Best Rewards Credit Cards
Key points about: Rewards credit cards
Rewards credit cards let you earn rewards that are a percentage of the amount you spend on purchases.
Credit card rewards usually come in the form of cash back or miles.
When choosing a rewards credit card, consider whether the rewards are worth more than any fees you might owe, such as annual or foreign transaction fees.
Rewards credit cards offer an appealing opportunity to earn rewards on purchases you’re going to make anyways. But there’s no overall best rewards credit card. What’s best for you depends on which cards you qualify for, the types of purchases you make, and how much effort you want to put into managing the rewards program.
All Discover credit cards offer rewards, but each card also has unique benefits that may fit your needs better than others. This guide explores the different types of rewards cards, how they work, and the application process, ultimately helping you determine which card may be best for you.
1. What is a rewards credit card?
A rewards credit card is any credit card that gives you rewards when you use the card for purchases. Think of rewards as an incentive to entice you to use the card. You can earn cash back or miles depending on which card you’re using. The reward redemption options can also vary depending on the card and program.
Sometimes a card that offers rewards also has a different feature that defines the card. For example, many reviewers may categorize the Discover it® Student Cash Back credit card as a student card. But it’s also a rewards card.
Learning about the different types of rewards cards can help ensure you don’t needlessly spend money on fees or miss out on rewards and benefits.
2. Types of rewards credit cards
Often, rewards cards fall into subcategories depending on the type of rewards you’ll earn and the card’s reward-earning structure. Credit card companies typically offer three common ways for consumers to earn rewards, each with its pros and cons.
Fixed-rate or flat-rate rewards credit cards offer the same rewards rate on all purchases. For example, with the Discover it® Miles card, you earn 1.5x Miles on every purchase.
These cards can be easy to use and might be a good option if you don’t want to spend much time or effort managing your card’s rewards program. However, you might not earn as many rewards as you could with cards that have bonus rewards categories.
Credit cards with tiered rewards give you different rewards rates depending on where you use the card. Often, tiered-rewards cards offer bonus rewards on select purchases and lower fixed-rate rewards on other purchases.
For example, with the Discover it® Chrome Gas & Restaurant Credit Card, you earn 2% Cashback Bonus® at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus earn unlimited 1% cash back on all other purchases.1
Tiered rewards cards can offer more potential rewards if the bonus categories align with your usual spending habits. Otherwise, you might be better off with a fixed-rate card. Some people choose to open several rewards cards to maximize the different perks they offer. For example, you might use the tiered-rewards card when you’re able to earn bonus rewards and use a flat-rate rewards card elsewhere.
Some cards have a tiered rewards structure with bonus rewards categories that change throughout the year. These cards can require a little extra thought, as you’ll need to remember which bonus categories are relevant at certain times of the year. One major advantage is that they may also offer some of the highest bonus rewards rates.
The Discover it® Cash Back Credit Card is an example of a rotating rewards card. It allows you to earn 5% cash back on everyday purchases at different places each quarter, up to the quarterly maximum when you activate. Some rotating rewards cards require you to activate or choose the bonus categories. Discover makes signing up for the quarter’s bonus rewards simple—you can activate with just one click to join the Discover quarterly rewards program.
3. Types of credit card rewards
In addition to offering different types of rewards-earning structures, credit cards may offer cash back, miles, or points. Many retailers offer their own store-related rewards credit cards, too.
Cash back rewards
Cash back rewards are easy to understand and use. You’ll earn a percentage of your purchase amount as cash back rewards, which can make calculating the value of your rewards fairly easy.
Generally, you can redeem your cash back rewards for a statement credit, a gift card, or a donation. Some card issuers also let you transfer your cash reward into your bank account, regardless of the financial institution.
Points-based rewards programs can be a little more complex to navigate than a cash back rewards credit card because the value of your rewards can vary greatly. Generally, these cards either offer rewards in the card issuer’s loyalty rewards program, or in the loyalty program of an associated retailer or brand.
- Card-issuer rewards cards. With general rewards cards, you earn points in the card issuer’s program and then redeem them in various ways, such as booking travel, getting cash back, and buying merchandise with points. The value of your points may vary depending on the card and redemption option. Many of these cards have a travel focus. Travel rewards cards may be best if you want flexibility while booking travel, as you’re not locked into booking with a specific airline or hotel. Some programs also let you transfer rewards to partner loyalty programs, which may open up high-value redemption options—especially for booking luxury travel.
- Co-branded airline and hotel cards. You can use these rewards cards to earn miles or points in the corresponding loyalty program. You’ll then have to redeem the rewards in line with the loyalty program’s rules. The value can depend on the program and the current cash price for a flight or hotel. A co-branded card could be a good option if you frequently use the same airline or hotel chain. In addition to rewards, co-branded cards may also offer helpful customer benefits, such as free checked bags, free upgrades, or status in the loyalty program.
