Credit Cards Rewards: How do they work?

We are all always looking for practicality and convenience when it comes to spending money. With credit cards rewards you have the possibility to spend money and at the same time have a reward for it

They really are an incentive for you to use credit cards.

Because credit card rewards offer an incredible way to earn cash, miles, or points every time you make a purchase or spend. 

This, of course, has the power to raise the value of paying with a credit card rather than cash or a debit card. 

Obviously, this modality is not saved from having rules and conditions that apply to its use, like any other credit and rewards system. 

That is why we want to explain a little about what credit card rewards are and how they work.

Credit cards that offer rewards usually work with different types of rewards: 

Cashback

Cashback is an easy way to get rewarded for making purchases with your card. With this type of reward, you will get back a percentage of the money you’ve spent for each of the eligible purchases you make with the card. 

Rewards programs include tiered, flat rate, and revolving bonus categories.

However, there are some cards that offer structure combinations, such as Chase Freedom Unlimited. With this type of credit card, you can earn up to 5% on trips purchased through Chase Ultimate Rewards; 3% in restaurants and pharmacies, and an unlimited 1.5% on all other purchases. 

This is a small example of the type of rewards you can get with credit cards that offer cashback. Of course, it all depends on the credit card you use and the program and structure that it has.

Points

Cards that work with points usually reward the owners of the credit card with a fixed amount of points for every dollar spent and a 1:1 exchange conversion. 

In the same way, everything depends on the issuer, because each one has different reward rates and conversion rates, as well as different redemption options.

Miles

These types of cards focus on collecting travel credit rewards, they are also known as mile cards, and the benefit they offer is that with them you can redeem your rewards for travel-related items and benefits, such as airline tickets, hotel stays, and access to airport waiting rooms. 

These cards are responsible for accumulating miles for every dollar you spend on eligible purchases, they are almost always directed to travel expenses, but they can also include purchases that are not directly related to travel.

Gift cards

Gift cards are one of the best and most common ways to redeem your earned rewards.

For this type of exchange, you have a lot of ​​options, from clothes or things that you want to some other type of entertainment that you enjoy or dinners in restaurants that you like. 

The good thing about gift cards is that if you have cards from several issuers, you can find many different options and brands to choose where and how to redeem your rewards.

Online retailers

There are some issuers that offer to exchange the points you have accumulated for products online, such as Amazon. 

This may seem like one of the best ways to redeem your points, but if you decide to do so, we recommend that you explore and evaluate your options and possibilities very well, since there may always be certain restrictions from the issuer that do not allow you to obtain some type of product.

Most of the time the reward is measured depending on the rate per dollar spent. 

And if you know how your type of card works and everything you can win with it, you can even maximize your earning potential considerably, which could be a great financial relief if you know how to take advantage of it.

Also, most of the cards that offer rewards get a fixed rate, which means that they offer a fixed amount or a percentage of return already established for each purchase you make.

There are other credit cards that work with much higher rates if you purchase something of a certain category. 

So basically the rewards with credit cards are some kind of benefit that you get for the fact of getting a credit card and shopping with them. 

It is a win-win if you are looking to get something for each payment you make.

Now that you already how credit card rewards work, we want to give you the top 5 of some of the credit cards with the best rewards and no annual fee, so you can choose the ideal for you:

For cashback: 

Wells Fargo Active Cash℠ Card: offers a 2% of reward on every purchase. 

For dining and groceries:

Capital One SavorOne Cash Rewards Credit Card: up to 8% of rewards to eat at home or dine out.

For traveling:

U.S. Bank Altitude® Connect Visa Signature® Card: it has no annual fee during the first year and a 1x to 4x of reward, perfect for road trips.

For students: 

Discover it® Student chrome: provides up to 2% of reward rate for college students. 

For families:

Blue Cash Preferred® Card from American Express: it is an annual fee only for the first year, but offers 1%-6% of rewards for groceries, gas, commuting, and streaming, which makes it perfect for families or homes. 

You must always bear in mind that not all credit cards are going to be ideal for you because you must evaluate the reward programs that the credit card manages and take into account your spending habits and the general structure of the instrument.

If you end up choosing one that doesn’t really suit your lifestyle and financial situation, you could run the risk of missing opportunities to earn rewards and get the most value out of them.

Paying a mortgage is a process that will last for long time periods, so it is recommendable to be aware of the paydays and put together a payment plan that fits your routine.

Also, when you choose your credit card as your payment method for the mortgage, its credit should be enough to cover the payment each time you use it. This way, the payment process for the mortgage will be easier to handle.

The whole time that this process will last is another thing to have in mind because the payment will be an important part of your routine. 

Make sure to schedule your payments, this will give you better control over your personal expenses and will remind you to make your payment on the due date.

This credit card is actually quite similar to the one we mentioned above. It has the same characteristics, with the only difference being that it works with the cashback system. 

What is the cashback system? : It is a system that offers the advantage that a person who makes a purchase can receive a part of the amount back.

Besides having the cashback system, this type of credit card has exactly the same characteristics and percentages as that of students: no annual cost, a regular APR of 12.99% – 21.99%, and intro APR of 0% on Purchases for 6 months. 

It also provides a 10.99% intro APR on Balance Transfers for 6 months. 

Which maybe makes it one of the best credit cards with a cashback system for students. 

The recommended credit score is about 630 – 689.

Its annual fee is 0% and it has nice cashback rewards, also it comes with an introductory 0% APR on Purchases for a period of 15 months and 13.99% – 23.99% Variable APR.

The recommended credit score is about 690 – 850.

In the particular case of this card, your deposit is not equal to your credit limit. This means that your deposit may be even less than the amount of the credit line. 

You can also aspire to a higher credit limit without having to deposit more money. 

This one can also be one of the best credit cards to build credit if it is what you are looking for.

It has a 26.99% of Variable APR and also the recommended credit score is about 300 – 629.

If you are a business owner and you have the privilege of having a solid cash account at the bank, maybe this credit card is the one for you. 

Because it does not require a personal guarantee, which means that unfortunately if your business fails you are not totally tied to the current balances of your business.

It doesn’t have an annual fee and the recommended credit score is about 300 – 850.

It is a great credit card for those students who don’t have a credit history yet or even if they don’t have a social security number. 

The annual fee is 0% and 18.74% Variable APR. 

You should keep in mind that the recommended credit score is about 630 – 850.

So it is definitely not an easy task to choose which one to keep in case you need a credit card, because each one offers different benefits and terms but we hope that once you have finished reading this article you can have a clearer idea of ​​which one is the best for you.