Credit cards come with their own advantages and disadvantages, depending on how you use it. For instance, if you use your credit cards to spend more than what you can afford, you’ll likely be stuck with a lot of debt that will accumulate over the months or years. However, if you responsibly use your credit card, it can bring in a lot of value without hampering your habits and routine. One way a credit card can help is through credit card rewards.

There are a bunch of credit card rewards that give consumers a great opportunity to avail benefits, such as miles, points, or cashback offers. If you have the perfect credit card rewards, you’ll be able to save more and get benefits like free travel, surplus spending money, and a lot more.  

How can one earn rewards with credit cards? 

To tell you the truth, not every credit card that you find out there will give you the rewards incentive. For instance, there are cards that are there to help you build your credit history, while there are others that give you an option to pay for your debt at zero interest. For those who have a credit card that fetches them good rewards, here are some ways in which maximum value can be derived.  

• Day-to-day spending
  There are credit cards that offer rewards in the form of miles, cashback, or the points on your daily purchases. In some cases, the rewards rate will be the same across all purchases, while others will give you additional rewards on a few spending categories. Moreover, if you link an authentic user with your account, you can generate more rewards from the purchases that they make.  
• One-time bonus
  A lot of credit cards have an incredible scheme of a one-time bonus, which you can get as an incentive to avail of a particular type or brand of a credit card. Now, the value of the bonus that you get will depend on the type of card that you have. It could be anything between a few dollars to maybe $1000, or at times even more. However, to avail this bonus, you’ll have to meet the bank’s criteria of minimum spending limit in the stipulated period. 
• Annual bonuses
  There are also credit cards that give you annual bonuses on the renewal of your card. It could either be a flat amount or could be a percentage of your last year’s spending. 
• Structure of the rewards programs
  Most credit cards have a similar structure for their rewards program. It could be either one of the three listed below: 

  Rotating rewards : There are only some credit cards that follow this structure of rewards. In this reward program, you’ll get rewards on a few specific categories only, and the rewards on them are also capped. However, the categories on which you get the rewards keep changing every few months. It is a perfect card for somebody who spends on a lot of different things, and their spending is in sync with the rotating categories of the card. 

  Tiered rewards : Just like the rotating rewards, these, too, offer rewards and bonuses on certain specific categories. Some of the categories wherein you might get bonus rewards include restaurant spending, gas, groceries, etc. However, when you spend on non-bonus categories, you’ll receive a base rate reward. Now, whether the card has a capping or not, would vary from one card to another. The credit cards with tiered rewards are perfect for the cardholders that prefer to spend in either one or two categories where they could avail good bonus rewards. 

  Flat-rate rewards : On this type of credit card, you’ll get a reward at a flat-rate on your all purchases. Such cards are ideal for those card owners who like simplicity and have no particular area where they usually spend their money.  

Amongst these three different types of programs for rewards, there’s no perfect way to determine which one would work best for you. It is only you who can decide whether the card will bring you enough rewards or not. For deciding this, you should consider your preferences and spending habits.

For those credit card owners who are okay with a little complex reward structure and need higher rewards, a rotating or a tiered rewards program would be the best. However, if you are a spender who does not wish to spend a lot of time deciding on the type of credit card you should get for yourself, you should play safe and get yourself a credit card with a flat-rate reward system. 

Types of credit cards rewards

The credit card rewards that you get are important in helping you decide the type of credit card you need. However, more than the rewards, you should look for the type of rewards you get. In general, the rewards on your credit card can be of two types – travel and cashback. Here is everything you should know about both of them. 

Cashback cards
As is evident from the name, a credit card that fetches you rewards in the form of straight cash is known as a cashback credit card. Though the redemption method of cards can vary, typically, you can employ these credit card rewards as a statement credit, paper check, or a direct deposit. There will also be a few credit cards that will give you a chance to utilize your cashback reward to shop online, buy a gift card, shop for merchandise, use for booking your travel, amongst other things.

There are also a few types of cards under this that would require you to accumulate a certain amount of cashback points to redeem them. The cards that do have this scheme will need you to have at least $25 or $20 for redemption. Also, one excellent thing about this type of credit card is that there’s no annual fee. Moreover, a lot of them also come with an introductory promotion offer of 0% APR on your bank transfer, purchases, or even both at times. Sounds great, right? Well, it certainly is.

