Unless you’ve been living under a rock, you have probably heard about most of the popular rewards credit cards. And if you really listen, you’ll probably hear all about people who have earned a boatload of cash back, free airfare or hotel stays, or any number of benefits they couldn’t get anywhere else.
Still, it’s important to note the differences between the various types of rewards credit cards. While all rewards cards were created with one goal in mind – to reward you for your spending, the details and offers can vary dramatically.
For example, some cards make turning in your points for gift cards ideal, while others allow you to earn airline miles instead. Other cards really rock at letting you earn free hotel stays, but are awful (and almost useless) if you want cash back. Then there are cards that offer several options when it comes to redeeming your points for the rewards you want.
4 Types of Rewards Cards to Consider
All of these details are absolutely crucial when it comes to figuring out which type of rewards card is best for you, which is why educating yourself is key. Before you pick a new rewards card for your wallet, consider each type of card, its benefits, and how it might benefit you.
Flexible Travel Credit Cards
If you want to earn rewards you can redeem for travel, a flexible travel card is often your best bet. Cards that fall into this camp include the popular Chase Sapphire Preferred® card which allows you to redeem your points for travel in more than one way.
With a flexible travel credit card, you can transfer your points to airline and hotel transfer partners, book directly through a travel portal, or redeem for cash back and book any type of travel you want. While some flexible travel credit cards charge an annual fee, most waive it for the first year. In addition, most flexible travel cards offer a huge signup bonus worth hundreds of dollars in travel to entice you to sign up.
Who should get a flexible travel credit card:
- Anyone who wants to earn points good for travel, but doesn’t want to be tied down to a specific airline or hotel chain
- People who earn enough rewards to justify an annual fee if they choose to keep the card
Who should pass:
- People who don’t spend enough to justify an annual fee
- Someone who doesn’t like to travel
Airline Credit Cards
Co-branded airline credit cards let you earn points that are redeemable for airfare and seat upgrades with a specific airline. With some airline credit cards, you can also earn additional perks like priority boarding, lounge access, and special status. The Citi® / AAdvantage®Platinum Select® MasterCard® is one such card, giving you priority boarding and one free checked bag on domestic flights – just for being a cardholder.
Most airline credit cards offer a signup bonus worth a free flight or two just for signing up and meeting a specific spending requirement. In addition, you can generally earn 1-2 “miles” for every dollar you spend, allowing you to rack up points for unlimited free airfare depending on your spending style. Since airline credit cards tend to come with annual fees, however, you’ll need to fly quite a bit to justify the cost.
Who should get an airline credit card:
- Frequent travelers who fly with one airline exclusively
- Anyone who wants to earn a signup bonus good for free airfare
Who should pass:
- Travelers who don’t like being tied down to a specific airline
- People who don’t fly frequently
Hotel Credit Cards
Co-branded hotel credit cards make it easy to earn free hotel stays and points for room upgrades, free breakfast, and more. With most hotel credit cards, you earn a signup bonus worth several free nights just for meeting a minimum spending requirement within the first few months of card ownership.
Some hotel credit cards offer additional perks like free in-room wi-fi access, and free Boingo wi-fi at airports.
Like the other rewards cards on this list, however, hotel credit cards typically charge an annual fee. If you don’t travel often enough to justify it, it may not be worth it.
Who should get a hotel credit card:
- People who are loyal to a specific hotel chain and want to earn free nights
- Anyone who likes to travel cheaply
Who should pass:
- People who don’t want to be tied down to a specific hotel chain
- Anyone who doesn’t like paying annual fees
Cash Back Credit Cards
Cash back credit cards reward you for your spending with actual cash back, usually in the form of a statement credit. Generally speaking, you’ll earn anywhere from 1-5% cash back by using your cash back card for all of your purchases and paying it off right away. Plus, many cash back cards offer a signup bonus worth a hundred dollars or more.
While cash back cards like the Chase Freedom® don’t necessarily offer a travel benefit, you can redeem your cash back for travel if you want. Or, you can use your cash back to pay monthly bills, buy groceries, or splurge on yourself. Because cash back is the most flexible type of rewards you can earn, the sky is the limit. Best of all, most cash back credit cards don’t charge an annual fee.
Who should get a cash back credit card:
- Anyone who wants to earn free money on their regular spending
- People who don’t want to earn rewards for travel
Who should pass:
- Frequent travelers who would be better off with a travel credit card
- Heavy spenders who might earn more with a top tier rewards credit card like the Chase Sapphire Preferred® card
Before you settle on a rewards credit card, it pays to know what type of rewards you actually want to earn. When you hone in on your ideal rewards scenario, research all of the top cards from your preferred category and pull the trigger. Once you receive your card in the mail, you’ll be on your way to earning some amazing (and free) rewards in no time.
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