What Is a Rewards Credit Card ?
Rewards recognition cards offer you some type of “ reward ” —typically cash back, points, or travel miles —for every dollar you spend, sometimes up to certain limits. Depending on the wag, you can then use your rewards in a diverseness of ways .
- Rewards credit cards typically offer cash back, points, or travel miles for every dollar you spend.
- Rewards cards make the most sense for consumers who pay their balance in full each month. Otherwise, the interest charges could easily exceed your rewards.
- The best rewards card for you will depend on your everyday spending habits and how you plan to redeem your rewards.
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How Rewards Credit Cards Work
Rewards cards represent a large part of the credit circuit board commercialize today, and they seem to offer something for everyone. In addition to different rewards structures, the cards vary in terms of how your rewards can be redeemed and what kinds of things they may be redeemed for .
typically, you can redeem your rewards for checks, statement credit, trade purchased through the card company, give cards, and/or travel perks. At the conclusion of each bill motorbike, you can see your current rewards counterweight on your credit card instruction .
many credit tease companies besides offer introductory bonus rewards to try to entice you to sign up. Those offers may involve hundreds of dollars in incentives once you reach a certain spend threshold, along with an basic 0 % APR for the first base respective months, and no fees for the first year .
How to Compare Rewards Credit Cards
If you ‘re shopping for a rewards credit card, here are some of the important features to consider .
- Annual fees. Not all rewards credit cards have annual fees, but a lot of the more lucrative ones do. So before you sign up, it’s important to weigh the cost of any annual fee against the value of the rewards you expect to collect over the course of the year. Paying an annual fee of several hundred dollars, as some high-end cards charge, could easily offset your rewards unless you’re a big spender.
- Interest rates. Many rewards cards offer a promotional 0% APR for the first year. But after that, unless you pay your balance in full each month, you’ll be subject to interest charges. Interest rates on rewards cards can be steep—often 15% to 20% or higher—and they can add up quickly if you keep running a balance. So, like a stiff annual fee, interest charges can outweigh any rewards you earn from your card.
- Tiered vs. fixed rewards. Some cards have tiered rewards structures, while others are fixed. Tiered cards offer different levels of rewards for different kinds of purchases. For example, a tiered card might offer 3 points for every dollar you spend on gasoline, but only 1 point per dollar on groceries. Fixed cards, on the other hand, pay the same level of rewards regardless of where you use them. For example, a fixed rewards card might offer 1% or 1.5% cashback on all purchases.
- Cashback spending caps. Many of the cards that offer cashback rewards put caps on how much you can earn in their most lucrative spending categories. For example, a card might pay 3% cashback on the first $1,500 you spend on groceries each quarter, but just 1% on any additional spending in that category until the next quarter begins.
A beneficial rewards credit circuit board will mesh with your casual outgo habits—not force you to change them or to overspend fair for the sake of rewards.
How to Find the Best Rewards Credit Card for You
No rewards poster, no count how generous it may seem, is good for everyone. A lot depends on your especial position. so before you start applying, it ‘s deserving taking a couple of extra steps .
1. Analyze your spend habits
The best rewards calling card for you will be one that takes advantage of your usual spend habits—without forcing you to change your habits just to chase rewards. For example, do you spend a batch of money each calendar month on gasoline, on groceries, or on restaurant boom ? If so, a card that provides extra rewards in those categories could be the best match for you .
Are you an avid traveler ? In that sheath, a tease that rewards travel purchases—and that allows you to redeem your rewards for farther travel—might be your best choice. similarly, if you buy most of your clothing or family goods at a particular retailer, or frequent a detail hotel range, a co-branded rewards tease issued in junction with that company might make sense .
besides, consider how much you spend overall. A calling card that requires you to spend $ 15,000 within the first three months in order to earn a big introductory bonus will be of little use to you if you entirely spend $ 1,000 or $ 2,000 a calendar month on your accredit cards. ( Worse, it could encourage you to overspend ! ) In that case, count for a calling card with a lower spend doorsill and, most likely, a smaller basic bonus .
2. Check your credit score
You ’ ll need a well credit grade to qualify for a good rewards circuit board. According to Experian, one of the three major national citation report agencies, it typically takes a credit score of at least 670 in order to qualify for a rewards batting order. ( For people with lower scores, a secured recognition card could be an option. Some of them nowadays have rewards programs, angstrom well. )
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so before you apply for a rewards card, take a expect at your credit sexual conquest and give birth in mind that the cards with better benefits and higher outgo limits may be out of range if you have a express or less-than-good accredit history. What ‘s more, applying for excessively many citation cards can hurt your sexual conquest .
The Bottom Line
There are lots of rewards cards out there, but finding the right one for you can take a moment of research. If you ‘d like some help, Investopedia publishes frequently update lists of the best rewards citation cards for particular types of users. Bear in mind, excessively, that you might want more than one rewards calling card. By mixing and matching travel, points, and cashback cards, you can find a combination that gives you the maximum benefit from all of your spend .