Yes, credit card rewards are worth it if you pay your credit card bill in full every month. If you do, no credit card interest will be charged on your purchases.
The great thing about rewards is that you get value back on every eligible purchase just because you pay with a credit card. Here’s an easy way to look at it: If you had the opportunity to get 2% back on your groceries, gas, and other bills, without putting any effort into it, it would make sense to take that deal. to go. With rewards credit cards, you can get just that.
However, you only get ahead if you don’t get any interest. That’s why it’s so important to consistently pay your bill in full each month and only buy what you can afford.
LEARN MORE: How does credit card interest work?
The Argument Against Credit Card Rewards
If you avoid interest charges, credit card rewards are like free money. So why do some experts act like rewards are a bad thing?
The biggest criticism of credit card rewards is that they encourage spending. It’s easy enough to spend too much money on credit cards and get into debt. When you’re earning points or getting cash back, it’s even more tempting to make that big impulse buy that you really shouldn’t.
I’ve never been a fan of this way of thinking. You’re missing out on something that’s beneficial to you because of a worst-case scenario that’s 100% avoidable.
Sure, credit card rewards encourage you to spend more, but you still have full control over what you spend. If you have a budget and keep track of expenses, you can reap all the benefits of credit card rewards with no interest or credit card debt.
What about the annual fees?
Another criticism I see all the time is that those rewards aren’t free because some reward cards have annual fees.
That’s not much of an argument. There are reward cards with annual fees, but there are also many cards that earn rewards and charge no fees. If you’re not interested in paying for a card, stick with credit cards with no annual fee.
COMPARE CHOICES: Best credit cards with no annual fees
The annual fee cards usually have more benefits, so it’s not like you’re paying a fee for nothing. For example, I have some credit cards with annual fees, but that’s because I’ve calculated it and I know they save me a lot more than they cost.
LEARN MORE: Is Your Credit Card Annual Fee Worth It?
How Rewards Credit Cards Work
If you’re interested in rewards credit cards, the first step is to learn how they work. A rewards credit card earns rewards, which can be cash, points or miles, when you use it to pay for purchases. These rewards are linked to your credit card account and you can redeem them with the credit card company.
There are all kinds of different reward cards to choose from, and we’ve covered the most popular below.
Refund credit cards
Cash back credit cards earn cash rewards on purchases. If your card earns 2% cash back, $1,000 in eligible purchases is worth $20. Most card issuers allow you to use cash back as statement credit to lower your credit card bill. Some of them also let you put cash back into your bank account or request a check for it.
Many consumers love cashback cards, and for good reason. They are easy to understand and do not require much time or knowledge from the cardholder.
COMPARE THE TOP CHOICES: Best Cash Back Credit Cards
Travel Rewards Credit Cards
Travel rewards credit cards earn points or miles on purchases. You can redeem these rewards for travel expenses.
LEARN MORE: How do credit card points work?
When looking for a travel credit card, there are a number of different options available. There are airline credit cards that earn credit card miles with a specific airline. There are also hotel credit cards that earn loyalty points with a hotel chain.
Finally, there are more all-purpose travel credit cards. Some of these earn rewards that you can redeem at a flat rate, such as $0.01 per point, for travel purchases. Others have transferable rewards that you can send to airline and hotel partners in that card’s rewards program. These include the American Express Membership Rewards cards and Chase Ultimate Rewards cards.
It takes a little more time to learn the ins and outs of travel cards compared to simple cash back cards. If you like to travel, that can be time well spent. Travel rewards allow you to travel for free with credit card points, and these cards often come with additional travel benefits as well.
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Bonus category credit cards
Credit cards in the bonus category earn more in specific spending categories. You can find cards that earn bonus rewards for groceries, gas, food and much more. There are both cash back and travel credit cards with bonus categories.
Bonus category cards can help you maximize your credit card rewards if much of your regular spending is concentrated in certain areas. For example, families often take advantage of credit cards for gas and groceries because they match their normal spending habits.
VIEW BONUS CATEGORY CARDS:
Should You Get a Rewards Credit Card?
If you have a good credit score and you always pay the full balance of your card every month, then a rewards credit card is a good choice.
The best credit cards, including the best rewards cards, are almost always aimed at those with good credit, a FICO® score of 670 or higher. If your score is in that range, you can get a high quality rewards card that can help you save money, through cashback or credit card rewards.
COMPARE THE TOP CHOICES: Best Rewards Credit Cards