But in all honesty, the cashback cards will offer you the same number of perks as those credit cards that give you travel-based rewards. With them, even the sign-up rewards are usually between $100 and $300. All said and done, the cashback points are ideal for those who like zero complexity of rewards in the form of the cashback, and are okay to settle with fewer rewards in exchange for zero annual fees.  

Travel rewards cards

When it comes to credit cards that fetch you travel rewards, you can use the rewards to book free travel. Some credit card companies might regard these as travel points, while others would say travel miles. Largely, they both mean the same. The miles primarily include travel benefits, which are beneficial for frequent flyers. However, Southwest Airlines and JetBlue Airways use the word points to refer to their rewards. Though points are the more common and accepted term, there are a few card companies that prefer calling it miles.

Also, unlike the cashback cards, your travel cards will have a yearly fee. However, almost all of them give substantial sign-up rewards that can be equivalent to hundreds of dollars, at times even higher than $1000. Travel rewards cards (TRC) can be divided into three different categories. Let’s understand them one by one. 

• General TRC
  In the general TRC, there’s no association with a particular hotel, airline, or travel brand. So, the miles or the points that you’ll earn would depend on the rewards program of the card issuer. Everything here depends on the card that’s been chosen by you. Listed below are some of the rewards that you might get with a general TRC: 

Travel bookings made via the card issuer: There are a few card issuers who tend to have their platform for booking, which works similar to travel platforms such as Orbitz and Expedia. So, as part of this deal, you have a chance to utilize your reward points to make the travel bookings using the rewards account. It is a great and highly simplified redemption process. However, in this case, you might only have a limited choice. So, consequently, it might not be easy for you to get yourself the best deal. 

Travel bookings made via the third-party merchants: Using this alternative, you have an option to utilize your credit cards to book your travels via a third-party travel merchant. On the merchant’s portal, you can utilize your miles or points to get a full or partial credit against your travel transaction. Utilizing an option like this entitles you to an improved chance of not only getting the best travel deal but also shopping around for better and more competitive travel prices. 

Transfer of rewards to different programs related to travel: There are certain programs that let you transfer the travel miles or points to a different rewards program, maybe with a hotel or an airline. Using this, you have an additional choice to get a requisite redemption on your travel plans.

In general, the travel rewards program tends to have a stipulated value assigned towards the reward currency, which is either one mile or point. However, at times it could be lesser or even higher than that. Of course, it simplifies everything for a customer. However, it does limit the value you get from your credit card. Though general cards do not necessarily offer the hotel or the airline-specific perk, they do offer a bunch of other benefits, like complimentary lounge access at airports, statement credits for travel, different travel insurance covers, and a lot of other things.

• Airline credit cards
  The next type of TRC includes airline credit cards. If you have an airline co-branded card, you can accumulate the miles or the points with a particular flyer program. These come with a dynamic structure of pricing. It implies that the actual value you get out of your miles or the points are based on your method of redemption and the time you use the points.

  So, valuation could be based on flight dates, fare class, destination cities, departure, cost of your ticket, among the other things. Yes, it is a bit more complex than general TRC. But you can certainly squeeze in a higher value, if you pick the right strategy for redemption.

  One should be aware that airline cards do not get you as many options as you could get in general TRC. But given the higher value it fetches you, they are certainly desirable. In addition to the rewards program, with this card, you can also get some specific airline-related perks. These include Priority boarding, Lounge access, Companion passes, Free check-in for bags, and Several discounts in flight. Those of you who have a fixed loyalty towards a particular airline, getting a co-branded credit card will certainly bring you great value. It’s value will increase with every flight that you take. 

• Hotel TRC

The hotel TRC is more or less similar to the airline TRC. They, too, are co-branded along with a particular chain of hotels. So, this means that you’ll earn points from the particular chain of hotels. You can later redeem these points and get yourself free stays. Again, the value of the points will depend on a bunch of factors, such as the price of the room, your stay dates, the hotel property, among other things. 

In addition to the rewards program, a few hotel TRC also give you an elite status or a free stay on special occasions, like birthdays or anniversaries. Of course, the cost of the stay is limited. It is certainly higher than the annual fee of the card, making it more lucrative for you to hold onto this card, despite it not being your primary mode of payment.