Hotels

Points from hotel spending

Most hotel rewards credit cards offer higher points earn rates for hotel-related spending. Often, this higher earn rate is limited to just a particular hotel chain (e.g., limited to spending at Marriott if it's a Marriott credit card).

Free nights

Many hotel rewards credit cards offer one or more free hotel nights. In a similar manner to how some airline rewards credit cards offer their free flights, they can be in the form of signup bonuses, anniversary bonuses, and bonuses for hitting specified spend levels.

Elite status and hotel conveniences

Many hotel rewards credit cards offer some form of complimentary elite status, which benefits such as hotel room upgrades, welcome packages containing tokens of appreciation, hotel concierge and other convenience-related services, and more.

Some specific examples:

• Not limited to a specific hotel chain:
  • American Express Fine Hotels & Resorts program: Provides the following elite-like benefits at over 1,000 luxury hotel locations: Room upgrade upon arrival (subject to availability), daily breakfast for 2 people, guaranteed 4pm late checkout, noon check-in (subject to availability), complimentary wi-fi, and a unique property amenity valued at $100 (spa or food and beverage credit).
  • Barclays Elite Gold status: Earn 10% in bonus points on qualifying stays, and get access to dedicated reservations, customer serivce numbers, and exclusive offers.
  • Chase Luxury Hotel & Resort Collection: Provides the following benefits at over 1,000 luxury hotels, resorts, lodges, and spas: Daily breakfast for two, a room upgrade (if available), early check-in and late check-out (if available), complimentary wi-fi, and a special benefit unique to each property (e.g., lunch or dinner for two, a spa treatment, waivers of golf greens fees, welcome gift, or airport transfers).
• For just a specific hotel chain:
  • Marriott Bonvoy Silver Elite status: Includes 10% point bonus, late checkout, and Elite reservation line.
  • Hilton Honors Silver status: Includes 15% point bonus, fifth night free on award stays, and two complimentary bottles of water per stay.
  • World of Hyatt - Discoverist Status: As the primary cardmember, you are eligible for Discoverist membership in the World of Hyatt global loyalty program, which includes 10% bonus points at Hyatt properties, upgrades to preferred rooms, daily bottle of water, complimentary premium internet, late checkout, elite reservation line, Pearl status with "M life" rewards, and bonus points on American Airlines flights.

Comparison: Which hotel chain has the best hotel rewards programs?

After reviewing the most popular hotel rewards programs, we found that Hilton offers the best hotel rewards program.

Here were the top 5 best hotel rewards programs:

1. Hilton (biggest strengths: status and related perks, plus above-average marks in each of the other high-level categories)
2. Wyndham
3. Radisson
4. Best Western
5. Marriott

The factors that we considered:

• Earning rewards: Value of rewards, points for hotel spending, availability of hotels for award nights
• Number of hotels: Total properties, number of countries, top US cities, top international cities
• Status and other perks: Ease of achieving elite status, value of membership level
• Booking: Blackout dates, 3rd-party sites, advance reservations, short-notice reservations
• Fine print: Expiration of points, earnings restrictions, exclusions, room availability
• Redeeming: Purchasing points at a fair value, ability to transfer points, ability to reinstate lost earnings

For the complete breakdown, check out the article titled Comparison of hotel reward programs.

International travel

If you travel internationally, you'll probably want to choose a card with no foreign transaction fee. Many travel rewards cards offer this money-saving feature.

Other types of travel rewards

In addition to the above-mentioned rewards and benefits related to air travel, hotel stays, and international travel, the following travel-related rewards and perks can help you save money and/or enhance your travel experience.

• Travel insurance and protections: Examples include travel accident insurance, rental car insurance, and lost luggage insurance. (Note: Check out the section on perks to see even more examples and details.)
• Saving money on car rentals: It actually takes a bit of creativity to earn savings on car rentals, but the opportunity is definitely there. The most common method is using rewards cards with higher earn rates for car rentals. Additionally, card issuer shopping portals are a good way to earn bonuses for spending at various car rental companies. Some rewards cards allow you to purchase car rental company gift cards with your miles/points. (Note: Car rental mileage bonuses, special offers, and promotions change frequently, so you'll need to be vigilant to take full advantage of these offers.)
• Saving money on packaged vacation deals: Many travel rewards cards offer special vacation deals as well as multiplied points/miles earnings for travel-related purchases on your card, allowing you to save money on your vacations.
• Cruise rewards: Some cruise lines partner with card issues to offer co-branded cards (e.g., Royal Caribbean Visa, Norwegian Cruise Line MasterCard, and Princess Cruises Rewards Visa). However, general travel cards that offer cash back, points, or miles toward cruise line purchases are often even more lucrative. (Note: You'll want to check the cruise line websites for bonuses and exclusive offers for booking your cruise on your card.)

