Best Rewards Credit Cards

With each passing year, it seems as though credit card rewards only get better. The best credit card rewards programs now offer extremely lucrative sign-up bonuses for new cardholders, plus high rewards yields on every dollar charged to the card. The most rewarding card on our list offers as much as $750 in travel value in the form of a new cardholder bonus, and a rewards yield as high as 4.5% in travel value for spending on restaurants and travel purchases, which showcases the value offered by the top rewards cards.

Selecting from hundreds of rewards cards on the market wasn’t easy, but having so many cards to choose from allowed us to be picky about which cards should make our list of the very best. We looked for a handful of attributes that we think are important for any rewards card, including:

• Simple rewards programs -- In our experience, complexity often works in the favor of the card issuer rather than the cardholder. We like programs with clear rules for earning and redeeming rewards that don’t make you jump through hoops to get the most value.
  

• 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 our list of the best cards. We like cards that offer a high rewards 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 since 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 our favorite 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.

Credit card rewards are benefits you receive for every $1 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.

Credit card rewards generally come in two types: Some cards offer cash back, while others offer travel rewards that can be redeemed for flights, hotels, rental cars, and other travel-related purchases.

Travel rewards come in two flavors. Some cards offer a travel portal through which points or miles you earn can be redeemed for travel. Others offer statement credit redemptions, which allow you to redeem rewards against travel purchases you make. Both types of travel rewards have their unique pros and cons.

• Travel portal rewards cards -- Chase Sapphire Preferred® and Chase Sapphire Reserve® are two of our favorite cards for travel portal rewards. These cards offer an extra perk in that the points you earn can be transferred to travel partners, making them more valuable for people who want to redeem points through hotel and airline loyalty programs.
  

• Statement credit rewards cards -- These rewards cards are excellent for people who like to shop around for travel deals and want flexibility in how they book travel purchases. Many people prefer statement credit rewards cards because the rewards can be redeemed any time you can make a travel purchase, and aren’t subject to limitations like blackout dates. The no-annual-fee Bank of America® Travel Rewards credit card and its sister card, Bank of America® Premium Rewards® credit card are examples of statement credit redemption travel cards.

People who are good at bargain shopping for travel deals may come out ahead with statement credit rewards cards. That’s because the rewards you earn can be redeemed for statement credits against a travel purchase made through an online travel agency (Priceline or Expedia, for example), as well as purchases made directly with a hotel or airline. If you’re the type of person who uses discounts and coupon codes and search high and low for a bargain, statement credit travel cards may offer more value to you.

Cash back cards are really simple. When you swipe your card to make a purchase, you earn rewards based on how much you spend, and what you buy. Like travel cards, cash back cards also come in two different types:

1. Unlimited, flat cash back on all spending -- These cards usually offer rewards equal to 1% to 2% on every $1 you spend. Since all types of spending earn at the same rate, you won’t have to bother thinking about which card to use for certain purchases to get the most value. These cards are great for people who simply want to earn a reasonable rewards rate on all types of spending, and don’t want to bother carrying several cards in their wallets.
   

2. Category bonus cards -- These cards offer large bonuses for spending in certain categories. Most programs use a rotating bonus category program, wherein certain types of spending (department stores, home improvement stores, gas purchases, restaurants, etc.) earn at higher rates for three months out of the year. The downside with these cards is that the base rewards rate is usually pretty low (1% or less). If you spend heavily in a certain category, though, these cards can offer a lot of bonus value.

To illustrate the utility of rotating category bonuses, we’ll use one of our favorite cards, Discover it® Cash Back, as an example. One thing we like about this card is that it offers visibility into its rotating categories by publishing its rotating rewards categories before they take effect. Its bonus categories in 2018 are shown in the table below.

Notice how Discover it® Cash Back offers bonus rewards in categories that are seasonally relevant. Its fourth-quarter bonus category can be especially lucrative during the holiday shopping season in which cardholders can earn up to $75 in bonus cash back by maxing out the 5% bonus on up to $1,500 of spending.

New cardholders really haul in the rewards with this particular card. That’s because Discover it® Cash Back matches all the cashback earned in the first year. Therefore, if you max out all four bonus categories and earn $300 in rewards in the first year, you’ll earn $300 in matching rewards after the 12th consecutive billing period of having the card. We think of it as offering a 10% rewards yield on bonus categories in the first year, which makes it a top choice in the rotating bonus category.

Category cards are most valuable when paired with another card that offers a high rewards yield on all types of spending. Using an unlimited 1.5% cash back card in tandem with a card that offers 5% or more in rewards on bonus categories can help you maximize the rewards yield on every swipe.

Families who have large grocery and gasoline budgets may be best suited for cards that offer bonus cash back on groceries and gasoline throughout the year.

One of our favorite cards, Bank of America® Cash Rewards credit card provides 3% cash back on a category of your choice, 2% on grocery stores and wholesale clubs, and 1% on all other types of spending. The category bonuses are limited to the first $2,500 in combined spending per quarter, which is one of the highest caps for the category bonuses.

We like this card because it also offers loyalty bonuses for being a Bank of America customer. When rewards are simply redeemed into a Bank of America checking or savings account, cardholders earn a 10% bonus, thus increasing its effective rewards rates to 3.3% on gas, 2.2% on groceries and wholesale clubs, and 1.1% on all other types of spending.

If you have lower spending needs or use multiple credit cards, you’re likely a good candidate for cards that do not have an annual fee. Though the credit cards with the best rewards typically have annual fees, it rarely makes sense to pay an annual fee unless you can put tens of thousands of dollars of spending on one card each year.

Most cash back credit cards do not have an annual fee, whereas many travel cards do. Note that only one no-annual-fee travel card makes our list of the best rewards cards.

One of the best things about using no-annual-fee credit cards is that you don’t limit yourself to any one card, nor will you have to choose between keeping a card open or closing it in order to save on an annual fee.

We think it’s a benefit to have credit cards that you can keep open for life. That’s because as much as 15% of your credit score is determined by the length of your credit history. For this reason, we think it’s smart to have at least one no-annual-fee credit card that you keep open for the long haul, helping you build more credit history with each passing month.

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, though 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 only makes sense to pay an annual fee 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 high rewards on all of your spending, whether it’s in the form of cash back or travel value.