Boost your wallet with a rewards card
Financial goals / Credit Cards
Edited by: Eric Freeman, Editorial Lead, Credit Cards
Credit card points, miles and other benefits and perks can feel complicated so we’ve simplified how they work, the different types and how to choose one that will meet your needs.
Image: goals-rewards-cardEditorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.
How do rewards cards work?
Rewards credit cards offer cash back or points for your spending and potentially other perks and benefits like spending credits and memberships. While they all have some things in common, there are key differences among them.
Credit required: Some cards with rewards don’t require excellent credit, but the best available cards typically do. If your credit still needs some work, it’s probably best to prioritize low fees and other credit-building features before rewards.
Fees: Cards with rewards can come with annual fees, but that isn’t necessarily a sign to look elsewhere. Just make sure you’ll earn enough value from the card to justify the cost.
Types of rewards
| What you earn | How you redeem | |
|---|---|---|
| Cash Back | A % back on your purchases | Statement credit or a bank account deposit |
| Travel | Points or miles | Flight or hotel bookings |
| Airline or Hotel | Points or miles | Flights or hotel bookings with a specific brand |
| General Rewards | Points | Cash back, travel and more |
Categories: Rewards are earned in spending categories that correspond to particular kinds of purchases. For instance, a card might offer 3% back at grocery stores, 2% back at gas stations and 1% back on all other purchases.
Sign-up bonuses: Rewards cards often come with valuable sign-up bonuses and welcome offers. These offers require you to meet a spending threshold within a certain timeframe to earn them, but they usually come with a much better rate of return than what you’d get from the standard rewards for your spending.
Redemptions: Some cash back cards allow you to set up automatic redemptions as a statement credit or bank account deposit, but travel, airline and hotel cards always require a manual redemption.
Perks: Rewards cards often offer additional spending credits and extras that don’t factor into your rewards balance. For instance, an airline travel card might offer a free checked bag when you book a flight using your card. Travel cards usually offer more perks than cash back cards.
What type of rewards card do you want?
What are credit card travel rewards?
Travel rewards cards offer points and miles for your frequent spending and can come with valuable perks.
Reality check
Image: true falseA: False! Different travel cards may call their rewards by different names, but points and miles work in the same way. Ultimately, these names are just marketing terms card issuers use to set their cards and rewards programs apart.
Image: Circle + Icon@2x-4How do I choose a rewards card?
The best rewards card is the one that fits your spending habits and needs. Here’s what to consider to find the right option:
The annual fee: Think of the fee as a starting point for determining how much value you’ll get out of the card. The higher the annual fee, the more value you’ll need to get from your rewards and perks to justify the cost.
The value of the perks: A card’s perks sometimes offer more straightforward value than what you get from rewards. For example, a hotel credit card with an annual free night award comes with a high baseline value just from one perk.
Where you spend: Your ideal rewards card will offer rewards in spending categories that line up with your shopping habits. If you usually cook your meals, look for cards with bonus rewards on groceries. If you don’t want to track spending too heavily, look for cards with a high rewards rate on all purchases.
How you’ll redeem: Rewards are only valuable if you use them. While travel rewards cards typically offer the most potential value, they’re not as useful if you don’t travel often, or if the redemption process comes with limitations, such as blackout dates.
Get more from a card
Got questions? We have answers.
A rewards card is worth the annual fee if you’re able to offset the cost with the card’s rewards and perks. Before applying, consider which card features you’ll use to determine how you’ll cover the annual fee.
Either cash back or points can be better rewards depending on your needs and habits. We typically recommend cash back when you want a more straightforward rewards experience and immediate value for your spending. On the other hand, travel rewards can offer greater potential value over the long term.
Rewards cards allow you to carry a balance (unless stated otherwise), but the cost of interest charges will outweigh what you earn from rewards in most cases.
The best flat-rate cash back cards on the market offer 2% back on all purchases. For cards with bonus spending categories, a good rewards rate for a bonus category is usually 3% or higher, but it depends on how common the category is and the card’s annual fee.
Common travel credit card benefits depend on the type of card and the card’s annual fee. The most expensive flexible travel cards on the market come with a bevy of perks like annual travel credits and monthly restaurant credits, while cards with annual fees around $100 might offer less valuable versions of the same benefits. Conversely, airline and hotel cards are most likely to offer perks and credits for those brands, such as shortcuts to elite loyalty status or amenities like free checked bags.
Neither a hotel/airline card nor a general travel rewards card is inherently better than the other — ultimately, the best option for you depends on your travel habits. If you always stay at the same hotel or fly with the same airline, it can be worth sacrificing flexibility for the loyalty perks that come with specific hotel or airline credit cards. But if you like to shop around for the best deals regardless of brand and maximize flexibility, a general travel rewards card is probably best.