Do you regularly make purchases with your credit card? A rewards card can help you get something back from your spending. Whether you’re a frequent flyer, loyal customer or big grocery spender, you can find a rewards credit card to suit almost any lifestyle.
As these cards come with fees and restrictions, compare your options to determine which card offers more rewards and more bang for your buck.
Why should I consider a rewards credit card?
The major draw of this type of card is earning points that can be redeemed for rewards. Depending on the card you use and the promotions in place, you may be able to earn bonus points when making certain types of purchases or shopping with a particular retailer. Additional cards linked to the account can also earn rewards points as well. What you can redeem your points for will vary from card to card. Some allow you to redeem points for flight rewards as well as shopping or travel vouchers. Others can be used for cash back, to redeem merchandise or even to donate to charity.
Some rewards credit cards come with extra benefits beyond the rewards program. Some may offer low interest on purchases, while others provide extra warranty or complimentary rental car insurance coverage. Compare the features of the card to discover which will work best with your lifestyle.
Types of rewards credit cards
- Retail rewards. These cards offer benefits and rewards tied to a particular retailer. Some retail credit cards are available from big retailers. Consider where you shop the most and see whether they offer a card to reward your loyalty.
- Cash back rewards. Some credit cards let you redeem your accumulated reward points as cash back. You can use this cash back to pay credit card fees or to reduce your outstanding balance (depending on the card).
- Gas rewards. If you use your credit card to pay for gas, this type of card could reward you every time you fill up. These cards also sometimes offer bonus points, fuel vouchers and discounts as rewards.
- Airline rewards. Are you a regular jet-setter? Then an airline rewards credit card could be a wise choice. You can use these cards to earn airline rewards points for everyday purchases and can redeem them for rewards such as airline tickets and flight upgrades. A variety of credit card providers offer credit cards linked to airline rewards. Learn more in our detailed guide to airline rewards.
- Travel rewards. Cardholders can earn points for both travel-related and everyday purchases. Depending on the card, you can redeem your rewards for travel perks (such as flights, upgrades and accommodation) as well as other rewards (such as gift vouchers, gadgets and homewares).
- Hotel credit cards. If you use a particular hotel chain on every trip, you could rack up rewards for your loyalty. The points you earn for staying at the hotel can then be redeemed for discounts and vouchers.
How to compare rewards cards
- Annual fee. While some rewards cards charge no ongoing annual fees, others charge higher annual fees. The more features the card has, the higher the fee is likely to be.
- Rewards program. Choose a rewards program based on your lifestyle, and select the one that will offer greater rewards value. If you’re a loyal customer to a particular retailer, you could benefit from their rewards card. A frequent globetrotter might get more from an airline rewards card. While you can sign up for multiple rewards cards, using a single card for all purchases is generally the fastest way to earn points.
- Earn rate. This refers to how many rewards points you earn per dollar spent, and generally varies from one to three points per dollar. The earn rate lets you calculate the monetary value of your points and how much you’ll have to spend to redeem a particular reward.
- Bonus points. Cards that offer bonus points to new customers can help you kickstart your rewards points. You may need to meet some eligibility requirements before you can claim the points (such as spending a certain amount in the first three months), so make sure to confirm these conditions before applying.
- Limitations and restrictions. Most rewards cards limit the way you can earn and redeem points. You’ll often only be able to earn points with particular retailers or airlines. If the card comes with a points cap, you’ll only be able to earn up to a certain number of points. If you’re a big spender, this could reduce your points earning potential. Keep an eye out for expiration dates on your points, too.
- Interest costs. Interest rates will vary from card to card. Comparing these in conjunction with your spending habits will help you calculate how much you’ll have to repay over time.
- Balance transfer. Some rewards cards offer promotional balance transfers that allow you to repay existing debt at a lower rate. As balance transfers are designed to help reduce your debt, using the same card for purchases to build up points isn’t advisable.
What are the pros and cons of using a rewards credit card?
- Rewards for spending. You can choose a card that fits your lifestyle and earn rewards on purchases you would have made anyway.
- Global acceptance. Most rewards cards are affiliated with Visa or Mastercard, and you can use these cards in over 200 countries and territories worldwide. While American Express credit cards aren’t as widely accepted internationally, they can still be used in many locations around the world.
- Extra perks. Many rewards cards offer extra perks, such as complimentary rental car insurance. Compare your options to see which features work best with your lifestyle and spending habits.
- Cost. Rewards credit cards aren’t free. For instance, you may have to pay an ongoing annual fee or the card will attract a higher APR than your basic no-frills card.
- Limitations. Your card provider might not let you earn more than a given number of points in a calendar year, and your points can also expire after a set time frame.
A rewards credit card can be a useful way to earn extra benefits on everyday purchases. The variety of rewards credit cards available ensures that there is an option to suit almost every lifestyle. As there are so many cards on the market, and each comes with separate terms and conditions, you should compare your options to determine which one offers you the most value.
Frequently asked questions
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