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To choose the best rewards credit card, match the card's earnings categories and perks to your actual monthly spending habits, then compare fees and intro offers on the cards you're likely to qualify for.
There is no single best rewards card for everyone, so it's important to know your credit score and what you want in a credit card. Here's what you need to know about how rewards cards work and how to compare them.
What Is a Rewards Credit Card?
A rewards credit card is a credit card that gives back a portion of what you spend in the form of cash back, points or miles. Some rewards cards come with other benefits, such as welcome bonuses, intro annual percentage rate (APR) promotions, travel and lifestyle perks and insurance protections.
There are rewards credit cards available to borrowers across the credit spectrum, though most typically require good to excellent credit to get approved.
Learn more: Different Types of Credit Cards
Types of Credit Card Rewards
Rewards credit cards offer value in the form of cash back, points or miles, though some rewards programs blur the lines a little. For example, a card may be advertised as a cash back card, but you'll actually earn points you can redeem for cash or other things.
Here's a quick summary of how each type works.
Cash Back
Cash back credit cards give you a fixed percentage of your spending. For example, a card may offer a flat 1.5% or 2% back on everything, or it may offer up to 6% back on certain spending categories and 1% back on all other spending.
You can then redeem your cash back rewards by requesting a statement credit, check, transfer to a bank account or one of the card's other redemption options.
Points
Many credit card issuers have their own rewards programs, allowing you to earn points on your everyday spending. Additionally, hotel rewards programs and even some frequent-flier programs issue their rewards currency in the form of points.
General points programs offer more redemption flexibility than hotel and airline loyalty programs. For example, you might be able to choose cash back options, book travel or even transfer your rewards to partner hotel and airline programs.
The flexibility can be a good thing, and you can find some high-value redemptions if you're willing to learn how a program's transfers and redemptions work. However, there are also lower-value redemption options, so make sure you understand what you're getting.
Meanwhile, when you earn points with a specific hotel credit card or airline card, you may be limited to redeeming your rewards with that brand and its limited partners. That said, co-branded hotel cards often offer other perks, like a free annual night's stay and elite status.
Miles
Most airline credit cards and a few issuer rewards programs use the term "miles" instead of "points" for their rewards currency.
With general miles programs, you may be able to use your rewards to book different types of travel or transfer your rewards to a partner hotel or airline brand. With frequent-flier programs, you're usually limited to using your rewards with the airline brand and its partners.
However, these cards also often come with brand-specific benefits, such as free checked bags, priority boarding and in-flight discounts.
Learn more: Cash Back vs. Points: Which Rewards Credit Card Is Better?
How to Choose the Best Rewards Credit Card
Follow these steps to get an idea of where you stand and determine which card is the best fit for you.
1. Check Your Credit Score
Check your credit score to get a sense of what type of credit card you'll likely qualify for. You can check your FICO® Score☉ Θ for free with Experian to see where you stand.
Having good or excellent credit—generally, a FICO® Score of 670 or above—is a common requirement for the best rewards cards. However, there are also options for people with fair and poor credit.
2. Choose a Type of Reward
You can narrow your search by deciding whether you want cash back, points or miles. Cash back may be the better fit if you want simplicity and a predictable value for your rewards. In contrast, points or miles could make more sense if you travel often and are willing to learn how a program works to get more value out of your rewards.
3. Consider Bonus Rewards Types and Categories
Rewards credit cards typically use one of four systems for determining the rewards you earn when using your credit card:
- Flat-rate rewards card: This type of card offers the same rewards rate on every purchase.
- Tiered rewards card: This card option offers bonus rewards on purchases in certain categories, such as travel, groceries, gas or dining. But all spending that doesn't fall into a bonus category may earn just 1% or 1.5% back.
- Rotating rewards card: With this option, the card issuer chooses new bonus reward categories every three months, and you'll earn extra rewards on spending in those categories up to a quarterly limit.
- Dynamic rewards card: With these cards, you can change the bonus reward categories, or they automatically change based on your spending each billing cycle.
In addition to the rewards structure, consider the card's bonus categories. If you spend a lot on gas and groceries, for instance, consider a card that rewards you more for those purchases. If you already have multiple rewards cards, you could look for a new rewards card that complements those cards' rewards structures and bonus categories.
Tip: Add up a few months of spending by category using your bank and credit card statements to get a good idea of which bonus categories to focus on in your search.
4. Review Common Credit Card Fees
Credit cards can come with various fees, and while most are avoidable, some may not be. Here are some common credit card fees:
- Annual fees: You may have to pay this when you open your card (although some cards waive the fee the first year) and after each cardholder anniversary. Annual fees are common on cards with robust rewards programs and other benefits, as well as on cards designed for borrowers with fair or poor credit.
