Credit card companies love to entice people with special reward programs – and for good reason – it works! Reward credit cards have become the preferred form of plastic for many consumers; providing cash bonuses, airline miles, gasoline rebates, gift cards and more. So how do you choose the best reward credit card with so many options to choose from? Here’s what to consider:
The Most Important Factors
The most important thing to consider when choosing a reward card is your personal needs and spending habits. Depending on your lifestyle and personal interests, different cards tend to make more sense than others. Instead of trying to choose between a gasoline credit card and an airline credit card, look at your spending habits and how meaningful the payouts are first to see which type of program would work best for you. Because different cards reward different kinds of purchasing behavior, pick the offer that will benefit you for what you do the most – whether it’s shopping, driving or traveling.
If you don’t travel much, then an airline credit card wouldn’t make sense since you won’t be able to maximize your bonuses and earn extra points. Plus, you’re less likely to need the rewards you earn – so you’ll be wasting time and money on higher interest charges and / or annual fees. Likewise, a shopping or rebate card tends to pay more when shopping a specific locations. Do you frequent these locations? Can you use the rewards you’ll earn?
Types of Reward Cards
- Airline / Travel Cards: Airline credit cards allow you to earn frequent flyer miles that you can redeem for free flights, hotels, rental cars and more. Most airlines have combined these offers with their frequent flyer programs so that you can earn even more when you charge flights and other purchases. Great for travelers!
- Cash Back Credit Cards: Undoubtedly the most popular reward system, cash back credit cards allow you to earn a flat percentage (normally 1% – 5%) on your total credit card purchases. This amount will be paid in the form of a check or a statement credit at the end of the month / year. With many offers, higher bonuses can be earned when you shop at particular locations.
- Rebate Credit Cards: This is the similar to the cash back system but instead of actually receiving a check in the mail, you’ll see rebates on your credit card for future purchases or you’ll receive cash rebates at authorized locations. Gift cards could also be considered a form of rebate.
- Point Credit Cards: Point programs allow you to earn points for your daily purchases. These points then accumulate and allow you to earn a variety of rewards. In most cases, you need to reach a minimum point value (i.e. 2500 points) to earn a bonus.
- Gasoline Credit Cards: Gasoline credit cards are either tied to a specific gasoline brand that rewards loyal customers, or they’re targeted towards general gas consumption. Rewards are usually in the form of monthly cash rebates applied to the credit card for future gas purchases. Normally, they operate in a tiered fashion (i.e. 6% for gas purchases, 3% for grocery store purchases, and 1% for all other purchases).
- Retail Credit Cards: Retail credit cards are usually tied to specific merchants like Target, Wal-Mart, Home Depot and more. Retail / shopping cards operate like cash back, rebate, or points cards, but extra bonuses are only rewarded at those particular merchants.
Other Factors to Consider
Once you choose the type of reward credit card that will benefit you the most, consider the following factors to determine the best deal:
- Reward Percentage / Amount: This is probably the BIGGEST factor to consider! How much will you earn? Percentages / points can vary greatly between offers. Look at how generous the company is and where you must make your purchases to earn points.
- Bonus Rewards / Points: Many rewards programs offer “double rewards” for a specified introductory period or “bonus points” for getting approved. How much extra can you earn? How long is the introductory?
- Fees: Many reward credit cards have annual fees. Are there any with no annual fee? Which card has the lowest? What other fees are associated with the offer?
- Reward Limits: Unfortunately, many credit card companies try to limit how much you can earn with their programs. They’ve set limits; normally, on an annual basis. Try to look for reward cards without any limits.
- Reward Form: In what form do you receive the reward? Cash? Credit applied to your credit card statement? Points that you exchange for items? This really depends on how you personally like to deal with your rewards.
- Reward Expiration: Do the rewards expire? How much can you convey over a calendar year and how long are your rewards ultimately good for before expiring?
- Reward Exclusions: How can you spend your rewards? The most open-ended program would simply send you a check that you could cash or apply a credit towards your credit card balance. Programs with the most restrictions may only allow you to use rewards for purchases towards a specific item (such as a new car, or shopping at a specific location).
- Lowest APR: Which card has the lowest APR? Is there an introductory APR with the offer? If a 0% offer is available, consider it first since you’ll save the most money during the intro period. Which card has the longest intro period?
* See a complete list of the best reward credit cards →