How does a rewards credit card work?

Rewards credit cards give you a sort of pseudo-currency (points, miles, or cash) from purchases you make with the card. You can then redeem these for real rewards, such as actual cash, travel, gift cards, and more. For example, you could earn 5% cash back on Amazon purchases, 2x miles per dollar spent on gas that you can redeem for travel, or 3x points per dollar spent on dining and restaurants that you can redeem for a gift card.

Which credit card has the best rewards program?

There is no "best credit card for points" or "best credit card for rewards." Rather, it depends on what type of reward you want to get, and where you do most of your spending currently. However, some cards are broadly popular, and for good reason. The Citi® Double Cash Card offers the highest flat-rate of cash back. The Discover it® Cash Back offers the highest overall percentage of cash back. The Chase Sapphire Reserve® is widely considered one of the best premium travel cards.

Best Rewards Credit Cards of January 2021

Finding the right credit card rewards to fit your needs can be difficult. We at The Ascent have reviewed hundreds of reward credit cards to find the best available for you. Below you'll find the best rewards credit cards that are currently available, reviewed by our team of experts as well as how to maximize your credit card rewards for your lifestyle.

The Ascent's picks for the best rewards credit cards for January 2021:

Travel sign up bonus: Chase Sapphire Preferred® Card
Bonus cash with no annual fee: Discover it® Cash Back
Cash back and 0% intro APR: Chase Freedom Unlimited®
0% intro APR for balance transfers: Citi® Double Cash Card – 18 month BT offer
Gas and U.S. supermarkets: Blue Cash Preferred® Card from American Express
Dining and U.S. supermarkets: American Express® Gold Card
Dining: U.S. Bank Altitude® Go Visa Signature® Card
Travel card with no annual fee: Bank of America® Travel Rewards credit card
Unlimited travel miles: Capital One® Venture® Rewards Credit Card
Dining: Capital One® Savor® Cash Rewards Credit Card
Travel, dining, and gas: Wells Fargo Propel American Express® card
Building credit: Petal® 2 "Cash Back, No Fees" Visa® Credit Card

Ratings Methodology

What is a rewards credit card?

A rewards credit card is a type of credit card that rewards you for using the card to make purchases. You earn rewards at a pre-set rate, such as 5% cash back, or 2x miles for every dollar you spend.

While it is possible to find annual fee-free rewards cards, a good chunk do charge a fee -- 18% of them, according to the Consumer Financial Protection Bureau (CFPB). These fees can be much higher than non-rewards cards, ranging up to several hundred dollars each year.

The best reward cards often have other features, too. Rewards cards may have sign-up bonuses where you can earn a jackpot of rewards if you spend a certain amount within a set time period, such as the first three months after you get the card. Other reward credit card offers include discounted event tickets, free checked bags at the airport, free rental car insurance, and more.

How do credit card rewards work?

Credit card rewards are a sort of pseudo-currency, and are often called "points," "miles," or "cash" as you make qualifying purchases with your credit card. Rewards don't have any real value until you redeem them, however. Some credit card rewards systems can be quite complicated with a lot of rules, while others are simple.

Some credit card enthusiasts prefer the complicated systems and use them to maximize the value they get from the cards. Other people prefer to stick to simple rewards programs where they don't have to worry about the details too much.

Different types of rewards credit cards

There are three main types of rewards credit cards: cash back rewards, travel rewards, and store rewards with specific merchants like Amazon, Home Depot, or Best Buy.

The top rewards credit cards usually offer a blend of cash back and travel rewards, but are still primarily known for one type of reward or another. For example, people see the Chase Sapphire Preferred® Card as a travel rewards card because of its excellent travel rewards program, but you can also use it to redeem your rewards for cash, gift cards, and more.

Cash back credit cards

Cash back credit cards allow you to earn rewards in the form of cash back. This can take one of several forms, depending on the details of your credit card's rewards program.

You might get a statement credit back on your account, which effectively erases some of the purchases you've made. You can also get cash back in the form of a paper check or a deposit into your bank account. Other cards even allow you to pay with your rewards points at popular online merchants like Amazon.

Over 25% of all credit cards with rewards are cash back cards, making them the single most popular category, according to the CFPB. It's easy to see why: Cash allows you to transform your rewards into anything you want.

You can split up cash back credit cards even further. The three main types of cash back rewards credit cards are:

Flat-rate cash back cards: These cards offer a flat percentage of cash back on all of your spending. Typically, these cards will give you between 1.5% and 2% cash back on every purchase you make.
Bonus category cash back cards: These cards give you a trade-off. They'll give you a higher percentage of cash back on certain common purchases, such as gas and groceries or dining and restaurants, but you'll get a smaller percentage of cash back on everything else. Often, these cards have spending caps on the categories as well, so you might earn the higher rate on only a portion of your spending in each area.
Rotating bonus category cash back cards: These cards are like bonus category cash back cards on steroids. You'll get the highest cash back rate of all (usually 5%), but there's a catch: The bonus categories change every three months, it's usually limited to the first $1,500 of purchases in the category, and you often need to activate the category first to earn the extra rewards.