Shopping (at a specific merchant)

Do you like to shop? Do you have the income to indulge in this expensive habit without impacting your ability to pay your bills and meet your expenses? If so, a store card might be your best friend.

Quick terminology clarification: Store card vs. cobranded card

• One type of credit card that would carry the name of a particular merchant is a "store card". This term typically refers to the types of credit cards that in-store cashiers will try to get you to apply for when you're in the process of buying items.
• Another type of credit card that would carry the name of a particular merchant is a "cobranded card" (a.k.a., "partner card"). These cards are the ones that not only feature the name of the merchant, but also somewhat prominently feature the name of the credit card issuer (e.g., Chase, American Express, etc.). Unlike "store cards", these "cobranded cards" are typically promoted on the credit card issuer's website, and can be used anywhere that you could normally use credit cards.
• In other words (in a nutshell): "Cobranded cards" can be used anywhere and are marketed by the merchant and the issuing bank, whereas "store cards" can often only be used at that one merchant and are often only marketed within that merchant's stores.

But, be aware of the two significant dangers mentioned below…

Danger: Store cards have really high APRs

The most important thing to note about store cards is their exorbitantly-high APRs (i.e., interest rate on purchases).

The APR for cobranded cards traditionally ranges between 12-20%. Retail cards that aren't co-branded (i.e., store cards that are "private label" rather than co-branded) usually start at around 20%! Obviously, that would make store cards a terrible idea for anyone who typically carries a balance (i.e., doesn't pay off their full credit card statement every month).

Danger: Some store cards can only be used at that particular merchant

Retail store credit cards encourage you to buy things in their store. They offer rewards, perks, bonuses, discounts, and all manner of benefits to encourage loyalty to their store. To that same end, some store cards can only be used only in that particular retailer's store/website.

On the other hand, some store cards take advantage of cobranding to attract your business, which means you'll be able to use the card to shop anywhere your major credit card is accepted. (But when you shop at that particular merchant's store, you'll earn an even higher rewards rate.)

Gas

The National Association of Convenience Stores reports that about two-thirds of consumers pay for their gas with credit cards. So, why not earn rewards while doing so?

Gas rewards cards vs. other types of rewards cards

A gas rewards card is your best option only if you regularly spend a lot on gas. If you only spend a moderately-high amount on gas (above average, but not super-high), you might want to consider a general rewards credit card that offers higher-than-average rewards (cash back, points, or miles) for gas spending. Even rewards cards with spend categories that rotate each quarter may offer better return for your money if you spend an above-average amount on gas.

Otherwise (if you spend an average amount or less on gas), several of the other types of rewards cards would almost certainly yield better rewards and benefits for you.

Things to be wary of

• Might be limited to specific gas merchant: Gas rewards credit cards are offered as retail/private label cards (a.k.a. "store cards") or as co-branded credit cards. Keep in mind that when you opt for a private label gas card, your gas rewards will be limited to a specific gas station.
• High APR: Just like with other types of store cards, gas rewards cards that are private label (store cards) typically have high APRs.
• Other things to watch out for: Rewards earn rate caps, minimum redemption thresholds, annual fees, late payment fees, and over limit fees.

Business

Business rewards cards are tailored to the small business niche. They normally offer a higher credit line than their consumer counterpart. These cards combine different aspect of other rewards programs, plus offer features suited for this market.

Here are some examples of common types of rewards offered by business credit cards:

• Airline miles
• Hotel points
• Cash back, points, and miles higher earn rates on other spend categories (e.g., gas, office supplies, etc.)
• Travel and emergency protections and insurance
• Account security and protection-related features (e.g., customizable spending limits for authorized users, fraud alerts, and more)
• Complimentary convenience services, such as detailed summaries and discounts for particular retailers (e.g., office supply stores, phone services, and internet services)

Tip: Carefully review the card's terms and conditions

The CARD Act does not cover small business credit cards, so make sure to review the terms and conditions of any business cards that you're considering.

Other specific categories (groceries, dining, etc.)

If you'll be using your card heavily in certain spending categories but not others (e.g., you'll mostly be using it for spending on groceries, or mostly at restaurants, etc.), you'll want to get a credit card that offers a higher earn rate (e.g., higher cash back earn rate) for the spend category or categories for which you'll be heavily using the card.

For certain categories, if your spending will be high enough and the earn rate will be high enough, it might make sense to go for a credit card that has an annual fee. (For example, if you'll be spending a lot on groceries, a card such as the American Express Blue Cash Preferred, which offers 6% cash back on groceries but also has a $95 annual fee as of the time this article was written, would probably make sense for you.) Otherwise, it might make more sense to go for a card that doesn't have an annual fee.

