What’s the best credit card to have for rewards?
Finding the right card to suit your lifestyle can expand your wallet with perks that will pay dividends long after you leave the store. It also adds new options for putting your benefits to work for you. With so many cards out there, it can help to know what a good perk looks like. There’s no single method to using rewards credit cards, but if you read through this guide, you’ll have a good understanding how they operate and what to look for to put your hands on one that could offer you the most bang for your buck.
Key Takeaways:
- How You Like to Spend Meaning: This tells you what categories you’re most likely to spend in, so you’ll want to pick a card that’ll reward you best in those categories.
- Examine Rewards Structures: These vary from card to card, and rewards come in different varieties (cash back, points or miles), and the systems are structured differently.
- Watch Out For Fees and Rates: Annual fees and interest rates can add up quickly and outweigh the value of your rewards.
- Stay on Top of Trends: Credit card rewards programs are never static, and if you fall too far behind the latest trends you might find yourself missing out.
1. Understanding Credit Card Rewards: Types and Structures
You know there are all kinds of credit card rewards programs serving different types of consumer interests. Recognizing these categories of cards can help you decide which card fits your financial goals.
Types of Rewards:
- Cashback: Get back a slice of your purchases in cash. That’s straightforward and flexible, and it sets you up to leverage the rewards and spend them however you please.
- Points: Settle your score, to redeem for merchandise, gift cards or travel. Points have varied value, depending on how you use them.
- Miles: For travelers, miles can be used to pay for seat reservations, hotel stays or just travel-related things.
Reward Structures:
- Flat-rate Rewards: With these, it’s simple — all purchases earn rewards at the same rate. So you could get 1.5% cash back on all your purchases, so long as you pay your rent on time.
- Tiered Incentives: In tiered reward systems, different levels of rewards produce different returns. You might earn, say, 3 percent on dining, 2 percent on groceries and 1 percent on every other purchase.
- Rotating Categories: Some cards offer higher rewards in categories that change quarterly. These require activation and careful tracking to maximize benefits.
2. Evaluating Your Spending Habits
Here are the tips for selecting the best rewards credit card for you:
Analyze your spending patterns:
Review Statements: Go through previous statements and mark the categories with the highest spending for you: dining, groceries, travel, entertainment, etc.
Assess Monthly Outlay: An idea of what you spend each month provides a basis for determining estimated rewards.
Ensure Rewards Align With Spending: Select a card that gives you higher rewards in the categories where you spend the most. I encourage you to read more about this blog here: What Credit Card is the Easiest to Get? A Guide to Quick Approval Credit Cards in 2024
3. Top Rewards Credit Cards of 2024
Rewards Structure | Annual Fee
Chase Sapphire Preferred® Card
- 5x points on travel purchased through Chase Travel℠
- 3x on dining, select streaming services, and online groceries
- 2x on other travel purchases
- 1x on all other purchases
- Annual Fee: $95
The American Express®
- 4x points on dine in, order takeout, or purchase groceries at U.S. supermarkets (on the first $25,000 spent annually)
- 3x points 3x on flights booked through the portal
- 1x on everything else.
- Annual Fee: $250
Wells Fargo Active Cash®
Card 2% unlimited cashback on all purchases. $0
Note: The above rewards structure may change, as may its fees. Be sure to confirm current terms before applying.
4. Factors to Consider Beyond Rewards
While rewards are enticing, consider the following factors:
Annual Fees: While some cards provide excellent benefits, they often charge significant annual fees. Make sure the rewards are greater than the cost.
Interest rates: If you keep a balance, a low APR might be more important than rewards. To avoid them, pay your balance month to month.
Foreign transaction fees: If you’re traveling outside the U.S., avoid using a card with foreign transaction fees.
Sign-Up Bonuses: Most cards are issued with generous signing bonuses to new cardholders if they satisfy a minimum spending requirement during a defined category period.
5. Maximizing Your Rewards
To maximize the rewards of your rewards credit card:
Strategic Spending: Use the card for purchases in high-reward categories.
Combine Cards: Some consumers use multiple cards to get the most points across different spending categories.
Stay Up to Date: Keep track of changes and activate rotating categories when needed. So pick your redemptions wisely: Not all redemptions are created equal. Points can be of better value if you transfer them to a travel partner, for instance.
6. Common Pitfalls to Avoid
Be aware of potential downsides:
Overspending: Chasing rewards can lead to unnecessary spending. Stick to your budget.
Ignoring Fees: Late payments or exceeding your credit limit can incur fees that outweigh rewards.
Point Expiration: Some rewards expire if not used within a certain timeframe. Regularly check your rewards balance and redemption policies.
7. Staying Updated with Trends
The credit card industry evolves, with issuers frequently updating rewards structures and introducing new cards. Staying informed ensures you continue to benefit from the best offers.
Monitor Industry News: Regularly read financial news outlets for updates on credit card offerings.
Review Your Cards Annually: Assess whether
Conclusion
Choosing the best credit card for rewards ultimately depends on your financial needs and lifestyle. Whether you value cashback, travel perks, or points for merchandise, there’s a card tailored for you. Start by analyzing your spending habits, comparing top cards, and calculating the potential rewards versus fees.
Take action today:
- Ask yourself what you spend most on and match it to a card’s reward structure.
- Avoid overspending or carrying balances to truly benefit from rewards.
- Regularly review your credit cards to ensure they continue meeting your goals.
What rewards card are you considering? Let us know in the comments! For more tips on smart credit card use, check out our other blogs on personal finance and travel rewards.
FAQs on What’s the best credit card to have for rewards
1. What’s the best credit card to have for rewards if I spend a lot on travel?
If you travel a lot, the Chase Sapphire Preferred or American Express Gold Card are excellent choices. They give you higher rewards on travel purchases, and the points or miles you earn can be used for flights, hotels, and other travel-related expenses.
2. Are rewards credit cards worth it if I pay an annual fee?
Yes, provided the rewards you earn are greater than the card’s annual fee. For frequent travelers or big spenders, the high ratio of premium cards that include high-end expenses are often worth it.
3. How do I maximize credit card rewards?
To maximize rewards:
Focus on cards that align with your primary spending categories.
Pay off balances in full to avoid interest charges.
Take advantage of sign-up bonuses and promotional reward categories.
4. Do rewards on credit cards expire?
Yes, some credit cards have expiration policies for unused points or miles. Read the card’s terms and redeem your rewards before they expire.
5. Should I have more than one rewards credit card?
Having multiple cards can be advantageous, as it allows you to:
Optimize rewards across categories.
Maintain flexibility in redemption options. However, ensure you can manage the accounts responsibly.
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