How to Make the Most of Rewards Credit Cards – Nasdaq | Eurica Project

IIf you use a credit card, shouldn’t you get paid for it? Reward cards help you cash in on your everyday expenses. Here’s what you need to know to get the most return on reward cards.

What is a rewards credit card?

Reward cards pay off every time you use them. Many such cards give you back a percentage of each purchase in cash. Others will give you points or miles back for a specific airline, hotel chain, or general travel expenses.

A shopper holding a credit card surfs the web on a laptop while sitting on a couch at home.

Image source: Getty Images.

Points and miles rewards are a bit more complicated compared to cash rewards. The value of a mile or point does not always correspond to an exact monetary value. Cards like Chase Sapphire Preferred offer Ultimate Rewards points, with each point being worth 25% more than its cash equivalent when redeemed for travel through the Chase Ultimate Rewards portal.

Whether in the form of cash or points, these rewards may seem small, but they can add up quickly. Rewards accumulate in the account over time until you redeem them.

The three types of cashback cards

fixed price tickets

Fixed rate cards earn a set percentage on all transactions, typically 1% to 2% depending on the card. These are perfect for people who love a slim wallet with a credit card without the fuss. That Wells Fargo The Active Cash Card gives you a 2% unlimited cash reward and a whopping $200 sign-up bonus after spending $1,000 on purchases within three months. As part of this no-frills spending strategy, you can top up anything on the card, including less obvious things like automatic home security payments or internet and phone bills.

Bonus category cards

Bonus category cards bring in increased cashback rewards – typically 5% in certain categories like gas, dining, or grocery shopping for a set period of time. These bonus categories usually change every three months. A card can offer 5% cashback Amazon and target Purchases from October to December. The cardholder must register in order to activate the bonus category either online, in the app or by calling customer service.

All other general purchases without a bonus will continue to receive 1% or 2% cashback without activation, depending on the card. That Discover The “it” card might be perfect for people who love the excitement of different bonus categories every quarter. Only use this card for the bonus categories to maximize the rewards.

Tiered Maps

Tiered cards offer a mix of fixed price and bonus cards. They offer a few select increased reward categories of up to 3% to 4% cashback and typically 1% on all other general purchases. The Blue Cash everyday card from American Express offers discounts such as 3% at supermarkets, gas stations and online retail purchases, each capped at $6,000 per calendar year. All other purchases earn 1%. Additionally, you’ll receive a $200 credit to your card balance after spending $2,000 on purchases with your new card within the first six months of membership.

Rewards can be redeemed online, in the app or by calling customer service. Cardholders can redeem what they’ve earned to top up their balance, donate to charity, book travel, receive gift cards, or simply receive a check for cash.

How to maximize credit card rewards

To get the most out of your rewards, you should have three credit cards: one from each of the above categories.

Before the start of each quarter:

  1. Plan your credit card usage.
  2. Check it out and sign up for the quarterly bonus category.
  3. Write down the bonus categories on a sticky note and keep it in your wallet.
  4. Maximize your cashback by sticking to your spending plan.

memory card type

Three Month Spending Plan

bonus category

5% restaurants


3% in supermarkets
3% at gas stations
3% off online retail purchases

Fixed rate

2% off everything else

Are Reward Credit Cards Right for You?

Rewards credit cards are ideal for consumers who want to pay their credit card bills in full every month. It’s not worth paying more than 20% interest to get 3% cashback. Also, it’s tempting but dangerous to spend more than you can afford to maximize sign-up bonuses and rewards. Additionally, some of the best rewards cards may charge an annual fee. The idea is to save money by collecting credit card rewards, not lose money by racking up credit card debt.

Regardless of your spending style or financial goals, a sound strategy is the ultimate goal during these challenging times. If your needs match what is on offer, rewards credit cards may be able to help you achieve that goal.

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Stupid contributor Alka Mehta holds no financial position in any of the companies mentioned. Discover Financial Services, American Express, and Wells Fargo are advertising partners of The Ascent, a Motley Fool company. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon and Target. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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