Typical spending in all categories

If you'll be using your card for all kinds of spending, rather than heavily in only a small number of spend categories, then you may want to consider a card that offers a fixed (flat) earn rate for all spending (e.g., "2% cash back on all spending").

Redeeming rewards

Ways to redeem

Credit card rewards aren't set up like your bank account; you typically can't just withdraw money as you see fit. The majority of credit cards require you to earn a set amount of rewards (e.g., a certain amount of earned cash back, points, or miles) before redeeming your rewards. For cash back rewards, for example, this minimum amount is often $25 or $50.

Some card issuers allow you to transfer points or miles to a cash value amount, but the cash value will usually be less than the value you otherwise would have received.

Here are some examples of various ways that rewards can be redeemed:

• Credit applied to your card account: You can choose to offset your credit card bill with your accumulated cash back amount.
• Merchandise: Credit card issuers with an online shopping portal often identify specific merchandise that you can "purchase" with your rewards.
• Gift cards: Most card issuers allow you to purchase gift cards with your rewards from their online shopping portals.
• Charity: Some card issuers will give you the option of donating money to a charity through your credit card rewards.
• Exclusives and experiences: Most of the elite rewards programs offer special experiences to their cardholders as a method of redeeming their rewards. This includes exclusive event tickets, the chance to meet a celebrity, and more.
• Paper check: You can often request that your card issuer mail your earned cash back reward.

Rewards credit card holders leave an astonishing amount of money on the table

A simple Google search for "unredeemed loyalty awards" returns a number of blogs and articles detailing billions of dollars in credit card rewards that were earned but never redeemed.

In fact, the 2011 COLLOQUY Loyalty Census discovered that credit card consumers fail to redeem about $16 billion in rewards miles and points out of the approximately $48 billion earned each year.

If you're curious to know which sectors the $48 billion of total earned rewards each year comes from, here's the breakdown:

• The largest provider of rewards is the financial sector ($18 billion per year).
• At a close second is the travel and hospitality sector ($17 billion per year).
• Despite its contribution to nearly half of all loyalty program memberships (40%), the retail sector comes in last ($12 billion per year).

All things considered, which issuers typically offer the best rewards programs?

Which issuer offers the best overall rewards programs?

Based on a weighted formula that takes into account all aspects of reward programs, we found that American Express offers the best overall rewards programs, followed closely by Capital One at #2.

See below for the comparison chart that shows the dimensions we considered and the per-issuer ratings for each dimension.

Note: More details about this comparison study can be found in the article titled Comparison of issuer overall reward programs.

Which issuer's cards are the most valuable for typical spenders?

Using monthly spending amounts and other reward preference and valuation of "typical spenders", we calculated the total value of all rewards, signup bonuses, issuer perks, networks perks, fees, and APRs for all of the popular cards of each credit card issuer (i.e., all the cards listed on this website).

Considering the prevelance of their credit cards in the top 5, top 10, and top 20 rankings of the most valuable credit cards for typical spenders, we concluded that American Express is the issuer whose cards are the most valuable for typical spenders, followed by Chase at #2.

Note: More details can be found in the article titled Comparison of issuer overall reward programs.

Definition of "typical spender"

A "typical spender" is defined as someone who spends the following amounts each month, and who has preferences and reward valuation opinions that match the "typical spender" spend profile on Findmeacard.

Summary: Number of cards from each issuer in each ranking tier

Tips

For this to be profitable, you'll need to pay off your full balance every month

High APRs will eat up any savings immediately, so even rewards earned from higher-earn-rate spend categories will only be a profitable strategy if you pay off your full credit card balance each and every month.

Credit card issuers want you to carry a balance, as they make their money off of your interest payments. Not only would your cash back be eaten up by these interest payments, but the added expenditures will put you in a financial position that increasingly threatens your ability to pay. As a result, this could also have a detrimental effect on your credit score.

If you find it difficult to adhere to this principle, one thing that might help is to set up a second checking account. One checking account would be for your regular recurring expenses, and the other would be for credit card spending. This would help with tracking your expenses for each of these two categories, and therefore would help with their respective budgeting.

Always pay on time

You likely have a grace period (e.g., 25 days) to pay your balance each month. However, you should try to pay your credit card statement as if you don't.

It's a mindset. If you tell yourself that you have extra time, there's a reasonable chance that you'll start budgeting to that later deadline instead of the actual due date. This would inevitably lead to worse spending decisions. 

