If you're going to use a credit card, shouldn't you get paid to do so? Rewards cards help you benefit from your everyday spending. Here's what you need to know to get the biggest possible returns from rewards cards.

What is a rewards credit card?

Rewards cards pay you back every time you use them. Many such cards give you back a percentage of each purchase in cash. Others pay you back with points or miles for a specific airline carrier, hotel chain, or general travel expenses. 

A shopper holding a credit card browses on a laptop while sitting on a couch at home.

Image source: Getty Images.

Points and miles rewards are a bit more complicated compared to cash rewards. The value of one mile or one point isn't always equal to an exact cash equivalent. Cards like Chase Sapphire Preferred offer Ultimate Rewards points, where each point is worth 25% more compared to its cash counterpart when redeemed for travel through the Chase Ultimate Rewards portal.

Whether in the form of cash or points, these rewards may seem small, but they can add up quickly. Rewards accumulate in the account over time until you redeem them. 

The three types of cash back cards

Fixed-rate cards

Fixed-rate cards earn a set percentage on all transactions, typically 1% to 2%, depending on the card. These are perfect for people who love a skinny one-credit-card wallet without any fuss. The Wells Fargo Active Cash Card earns an unlimited 2% cash reward and a hefty $200 cash reward sign-up bonus after you spend $1,000 on purchases within three months. Under this no-frills spending strategy, charge everything on the card, including less obvious items like auto payments on home security or internet and phone bills.

Bonus category cards

Bonus category cards earn elevated cash back rewards -- typically 5% in specific categories like gas, restaurants, or grocery purchases for a particular time frame. These bonus categories generally change every three months. A card may offer 5% cash back on Amazon and Target purchases from October through December. The card member must enroll to activate the bonus category either online, in-app, or by calling customer service.

All other general non-bonus purchases continue to earn 1% or 2% cash back without any activation, depending on the card. The Discover "it" card may be perfect for people who love the excitement of different bonus categories each quarter. To maximize rewards, only use this card for the bonus categories. 

Tiered cards

Tiered cards offer a hybrid between fixed-rate and bonus category cards. They offer a few select elevated rewards categories of up to 3% to 4% cash back, and usually 1% on all other general purchases. The Blue Cash Everyday Card from American Express offers benefits like 3% at supermarkets, gas stations, and on online retail purchases, each capped at $6,000 per calendar year. All other purchases earn 1%. Additionally, it gives you a $200 credit on your card balance after you spend $2,000 in purchases on your new card within the first six months of membership.

Rewards can be redeemed online, in-app, or by calling customer service. Cardholders can redeem what they've earned to pay down their balance, donate to charity, book travel, receive gift cards, or just get a check for cash. 

How to maximize credit card rewards 

To make the most of your rewards, consider owning three credit cards: one from each category above. 

Before the start of each quarter:

  1. Plan out your credit card usage.
  2. Look up and enroll in the bonus category for the quarter.
  3. Jot down bonus categories on a sticky note and keep it in your wallet.
  4. Maximize your cash back by sticking to your spending plan.

Card Type

Three-Month Spending Plan

Bonus Category

5% restaurants


3% at supermarkets
3% at gas stations
3% on online retail purchases


2% on everything else

Are rewards credit cards right for you?

Rewards credit cards are ideal for consumers planning to pay their credit card bills in full every month. It's not rewarding to pay upwards of 20% in interest to receive 3% cash back. Besides, spending more than you can afford to maximize sign-up bonuses and rewards is tempting but dangerous. Additionally, some of the best rewards cards may charge an annual fee. The idea is to save money by racking up credit card rewards, not lose money by racking up credit card debt. 

Whatever your spending style or financial goals, a solid strategy is the ultimate goal during these challenging times. If your needs match what they offer, rewards credit cards might be able to help you reach that goal.