Compare more picks: Check out The Ascent's best cash back credit cards

Travel rewards credit cards

Travel rewards cards allow you to redeem your rewards specifically for travel. This could include airline tickets, hotel and Airbnb stays, tours, car rentals, cruises, and more. You may be able to redeem your rewards for a statement credit towards travel purchases, deposits of miles into your airline frequent flyer account, or use them to make travel purchases directly through your card issuer's rewards portal.

If you're a traveler (or you'd like to be), it often pays off to choose a travel rewards card instead of a cash back card, even though you could use the cash to pay for travel. That's because you can often get a better return on your spending by choosing a travel rewards card.

For example, Chase Ultimate Rewards® points are worth up to $0.05 each, and you can earn up to three of them for every dollar you spend on dining with the Chase Sapphire Preferred® Card. That's an effective cash back rate of up to 15% -- far higher than you'd get with a cash back rewards card.

Compare more picks: Check out The Ascent's best travel rewards credit cards

Store credit cards

Store credit cards allow you to earn points that you can redeem for in-store purchases. Some of these cards only allow you to make purchases from that store, while others can also be used elsewhere.

For example, T.J. Maxx has two different rewards cards. Both of them allow you to buy things at T.J. Maxx stores and earn T.J. Maxx rewards. But only one -- the TJX Rewards^® Platinum Mastercard^® -- also allows you to make purchases with other merchants.

Store credit cards often offer smaller perks like fan club membership, access to special sales, discounts, and more. But unless you really spend a lot of money at the store, it's usually better to stick with a regular cash back rewards card. That way you can still use your cash rewards to buy things at the store if you want, but you're not narrowing your options.

TIP

How to maximize your credit card rewards

Always pay your bill in full: If you carry a balance from month to month, you'll have to pay interest on your credit card. This will wipe out the value of any rewards you get.

Read and understand the fine print: A lot of people miss out on getting the most from their rewards card because they don't understand exactly how the rewards program works. Don't let that be you.

Don't overspend: Rewards cards often tempt people to spend more than they can pay off in a single month. Keep an eye on your spending, and pay your bill every week to keep your spending in check if you have to.

What are the best credit card rewards programs?

There's no shortage of rewards cards out there these days. And while there is no single "best rewards credit card" because everybody's circumstances are different, there are some cards that are generally better than others. Here are some of the top rewards credit cards out there today:

If You’re Looking For:	Consider:
Premium travel benefits	Chase Sapphire Preferred® Card
Unlimited rewards	Citi® Double Cash Card – 18 month BT offer
High cash back	Discover it® Cash Back
Gas points	Blue Cash Preferred® Card from American Express

How to redeem credit card rewards

Each rewards credit card has its own rules for how you redeem your rewards, and

these programs can often be confusing. A full 36% of people don't understand exactly how their credit cards rewards work, according to a 2020 survey from J.D. Power. Here's a step-by-step method for how to redeem your credit card rewards according to what type of card you have:

Redeeming rewards with travel credit cards

Travel rewards cards are especially tricky because they often come with a lot of options for how to use your points, and with complicated rewards programs.

Read the travel program rules: Travel rewards cards can be especially confusing. Read the fine print that comes with your card, especially if it's a part of a larger rewards program like Chase Ultimate Rewards or American Express Membership Rewards.
Develop a game plan: Figure out how you want to use your rewards in advance. Do you want to save up for a specific trip? Or just keep a stockpile for emergency travel, for example?
Know the value of each redemption option: Some redemption options are crappy, and others are especially good. You can look at the value of each point for your redemption options. For example, a single point might be worth half a cent when redeemed for cash, or 1.5 cents per point -- three times as much -- when redeemed for travel.
Research transfer options: Most travel cards let you transfer points to other programs. This is a more technical way to do it, but you can often really skyrocket the value of your points even further by transferring them to a different travel partner instead.
Use your points: Depending on your card you might need to make a purchase and have it erased with your points balance, buy something through a specific portal using your points, or more. Make sure you know exactly how to redeem your points when it comes time to use them for your preferred option.

Redeeming rewards with cash back credit cards

Cash back credit cards offer a simpler rewards structure, but that doesn't mean you're off the hook for making sure you can maximize the value of your rewards.

Read the cash back program rules: You'll need to know how the rewards program operates to get the most from it.
Develop a redemption plan: When do you want to redeem your rewards? Once a year, before the holidays, or just let them accrue indefinitely?
Meet the minimum redemption threshold: Some card issuers only let you redeem your rewards once you reach a certain rewards balance, or in certain increments such as $25 or $50.
Determine how you want your cash: You can often choose between gift cards at merchants, statement credits, a physical check, or more.
Request your reward: Log into your account or call up your card issuer to request your rewards in your preferred form when you're ready.