Be mindful of these common credit card reward "gotchas"

Shiny offers

Cards with high reward rates may look quite attractive, but can sometimes come with restrictive limitations. If a rewards rate seems unusually high (e.g., higher than 3% cash back or higher than 3 points or miles per dollar spent), then make sure you read enough of the reward program's offer details and fine print to understand what the "catch" is, i.e., how the credit card issuer is able to offer such a reward while still being profitable to the issuer. Many times, the "catch" will simply be an annual fee charged by the credit card (so you'll just need to do the math to figure out if the benefit you'd receive outweighs that cost), but other times, the "catch" is overly-restrictive spend category definitions, reward limits, or minimum redemption amounts.

Rotating categories

Some card issuers set up specific categories wherein you are able to earn the highest cash back rate, but those categories change each quarter (every 3 calendar months). So, you may earn 5% on restaurants and movie theaters in February, but by May, the categories may have changed to gas and utilities. If you get one of these cards, you'll need to remember which categories are applicable for the current quarter, and you'll need to find out what the new categories are every 3 months. Additionally, you'll need to actually sign up for the higher-reward-rate program each quarter, as you won't be automatically enrolled in it each time.

Excessive spending required to earn cash back

Because card issuers set a minimum threshold in order to earn a signup bonus, many consumers may be tempted to overspend to reach that limit. Rather than falling into this trap, try to put off certain large-purchase and other non-time-sensitive expenses in the weeks or months leading up to getting a new card, and then make those purchases with the new card once you have it.

Reward limits (maximums)

Most rewards programs set some sort of limit on the amount of rewards you can earn with the card. These may be implemented on a periodic basis (e.g., monthly or quarterly) or on an annual basis. Make sure to read the terms of your card's reward program to determine how this might impact you.

Points and miles that are worth significantly less than other cards' points and miles

Points and miles are not created equal, and may carry very different values per point or mile from one card program to the next. (Refer to an earlier section of this article for some more details on this topic.)

Additionally, not all card points and miles work with every hotel chain or airline. You will want to check where you can redeem your earned rewards before selecting a card.

Minimum redemption amounts or increments

Because the value assigned to points and miles is set by the card issuer and partner vendor, your issuer may set arbitrary plateaus that you're required to attain before you can cash them in. Unfortunately, these plateaus are often reset over time, requiring increasingly more points/miles to reap the same benefits.

Expiring rewards

Most card issuers do not set expiration dates on rewards these days, but there are still some that do. Watch out for this, and be sure to carefully read through any credit card offer that you're considering to determine if the rewards expire.

Fine print

Carefully review and compare the specifics of a card's offer before applying. Look out for hidden charges and processing fees, caps on earnings, expiration deadlines, devaluation, and how card inactivity or late payments can affect your rewards rate or existing rewards balance. Learn whether you can only redeem your rewards in specific increments, if there's a minimum redemption amount, where you can "spend" your rewards points or miles, whether your pointswill  go away if you don't use your card regularly, and how spending and dollar amounts impact your rewards and/or how the rewards are earned.

Document your spending thoroughly

Document your spending as though you are using your debit card or checks instead of a credit card. Use a checkbook ledger and debit each expense as you pay. Never treat these purchases as anything other than cash coming directly out of your monthly income.

Shop at your card issuer's online shopping portal to maximize savings and earn even higher reward rates

Most large financial institutions that issue credit cards also offer or sponsor online shopping portals (a.k.a. issuer "malls") for their card members.

The majority of these portals offer steep discounts and other opportunities to maximize the value that you can get out of your points. Often, this can mean earning double or triple the normal rewards rate per dollar spent. Sometimes, you can even rack up the portals' points/discounts with a different issuer's rewards credit card.

Comparison of some of the most popular issuer shopping portals

Tip: Use Evreward to find the best offers and deals across multiple issuer portals

Each shopping portal has its bonuses and preferred features. Rather than spend an excessive amount of time researching the pros and cons of each issuer shopping portal and scouring several of them for worthwhile discounts and high-earn-rate opportunities, you can instead use a site like Evreward, which allows you to enter the merchant or retailer where you wish to shop and then see which portal(s) will offer you the best deals for that merchant.

Conclusion

Rewards credit cards come in many varieties; there's truly something for everyone. They're an excellent way to save money, earn rewards, vacations, upgrades, and a number of other perks and advantages.

To reap the maximum benefit from rewards cards, though, you'll need to invest time and research into selecting your cards and into the most beneficial way of using them. Your best approach is to determine exactly what you want from your rewards-- prioritize your needs and goals, and then start narrowing down the myriad credit cards that you have to choose from.

If you take the time to figure out which credit card is the right fit for your spending patterns and reward preferences, and pay your balance in full each month, you'll be able to profitably benefit from your credit card's rewards and benefits.