If you have ever wanted to travel the world, earn cash back for a rainy day, or rack up points good for gift cards or merchandise, a rewards credit card might be exactly what you need. After signing up for a rewards card, you can easily earn 1-5 points worth of cash back, gift cards, merchandise, or travel rewards for each dollar you spend.
Some rewards cards do charge an annual fee, but many come with no fee at all. And most of the time, you can rack up rewards completely free of charge - that is, if you pay your balance in full to avoid credit card interest charges every month.
While the gist behind each offer for a rewards credit card is the same, the best card option for individuals varies. That’s because there are different types of rewards cards to consider. While each card type doles out rewards based on spending, the different types offer their own array of prizes or compensation.
5 Types of Rewards Credit Cards
If you’re in the market for a rewards credit card, knowing the type of rewards you’re after can help you find the best deal. Here are the five main types of rewards cards along with the benefits that make them unique.
#1: Flexible Travel Credit Cards
While some rewards cards offer points that work with a specific loyalty program, flexible travel credit cards strive to offer multiple options. You may be able to book travel through a co-branded travel portal, for example. With some flexible programs, you can also transfer points to airline and hotel transfer partners. For ultimate flexibility, some travel cards offer the option to redeem your points for gift cards or cash-back as well.
Many flexible travel credit cards let you earn a flat rate of rewards for each purchase you make, while others offer “bonus categories” with higher earnings.
Biggest Benefit: Many consumers flock to flexible travel credit cards because they don’t want to be tied down to a specific loyalty program. With a flexible card, you can earn points now and decide how to redeem them later. If you earn points because you think you’ll travel but decide to stay home, for example, you can redeem your points for cash-back, gift cards, or merchandise instead.
Biggest Drawback: The biggest downside to flexible travel credit cards is that they don’t help you earn loyalty with a specific hotel or airline program. While some co-branded hotel and airline credit cards give you special status or additional perks, generic travel credit cards may not offer loyalty benefits for your favorite program – or any program at all.
#2: Fixed-Value Travel Credit Cards
Fixed-value travel credit cards make it easy to earn travel credit for each purchase you make. Most cards in this category offer a set rate of 1-3 points for each dollar you spend, then make it easy to redeem your points for any type of travel you desire. With fixed-value travel credit cards, redemptions are simple and your points are worth one cent each. Simply use your card to book any travel of your choosing, then redeem your points to cover the purchase. It’s as simple as that.
Biggest Benefit: Fixed-value travel credit cards take the stress out of redeeming points for travel. Since your points aren’t tied down to a specific loyalty program, you can cash them in for nearly any type of travel through any website or travel vendor. Better yet, you don’t have to worry about award availability or deal with a complex airline or hotel program.
Biggest Drawback: While fixed-value travel credit cards offer a lot in terms of flexibility, it’s hard to get outsized value when you redeem. Most reward currencies in this category are worth one cent per point, making them inferior to many hotel and airline loyalty programs.
#3: Airline Credit Cards
- Credit Recommended (660-850):
- Intro Rewards Bonus
- Earn 50,000 points.
- Regular APR
- 17.49% - 24.49% Variable
- Annual Fee
- Foreign Trans Fee
- Credit Recommended
- Rewards Rate 1
- Earn 3X points on Southwest® purchases. Earn 2X points on Rapid Rewards® hotel and car partners. Earn 2X points on local transit and commuting, including rideshare. Earn 2X points on internet, cable, phone services, and select streaming. Earn 1X points on all other purchases.
- New Offer: Earn 50,000 bonus points after spending $1,000 on purchases in the first 3 months.
- 6,000 anniversary points each year.
- Earn 3X points on Southwest® purchases.
- Earn 2X points on local transit and commuting, including rideshare.
- Earn 2X points on internet, cable, phone services, and select streaming.
- 2 EarlyBird Check-In® each year.
- All points earned count towards Companion Pass®.
- No foreign transaction fees.
Co-branded airline credit cards offer benefits and rewards tailored to frequent flyers. Many co-branded airline cards offer special perks to cardholders, including early boarding, free checked bags, and discounts on in-flight purchases. And whether you fly a specific airline often or not, co-branded cards let you earn airline miles for each dollar you spend. At the end of the day, you can cash in your airline miles for nearly-free airfare, seat upgrades, and more.