Is a rewards credit card right for you?

Rewards credit cards aren't right for everyone, and that's OK. But if the following items are true, a rewards card may be a good bet:

You have a good credit score: The best reward credit cards often require a good to excellent credit score, which is usually 670 or above.
You can pay your balances off each month: It's a good idea to pay off your credit card in full each month. If you get into the habit of doing this, you won't owe any interest. On the flip side, if you do have to pay interest because you didn't pay off the whole bill, the cost will usually negate any rewards you get. You can transfer over an existing balance at 0% APR with some rewards cards, but you'll need a lot of discipline to keep paying down your balance every month and not let it grow.
You don't mind putting in a minimal amount of extra work: Rewards credit cards also require you to put some work in to understand how the card works and to make sure you're getting the most from the card. Even the simplest rewards cards require you to follow some rules, such as the procedure to earn and redeem your rewards. At the other end of the extreme, some people spend hours of work each month in maximizing the rewards they get from complicated rewards programs.

Alternatives to consider

Rewards are not the only benefit a credit card can give you. Here are some other types of credit cards that you might find more useful, depending on your situation:

0% APR purchase cards: If you need to make a big purchase, you can use a 0% APR purchase card to skip interest payments for a certain length of time while still earning rewards. Watch out for deferred interest cards, though.

Secured credit cards: If your credit score could use some work, you could apply for a secured credit card. You'll need to put down a refundable deposit, but you can use it just like a regular credit card to build your credit score.

Student credit cards: If you're a student, you may be able to get a low-limit student credit card to help you build your credit. If you learn to manage it well, you'll be at a huge advantage by the time you graduate.

Compare the best rewards credit cards

You have a lot of options when it comes to the best credit cards for rewards. Here are some of the top reward credit card offers we've seen lately:

The Picks
Card	Rating	Great For
Chase Sapphire Preferred® Card	Rating image, 5.0 out of 5 stars. 5.0 stars	Great For: Travel sign up bonus
Discover it® Cash Back	Rating image, 5.0 out of 5 stars. 5.0 stars	Great For: Bonus cash with no annual fee
Chase Freedom Unlimited®	Rating image, 5.0 out of 5 stars. 5.0 stars	Great For: Cash back and 0% intro APR
Citi® Double Cash Card – 18 month BT offer	Rating image, 5.0 out of 5 stars. 5.0 stars	Great For: 0% intro APR for balance transfers
Blue Cash Preferred® Card from American Express	Rating image, 5.0 out of 5 stars. 5.0 stars	Great For: Gas and U.S. supermarkets
American Express® Gold Card	Rating image, 4.5 out of 5 stars. 4.5 stars	Great For: Dining and U.S. supermarkets
U.S. Bank Altitude® Go Visa Signature® Card	Rating image, 5.0 out of 5 stars. 5.0 stars	Great For: Dining
Bank of America® Travel Rewards credit card	Rating image, 5.0 out of 5 stars. 5.0 stars	Great For: Travel card with no annual fee
Capital One® Venture® Rewards Credit Card	Rating image, 4.5 out of 5 stars. 4.5 stars	Great For: Unlimited travel miles
Capital One® Savor® Cash Rewards Credit Card	Rating image, 4.5 out of 5 stars. 4.5 stars	Great For: Dining
Wells Fargo Propel American Express® card	Rating image, 5.0 out of 5 stars. 5.0 stars	Great For: Travel, dining, and gas
Petal® 2 "Cash Back, No Fees" Visa® Credit Card	Rating image, 4.5 out of 5 stars. 4.5 stars	Great For: Building credit

FAQs

A rewards credit card is a special type of credit card that helps you earn real, tangible rewards from your everyday spending. You'll typically need a good credit score for a rewards credit card. You'll also need the discipline and ability to pay off your card each month so you don't have to pay interest, which can cancel out any rewards you do earn.
Rewards credit cards give you a sort of pseudo-currency (points, miles, or cash) from purchases you make with the card. You can then redeem these for real rewards, such as actual cash, travel, gift cards, and more.
For example, you could earn 5% cash back on Amazon purchases, 2x miles per dollar spent on gas that you can redeem for travel, or 3x points per dollar spent on dining and restaurants that you can redeem for a gift card.
There is no "best credit card for points" or "best credit card for rewards." Rather, it depends on what type of reward you want to get, and where you do most of your spending currently.
However, some cards are broadly popular, and for good reason. The Citi® Double Cash Card offers the highest flat-rate of cash back. The Discover it® Cash Back offers the highest overall percentage of cash back. The Chase Sapphire Reserve® is widely considered one of the best premium travel cards.

Best Rewards Credit Cards for January 2021