These Are the People Who Are 'Winning' the Credit Card Rewards Game, Experts Say

Have you felt like the world of rewards credit cards is only for an "exclusive" club of shoppers, where maybe you don't belong? Or if you have some rewards credit cards, maybe you've wondered how to get the best deal from credit card reward points.

The truth is, a wide range of people can get benefits from rewards credit cards, not just the biggest spenders and higher earners. But if you want to get the best deal from rewards credit cards, it's important to be a savvy customer with a good credit score.

Let's take a look at what kinds of credit card customers tend to get the best deal from credit card reward points -- and how you can join them.

How to get the most out of credit card rewards

First, let's talk about what we mean by winning the credit card rewards game. If you're a rewards credit card customer, you should try to:

• Get more value (cash back, frequent flyer miles, free hotel stays, etc.) from the cards than they cost in annual fees.
• Avoid paying late fees and interest.
• Pay your credit card bills on time (or even early) to protect your credit score.

At their best, rewards credit cards should make your life better. They should help you unlock extra deals, discounts and value-added experiences from your everyday spending. But if you're not careful, these cards can be risky -- and cost more than they're worth.

Are reward cards worth it? Example success story

Let's say you have a travel rewards credit card that charges you an annual fee of $250, but the card offers $300 worth of free streaming subscriptions, cash back on restaurants, and a free membership to TSA PreCheck. Along with that, your reward points are worth more when booking travel.

With this card, you may be able to get hundreds of dollars per year of free travel and discounts that are worth much more than the $250 annual fee. Getting a good deal on rewards credit cards is not just a matter of what you pay, it's the value that you receive.

Downsides of rewards credit cards

No matter what card you have, winning the credit card rewards game requires you to pay your bills on time, pay your balance in full, and avoid paying extra fees or interest to the credit card company. If you're not careful or have some bad luck with your personal finances while using rewards credit cards, you might end up paying more than the cards are worth.

Let's say you have a card that pays you 1% cash back and you spend $10,000 in a year; you'll get $100. But if you carry a balance and pay $200 in interest, you actually lose money ($100) on that card. And if you make a late payment on that card, your credit score could take a big hit -- raising your costs of borrowing in other areas of life, like auto loans or mortgages. Credit card rewards aren't worth it if they cost you more money than you gain.

Credit card reward points success is not just about income

You might think the best rewards credit card experiences are only for the wealthy, right? Like it's an exclusive velvet-roped VIP club. But the truth is, people of all income levels can benefit from credit card rewards -- as long as they're savvy about how to use the cards.

Research shows that people who are the biggest "winners" of the credit card points game are people with high FICO® Scores -- not just people with high incomes. A 2023 study from Federal Reserve economists (titled "Who Pays for Your Rewards? Redistribution in the Credit Card Market") tried to solve the puzzle of what it takes to get the best deal from rewards cards.

The Federal Reserve study found that financially "sophisticated individuals" who have higher FICO® Scores tend to get the best deal from rewards credit cards -- they get a net gain of rewards from their cards that's bigger than what they pay. But people the study described as financially "naive individuals" unfortunately are more likely to lose money on reward cards -- people with lower FICO® Scores are more likely to pay more interest and fees than they gain in rewards.

People who get the best deal from rewards credit cards tend to have higher incomes (more than $79,000 per year) and "super-prime" FICO® Scores of 780 or higher. People who end up paying the most for their rewards cards also tend to have higher incomes, but lower FICO® Scores -- that's because they tend to spend more on their cards and end up paying more interest than lower-income customers do.

Bottom line

If you want to get the most out of your rewards credit cards, it's important to understand the rules and read the fine print. Pay your credit card bills on time, or even early, and try not to carry a balance that will cost you money in interest. Being a sophisticated customer can help you get the benefits of your card without paying extra money.

If your credit score is not high enough to qualify for the rewards cards you want, you could apply for a secured credit card or use a credit-building product to boost your score. Or sign up for a credit-monitoring service to understand your credit report and learn how to build credit.