Best Rewards Credit Cards for June 2020

Competition in the credit card industry has never been hotter. And when banks compete, consumers win. The introductory bonuses, rewards programs, and cardholder benefits offered by cash-back and travel rewards credit cards are some of the best we've ever seen. Here's a list of the best rewards credit card offers right now, as well as what you need to know to make the most out of the rewards credit cards in your wallet.

As mentioned above, steadily rising competition among credit card issuers has led to increasingly generous rewards programs and introductory offers. The best credit card rewards programs now offer lucrative sign-up bonuses for new cardholders -- some potentially worth over $500 -- plus high reward rates and valuable perks. Some of our top rewards credit cards are great for frequent travelers, some are great for budget-conscious consumers to use on everyday purchases, and some are somewhere in between.

Selecting from hundreds of rewards cards on the market wasn’t easy, but having so many to choose from allowed us to be picky about which cards should make the list.

Here are the attributes we think are important for any rewards card to have:

• Simple rewards programs: Complexity often works in favor of the card issuer, rather than the cardholder. We value programs that have clear rules for earning and redeeming rewards that don’t make you jump through hoops.
• High reward yields: It should go without saying that a high rewards yield per $1 of spending is one of the most important criteria for making the best cards list. We like cards that offer a high reward rate on categories that make up a majority of a cardholder’s monthly budget.
• Low minimum redemptions: Rewards aren’t worth anything until they can be redeemed. We prefer cards that have a no- or low-minimum redemption threshold. We think cards that have redemption minimums of $25 or less are best, because cardholders will be able to redeem their rewards frequently.
• Annual fees that make sense: Not all of the cards on this list carry annual fees, but we wanted to make sure that when they do, it’s because they offer something more (higher rewards yields or other perks) that can help make up for the cost.
• Sign-up bonus potential: Many of the top cards offer a sign-up bonus valued from $150 up to $750. While they aren’t necessary to make the cut, we like offers that give cardholders an opportunity to get a jumpstart to earning rewards with new cardholder bonuses.

Here's how the credit card rewards process works:

1. Get a rewards credit card. Our best-of list is a great place to start, but the most important thing is finding a rewards credit card that makes sense for you.
2. Use your card to make purchases. As you spend money using your card, you'll earn rewards based on your card's rewards program. For example, if your card earns 3% cash back at restaurants and you spend $100 on a meal, you'll earn $3 in cash back for the purchase.
3. Redeem your rewards. Some cards give cash-back rewards, which can be redeemed as a statement credit or as a check to you. Others offer travel rewards that can be redeemed for flights, hotels, and other travel purchases.

It's also important to note that cards with introductory bonus offers generally have minimum spend thresholds -- typically, the bonus will be awarded upon spending a certain amount of money on the card within the first three months.

With most of these cards, you can expect to earn at least 1% back in value on every purchase, although some of the best rewards credit cards earn significantly higher rewards rates. There are also cards that earn much higher rates in some categories. These spending categories can be fixed or can change over time. Either way, they give you the opportunity to earn more rewards.

This is why it's important to evaluate all of your options to find the card that makes the most sense for you. For example, a card that earns 3% cash back at restaurants and 1% on every other purchase might make sense for someone who dines out often, but a card with a 2% rewards rate on all purchases might be a better fit for someone who doesn't.

There are three types of rewards credit cards: cash-back cards, travel rewards cards, and store credit cards.

Cash-back credit cards

A cash-back credit card works exactly as its name suggests, and this is the most popular type of rewards credit card because of its simplicity. On each purchase, a percentage of the transaction amount gets added to your cash-back balance. The percentage depends on the cash-back card you have and, in some cases, what you buy. For example, if you have a card that earns 1.5% back on everything and you make a $100 purchase, then you'd earn $1.50 in cash back.

The three types of cash-back credit cards:

1. Unlimited, flat-rate cards: These cards offer one cash-back rate that you earn on every $1 you spend. They're ideal for consumers who don't want to carry multiple cards or worry about bonus categories. With a flat-rate card, you can earn a reasonable amount of cash back on each purchase without making your payment choices more complicated.
2. Bonus category cards: These cards offer higher cash-back rates on specific types of purchases, such as 3% back at grocery stores, and a lower flat rate for all other spending. Many of these cards put a limit on how much bonus cash back you can earn. For example, a card may earn 4% back on dining, but only up to $10,000 in annual spending. If there are specific areas where you have high monthly spending, then bonus category cards could earn you much more cash back.
3. Rotating bonus category cards: These cards also offer bonus categories with higher cash-back rates, but the bonus categories change periodically -- typically every quarter. They usually limit the amount of bonus cash back you can earn and require that you activate your bonus categories to earn the higher bonus rate. The biggest advantage with these cards is that they can earn some of the highest cash-back rates on their bonus categories, with some offering 5% back.