Biggest Benefit: Airline credit cards offer some of the best redemption opportunities among all rewards cards. It’s common to cash in your points for more than 3 cents in value each (i.e. cashing in 50,000 Air France/Flying Blue miles for a round-trip economy ticket to Europe worth $1,800).
Biggest Drawback: The biggest downside to earning airline miles is the fact that award availability is often limited. It may be difficult to find more than one “award” seat on a specific flight, making this a tricky option for large families. With airline programs, you may need to fly off-peak to find flight options without added layovers or other inconveniences.
#4: Hotel Credit Cards
Hotel credit cards work similarly to airline credit cards in the fact they offer rewards tied to a specific loyalty program. With hotel credit cards, you’ll earn points you can use with specific hotel brands around the globe. Some hotel credit cards also offer exclusive perks for cardholders, such as free room upgrades or a welcome amenity. Either way, you’ll earn hotel points for each purchase you make with your co-branded hotel rewards card. Once you rack up enough points, you can use them for free hotel stays in properties you couldn’t otherwise afford.
Biggest Benefit: If you lean heavily on a specific hotel program for all your travels, you can earn special status and unique amenities with a co-branded hotel card. You can also earn more points over time by using your card for both travel and everyday spending.
Biggest Drawback: While hotel credit cards are great for consumers who pledge their loyalty to a specific program, they don’t offer a lot of flexibility. Most of the time, you are limited to redeeming your points for free hotel stays or transferring them to select airline programs.
#5: Cash-Back Credit Cards
- Credit Recommended (660-850):
- Intro (Purchases)
- 0% Intro APR on Purchases 15 months
- Intro Rewards Bonus
- Up to $300 cash back
- Annual Fee
- Intro (Transfers)
- 0% Intro APR on Balance Transfers 15 months
- Regular APR
- 16.49% - 25.24% Variable
- Credit Recommended
- INTRO OFFER: Earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) - worth up to $300 cash back!
- Enjoy 6.5% cash back on travel purchased through Chase Ultimate Rewards®, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more; 4.5% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and 3% on all other purchases (on up to $20,000 spent in the first year).
- After your first year or $20,000 spent, enjoy 5% cash back on Chase travel purchased through Ultimate Rewards®, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1.5% cash back on all other purchases.
- No minimum to redeem for cash back. You can choose to receive a statement credit or direct deposit into most U.S. checking and savings accounts. Cash Back rewards do not expire as long as your account is open!
- Enjoy 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 16.49% - 25.24%.
- No annual fee - You won't have to pay an annual fee for all the great features that come with your Freedom Unlimited® card
- Keep tabs on your credit health, Chase Credit Journey helps you monitor your credit with free access to your latest score, real-time alerts, and more.
Cash-back credit cards may offer more than one way to redeem your rewards. For example, these cards frequently offer the option to redeem points for merchandise and gift cards in addition to cash-back. Some cash-back cards offer a flat rate of rewards for each dollar you spend (i.e. 2 percent cash back on all purchases), while others offer bonus categories with up to 5X points.
Biggest Benefit: The most obvious benefit of cash-back credit cards is that they make redeeming your points easy. Where travel rewards may be especially lucrative, many people prefer to earn cash-back they can spend however they want. With cash-back, you can use your points to splurge or pay for groceries or regular bills.
Biggest Drawback: The notable downside that comes with earning cash-back is that redemptions aren’t that valuable. With just about any cash-back credit card, points are worth one cent each.
Which Rewards Credit Card is Best for You?
While cash-back works for nearly everyone, various travel credit cards offer tailored rewards that benefit frequent flyers, hotel enthusiasts, and occasional wanderers. Before you choose a card, it helps to know who you are and what you want.
At the end of the day, any rewards credit card can leave you a lot better off. However, holding the right rewards card can mean the difference between earning hundreds – or thousands – of dollars in cash-back or travel. When it comes to rewards credit cards, make sure to do plenty of research, ask a lot of questions, and choose wisely.
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.