- Retailer rewards. Retail or store credit cards may give you rewards points in the merchant’s loyalty program. Some cards also offer you benefits when shopping at the store, such as free shipping, extra discounts, or longer return periods. A retail card from your favorite store might be a good option, but your redemption options may be limited. Also, store cards could be closed-loop cards, which means you can only use the credit card for purchases at the associated store.
4. How do credit card rewards work?
Rewards credit cards all work a little differently depending on the specific card and program. But here’s an overview of what you need to know and should look out for when using a rewards card.
Earning credit card rewards
You’ll usually only earn rewards on eligible purchases that you make with your credit card. That doesn’t include any interest charges that may accrue. Other types of transactions, including balance transfers and cash advances, generally don’t count, either. You also might not earn rewards on cash-like purchases, such as money orders, gift cards, and lottery tickets.
With some cards, you won’t earn bonus rewards unless you actively opt in to the bonus rewards offers.
Redeeming credit card rewards
Review the card’s terms and program rules to learn about redeeming rewards.
Did you know
With a cash back card, your rewards may always be worth the same amount. But some cards require you to accumulate a minimum rewards balance before redeeming. Any Discover credit card lets you redeem your rewards for cash in any amount.2 Finding good travel redemption options can be complex, particularly with travel cards that offer points in the issuer’s program. With the Discover it® Miles travel card, 100 Miles = $1 to spend.2 If you’re registered for the Account Center, you can review all of the rewards you have available to redeem on your Discover® Card.
5. Which is the best rewards credit card for you?
When comparing rewards credit cards, consider which type of rewards structure you want to use and the type of rewards you want to earn. Also, consider where and when you tend to use credit cards and how much you spend in different categories. If you keep a budget, checking your previous purchase records can be helpful. Another thing to consider is any upcoming large purchases you’ll need to make in the near future. Will you need a new washing machine or refrigerator soon? Using a rewards card to buy an expensive item could be a good way to get some return on that investment, whether that be cash back or travel miles.
After narrowing in on the type of card you want and how it may fit your needs, consider some of the card’s features, fees, benefits, and drawbacks. In particular, you could look at:
- Annual fee: Discover has no annual fees on any of our cards, but other rewards cards might. Fees can range widely, with some rewards cards having an annual fee of over $550 per year. Cards with fees may offer higher rewards rates or other benefits. But depending on how you use the card, you might not earn enough rewards to make up for the fee.
- Foreign transaction fee: Look for foreign transaction fees if you plan on using the card outside the United States or for making online purchases in a foreign currency.
- Expiring rewards: Some programs’ rewards expire over time or when you close your account. At Discover, your rewards never expire.3
- Interest rate: Rewards cards may have a higher Annual Percentage Rate (APR) than non-rewards cards. Consider a non-rewards card if you don’t plan on paying your balance in full each month. Otherwise, the interest may cost you more than you can earn in rewards.
- Promotional interest rate offers: Some rewards cards also offer an intro 0% APR on purchases or balance transfers. The offers can be a good way to pay off a large purchase over time or transfer and pay down debt without accruing interest.
- Additional bonuses: Rewards credit cards may offer bonus rewards opportunities to new cardholders. Often, these require meeting a minimum spending requirement within a few months, which could lead to overspending. Instead of a one-time bonus, Discover has an unlimited Cashback Match: we’ll automatically match all the cash back you’ve earned at the end of your first year.4 Additionally, Discover has unlimited Discover Match®: we’ll automatically match all the Miles you’ve earned at the end of your first year.5
- Customer benefits: Some rewards credit cards come with additional benefits, such as a travel credit card that can give you status in loyalty travel programs. Benefits often correspond with annual fees, so review the perks to see if you’ll use them enough to make up for a card’s annual fee.
- Credit score requirement: Rewards cards may require you to have a good to excellent credit score (700 or higher is good; 800 or higher is considered excellent), particularly if you’re looking for a premium card. There are only a few rewards cards, such as the Discover it® Secured Credit Card, helps you build/rebuild your credit history. 6
Ultimately, no rewards credit card is the perfect fit for everyone. But comparing rewards cards can help you narrow down which card might be the best credit card for you. In some cases, using several rewards credit cards that offer different rewards rates or bonuses can be a good idea if you want to earn rewards in different categories. For instance, if you buy gas for your car and dine out frequently, you might apply for the Discover it® Chrome card. If you also want to earn travel rewards, you might also apply for the Discover it® Miles card to get rewards on a travel purchase or other types of purchases.
6. Applying for a rewards credit card
Ideally, you’ll be able to qualify for the rewards credit card—or cards—that you want. But keep in mind that applying for multiple credit cards during a short period may hurt your credit score. Even if your application is denied, the hard inquiries from each application could negatively impact your credit.
Discover lets you check if you’re pre-approved for credit card offers with a soft inquiry, the type that doesn’t impact your credit scores. You’ll still need to complete a full application before a final decision is made, but getting pre-approved first can give you a good sense of which Discover cards you can qualify for.
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