- Balance transfer fees: This is the fee to transfer balances to the credit card. It's often 3% to 5% of the amount you transfer and only applicable if you transfer a balance from another card.
- Cash advance fees: You'll pay a fee if you use your card for a cash advance, usually 3% to 5% of the amount. Note that advances are also typically subject to a higher interest rate.
- Foreign transaction fees: You may pay this fee for using the card outside the U.S. and to make purchases in foreign currencies. It's usually 1% to 3% of the transaction amount, but many rewards credit cards waive it.
How you plan to use the card could dictate what's best. For example, if you plan to travel abroad a lot, look for a rewards card that doesn't have foreign transaction fees. There are also plenty of rewards cards without annual fees, but sometimes the annual fee is worth paying to get higher rewards rates and extra cardholder benefits.
5. Get Prequalified
With a few specifics in mind, you can try to get prequalified for credit cards that will fit your criteria. Many credit card issuers have prequalification tools that you can use to see which of their cards you'll likely qualify for without impacting your credit score.
You can also use Experian's card comparison platform to compare credit card offers from multiple credit card issuers that partner with Experian.
6. Compare Intro Bonuses
Many credit cards offer intro bonus rewards to new cardholders. If you plan to use the card for a major purchase or balance transfer, also look into introductory 0% APR offers.
Before applying, compare these introductory promotions to see if one stands out to you. If you know that a card has offered a higher bonus in the past, you might want to hold off on applying until a better one returns.
Pros and Cons of Rewards Credit Cards
Rewards credit cards can put money back in your pocket, but they're not the right fit for everyone. Here's what to weigh before you apply.
Pros
Rewards on everyday spending: You can earn cash back, points or miles on purchases you'd make anyway, such as groceries, gas and utility bills.
Welcome offers: Many cards offer a sign-up bonus to new cardholders who meet a minimum spending requirement in the first few months.
Extra perks and protections: Depending on the card, you may get other benefits such as extended warranties, travel insurance and statement credits. If you'll actually use them, these perks can help offset the cost of an annual fee.
Cons
Potentially higher interest rates: The APR on a rewards card can run higher than on a card without rewards. If you carry a balance from month to month, the interest you pay can quickly outweigh the value of what you earn.
Temptation to overspend: Chasing rewards or a welcome bonus may nudge you toward purchases you wouldn't otherwise make, and overspending can leave you with a balance you can't pay off in full.
Rewards can lose value: Card issuers, airlines and hotels can change their programs, which may mean you need more points or miles for the same redemption over time. Some rewards can also expire, so it's important to make sure you don't let a balance sit.
Are Rewards Credit Cards Worth It?
A rewards credit card can be worth it when your spending lines up closely with the card's bonus categories and you pay your balance in full every month.
A card with an annual fee can also make sense, but only if the rewards and perks you'll use are worth more than the fee. Run the numbers based on your typical spending rather than the card's maximum earning potential.
Rewards cards are less likely to pay off if you tend to carry a balance or if earning rewards tempts you to spend more than you planned. Interest charges can quickly neutralize the value of your rewards, and a growing balance can drive up your credit utilization rate and hurt your credit score.
Alternatives to Rewards Credit Cards
If you can't qualify for a rewards card yet, or you tend to carry a balance, one of these options may be a better fit:
- Secured credit cards: A secured card requires a refundable security deposit, typically equal to your credit limit. These cards are designed for building or rebuilding credit, and some earn rewards.
- Student credit cards: Student cards are designed for college students who are new to credit, and some don't require a credit history at all. Many charge no annual fee, and some even offer rewards.
- Retail credit cards: A store credit card may be easier to qualify for than a general-purpose card, and it often offers discounts or rewards with a specific retailer. Keep in mind that store cards typically charge high interest rates and may limit you to spending with one or more specific retailers.
- Low-interest credit cards: If you expect to carry a balance, a low-interest card with a lower ongoing APR could cost you less over time. Keep in mind that these cards usually require excellent credit for their best interest rates.
- Rewards debit cards: Some banks offer debit cards that earn rewards on everyday purchases. With this option, you're spending money from your own checking account instead of borrowing. That said, a debit card typically won't help you build credit.
Monitor Your Credit Score and Credit Card Offers
In addition to earning rewards, you can use your new credit card to improve your credit score. You can also use your Experian account to monitor your credit score for free, and you might qualify for more and better credit cards as your credit score increases over time.