*Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on product links. For more information, please see our Advertiser Disclosure
There are 199.8 million credit card holders in America, and 60% of those people own rewards credit cards. Even though over half of America’s cardholders carry rewards cards, there are close to a third that lose out on the rewards they have earned. We can only assume that this is because many credit card users are unaware of how to earn rewards and how to cash them in for big savings.
Our newest infographic, The Credit Card Rewards Card Game, will show you the tricks to earning rewards, the different types of rewards credit cards and how those sign-up bonuses actually work. Earning rewards is one of the best reasons to use a credit card, but you have to learn the rules of the game before you can win big.
Know the Rules
The first step to raking in the rewards is learning the rules of the game. The best rewards programs are tied to credit cards for excellent credit, which is a FICO credit score of about 700 and above. Let’s take a look at some of the rules and fees that are often overlooked by consumers:
- Spending Tiers. Some credit card require you to spend a certain amount within a certain time period to earn the sign-on bonus, while others can earn the bonus after making their first purchase with the card.
- Registration Requirements. Some rewards programs require you to sign-up for the rewards category before you can earn 2, 3, or 5% on certain purchases. Forget to sign up and your purchases may only earn 1% cash back or 1 reward point.
- Rewards Limitations. Some rewards can’t be claimed until you reach a certain amount, such as $25 in cash back value.
- Penalties. If you miss a payment of your account goes into a delinquent status, you could lose all your accumulated rewards.
- Changing Terms. Programs and terms change all the time. Be sure to read all newsletters, notifications, and announcements to changes in your terms and conditions.
- Fees. Using your rewards card may not be beneficial if you’re paying more in fees than you’re earning in rewards. Make sure your card is working for you, not against you.
Types of Rewards Credit Cards
Before you pick a rewards card, understand your spending habits and so you can pick the best card for you. For example, if you travel a lot for business or leisure, you may want to consider the Capital One® VentureOne® Rewards Credit Card. If you can follow the rotating bonus categories –cards that earn bonus rewards that change every quarter- Chase Freedom® may be a good option for you. If you can’t follow rotating categories, the Citi® Double Cash Card – 18 month BT offer may be a good fit instead.
Here are the types of rewards cards on the market today.
- Cash Back- These credit cards allow cardholders to earn anywhere from 1-6% cash back for their purchases.
- Travel Rewards & Air Miles- These rewards are tracked as points, and earn points or miles for every dollar spent and may also earn bonus points or miles on certain travel-related purchases. Points can be earned travel related purchases such as hotels, airfare, cruises, train tickets, bus tickets, car rentals, and more depending on your travel rewards program.
- Points- Credit card purchases that earn points can be redeemed for merchandise, gift cards, statement credit, or as cash back. Occasionally these points can be transferred to airline miles or applied to hotel stays, but you won’t likely get the most value using this method.
- Rewards- These credit cards are typically merchant-specific. The programs offer cash back when you shop with certain retailers or make purchases in certain categories, such as gas and groceries that sometimes rotates every quarter. These merchants may also offer discounts for future purchases.
- Special Interest Cards- These credit cards earn rewards for very specific purposes, such as military rewards cards, business credit cards, and credit cards that allow cardholders to donate rewards or points to a charity.
Rewards can be redeemed in a number of different ways, depending on your card’s rewards program. Rewards can be redeemed as:
- Statement Credits. Using rewards in this way will simply put your earned rewards back into your account as a credit. Although it will reduce the total balance owed, it’s important to know that some programs don’t consider this as payment. Don’t make that mistake or you could have a missed payment reported to the credit bureaus.
- Cash Back. This can be used the same as a statement credit or you can redeem into your own checking account or receive a check by mail.
- Cover a Past Expense. Some rewards programs allow cardholders to essentially “erase” a past purchase. You simply sign into your account and choose a purchase to erase.
- Travel/Airline Miles. Travel rewards experts believe redeeming points or miles for travel will get you the most value for your earned rewards.
- Gift Cards. You can apply your rewards and points to gift cards, which can earn you 5% - 20% cash back.
- Merchandise. If your rewards program has their own online shopping mall or affiliation with Amazon.com, for example, you can use your rewards to cover those purchases.
- Transfer to a Program or Friend. Some travel rewards cards have affiliations where you can only use your earned rewards with Travelocity.com through their rewards portal, for example, while others may allow you to transfer your rewards to a travel program like the United Airlines Mileage Plus Program or Priority Pass. If you have a family member or friend that has the same credit card you have, you can also transfer some rewards into their account.
- Donate. Some credit cards will have programs where they are affiliated with a charity programs, allowing the cardholder to choose which charity to donate to, while others are created for a specific charity, like the Susan B. Komen Credit Card.
Cash in & Maximize Your Rewards
Once you know the rules of the game and understand your rewards program, you can start racking up the rewards. You’ll want to pay close attention to your rewards statement that you should receive every month along with your bill.
Keep track of those rewards and make sure you are earning rewards as often as stated in the credit card agreement. Be careful not to cash in those rewards too soon because it may be worthwhile to rack them up to cover the cost of a high-ticket item. You can also purchase points to add to your program in order to cover an expensive purchase. It may sound like a complicated process, but once you understand all the rules you’ll be maximizing rewards and taking full advantage of everything your credit card has to offer.