Travel rewards credit cards

Travel rewards credit cards earn rewards that you can redeem toward travel purchases. These rewards are referred to as either points or miles, depending on the card. Most of these cards have bonus categories with higher rewards rates and a lower rate for all other spending, but there are also some unlimited, flat-rate travel cards. This type of card often includes perks to enhance the travel experience.

The way you can use travel rewards depends on the card you have. Here are the different redemption methods that cards can offer:

1. Redeeming rewards as cash for travel purchases: You book travel at its cash price and pay for it using your rewards. The standard value of travel rewards is $0.01 per point/mile, but this can vary from card to card. To book travel with rewards this way, you typically need to go through the card issuer's travel portal. However, some cards let you apply rewards as a statement credit to previous travel purchases.
2. Booking award airfare or hotel stays with rewards: You use your rewards to book travel through an airline or hotel's loyalty program. For example, an airline ticket may cost 20,000 miles, or a hotel stay could cost 10,000 points per night. This option is most common with cards that are tied to one airline or hotel's loyalty program.
3. Transferring rewards to travel partners: You transfer your rewards to your loyalty program account with any airline or hotel that's partnered with your credit card company. If your credit card lets you transfer rewards to United Airlines, Southwest, and Hyatt Hotels, then you could send points/miles to any of them. You can then use your transferred rewards to book airfare or hotel stays.

While redeeming your rewards as cash is the easiest method on this list, booking airfare or hotel stays with rewards sometimes gets you much more value. That's why cards with transferable points are highly valuable, if you don't mind a bit of a learning curve.

Travel cards may also offer other redemption options such as cash back. However, these cards will get you much less value for your rewards. If you're going to get a travel card, you should use your rewards only for travel.

Store credit cards

Store credit cards are tied to one specific retailer and earn rewards you can use with that retailer. They typically earn a large amount back at that retailer, with several store cards offering rates in the 2%-to-5% range. The most common way to redeem rewards from a store card is as a gift certificate or a spending credit that you use on purchases.

Some store cards can be used for payments only at the retailer that issues them, whereas others can be used anywhere credit cards are accepted. There are also stores that offer both card options and decide which one to issue based on your credit. If your credit is good enough, the store will issue you a card that can be used anywhere. If not, it may issue you a card you can use only at that store instead.

For the typical consumer, a cash-back or travel card will provide more value, because those offer more useful rewards. But most of those cards also require good to excellent credit. On the other hand, store credit cards are often available to applicants with lower credit scores. This can make store cards a good option for earning rewards while building credit.

Credit card rewards are benefits you receive for the purchases you charge to a credit card. These programs date back all the way to the 1980s, when card companies started offering cash back and airline miles for making purchases on credit. Later, other companies rolled out credit cards that earned free long-distance minutes, or cash towards the purchase of an automobile.

Cardholders can expect to earn at least 1% in cash back or travel value on every purchase, and the best cards can offer rewards that rise as high as 5% on certain types of spending. Travel cards also boast features like free checked bags on flights, extended checkouts at hotels, and other perks that would have been unthinkable when the programs first began. It's also important to note that credit card rewards are typically only paid on purchases. Cash advances and balance transfers are generally not rewards-eligible purchases.

Although it may sound like a cop out, there isn’t any one card that offers a rewards program that is obviously better for all people than any other credit card. We’d encourage you to compare credit card rewards based on the types of spending that make up the majority of your budget, as category bonus cards may be a better option for people who spend heavily in one particular corner of their monthly budget.

Before applying for a rewards card, there are three ground rules you should know:

• Don’t redeem travel rewards for cash: One of the most important decisions to make is whether you want cash back or travel rewards. Travel rewards, although lucrative, usually convert into a lesser amount of cash than travel. Unless you know you will have travel expenses, a cash-back card is usually a better choice.
• It doesn’t make sense to carry balances: While spending more means earning more rewards, it doesn’t make sense to spend more money, or carry balances, in order to earn more in rewards. Just one or two months of carrying a balance can result in interest charges that vastly exceed the rewards you earn on your card. If you have credit card debt, a balance transfer card would be a smarter choice than a rewards card.
• Be smart about annual fees: We think it makes sense to pay an annual fee only when it pays for itself. With so many no-annual-fee credit cards offering rewards yields of 1.5% in cash or travel, we think it’s smart to use this as the baseline to compare to an annual fee card.

If you follow the advice above, you’ll be well on your way to earning and maximizing rewards on all of your spending, whether it’s in the form of cash back or travel value.