Are Reward Credit Cards the Best Credit Card Option?


Credit cards carry many benefits like convenience and security so you don’t carry around cash or your checkbook. Credit cards also help you build your credit rating, but one of the best reasons to own a credit card is that if a card has a rewards program attached to it, it can actually save you money.

Types of Rewards

While some credit cards charge you for the use of your credit card (interest rates and annual fees), others literally give away benefits and cash the more you use your credit card.


Some rewards programs give you points for every purchase made, for example, one point per dollar spent. Points can be redeemed in the rewards program online shopping mall, exchanged for cash back, gift cards or even travel. Redeeming your points for gift cards can be the best bets, as some programs give you 10 to 20% off of the gift card retail price. There are also some secured credit card programs that will offer you points with every purchase.

Cash Back

Cash back programs work in a similar manner to points programs in that you build a balance based on every dollar spent. While cash back is misleading, as you are not given actual cash back, the programs will auto deposit money into your credit account or you can use your earned money to make a payment on your account (though you are still required to make a payment for that month’s billing cycle). Most cash back rewards programs can only be redeemed in increments, usually about $25. Even if your credit is fair, you can still get a cash back card.


Miles rewards programs reward you with miles you can use to purchase airline tickets. Most U.S. air carriers have some kind of credit card that you can use to build up your miles for their airline. These cards sometimes have programs to exchange with other U.S. carriers’ miles programs, but you may lose points in the transfer process.

Low introductory APR (annual percentage rate)

Some credit cards hook you by offering you a balance transfer to a 0% APR rate for a limited period of time. These rewards programs are good for people with large balances who are getting killed in interest fees. Some of these programs also include mile programs or points as part of the rewards programs, but the big-ticket item is the 0% interest rates.

What Type of Credit Card Users Benefit from Reward Cards?

Most reward credit card programs are geared toward those with good or excellent credit, though as noted above, some secured credit card programs have rewards.   Rewards credit card programs carry high interest rates, so unless you are paying off all of your credit card balances each month, the interest payments will offset any benefit you have in the cards.

Should all of your credit cards be reward-based?

All of my credit cards are rewards based, but I do pay my credit cards each month. I have enjoyed free airfare for the past 2 years and have made two payments towards my credit card balances totaling $1000. I say yes, all of your credit cards should be rewards based. The caveat: you should only think about getting a rewards card if you can commit to some credit card self-discipline (like paying off your card balance to zero every billing cycle).

When Are Rewards Credit Cards Not Worth It?

Although I strongly advocate the use of rewards cards, there are some circumstances where they are not beneficial.

  • If you have a miles-based reward card and you don’t travel, obviously, this type of credit card is not going to benefit you.
  • Similarly, if you have a rewards card with any kind of annual fee and you are not actively using the card and enjoying the benefits, this is money down the drain.
  • As we’ve stated before, if you are carrying any kind of balance on your credit cards month to month, you are losing money to interest. Credit card companies are out there to make money and they entice with rewards and punish those who carry a balance with high APRs.

A little simple math:

Average rewards cards interest rates: 15.9%

Average total of credit card balances: $10,902

Average value of rewards: 1.5 cents/point

Average annual fee: $58.

Using the figures above, points earned for the average credit card balance, assuming 1.5 points per dollar: 16,353 points.

Value of those points: $245.

Interest paid on average credit card balance: $1733 (although average interest paid by the typical American on credit cards is $2500 each year).

As you can see, if you carry a balance, rewards cards that charge interest are a losing bet for you if you. If you must carry a balance, you should shop for rewards cards that advertise a low APR (preferable zero). You should be careful about balance transfers, though they usually come with a 3-5% transfer fee, which can really add up, if you’re one of those people who plays the balance transfer game to avoid interest. However, there are some cards that will offer you a 0% balance transfer fee to a 0% interest rate. You need excellent credit to qualify for any type of 0% APR card.

Related Articles:

What Are Smart Credit Cards?

6 Ways to Build Credit Even If You Don’t Believe in Credit Cards

What Are Those Chips On My Credit Cards?

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