What are Credit Card Rewards? A Guide to Earning Points, Miles, and Cash Back

I’ve always had a soft spot for iconic TV westerns like “Gunsmoke.” As a young child, I remember my fascination every time Marshall Dillon tacked up a wanted poster promising a $100 reward for the capture of a no-good scoundrel — dead or alive. 

Today’s bounty hunters don’t need a horse or six-shooter, just a rewards credit card. This kind of credit card dishes out cash, points, or miles whenever you use it.

Credit card rewards are points, miles, or cash back you earn by making purchases with your card.

If you’re smart about it, you can collect rewards quicker than a cattle dog chasing strays. Stay tuned, partner; I’ll show you how to rustle up credit card rewards and set them to work for you.

Knowing your credit card rewards options can pay off handsomely. Whether you are aiming to earn some extra cash, rack up points, or collect miles for your next trip, knowing your options helps you choose the best card for your lifestyle. 

Each type of reward has its own set of perks and quirks, so let’s take a closer look before you start swiping your card.

Cash Back

Cash back rewards are about as straightforward as they come, making them a favorite for folks who like to keep things simple. With every purchase, you get back a certain percentage in cold, hard cash. 

Whether you are purchasing provisions, refueling the horseless carriage, or just picking up a cup of sarsaparilla tea, every bit of your spending contributes to your nice little cash back stash.

Cash back rates typically range from 1% to 5% or more per category, depending on the card. Some cards offer a flat rate across all purchases. Other cards give you extra in specific categories, such as dining or travel. 

For example, you may get 3% back at restaurants and 1% on everything else. It’s a nice little way to earn something extra on stuff you’re going to be buying anyway.

Cash back cards often appeal to folks who want their rewards simple and fast. If you’re not the type of person who spends weeks planning trips or searching for a better deal, cash back is an easy way of earning a little bit more value for your buck. Besides, redemption is straightforward, and nothing is more versatile than cash.

For the pinchpenny bargain seekers among us, cash back rewards are like finding money in the couch cushions. More importantly, you don’t have to change your spending habits to get the most from your card. And in today’s world, every little bit helps, whether it’s saving for a rainy day or just having a bit more to spend.

Points

Points-based reward systems are somewhat akin to a treasure hunt — you get points on your purchases to cash in for all sorts of booty. You can redeem these points for various things, including gift cards, merchandise, or travel. 

The biggest benefit to points rewards is one word: flexibility. You are not locked into one kind of redemption. That is what makes it so appealing – people love having choices.

How you earn points and what they’re worth will vary from card to card. Some cards give one point for every dollar you spend, while others offer bonuses in certain categories, such as dining or travel. Many cards give you multiple options for redeeming the points you rack up — I’ll have more to say about redemptions later on. 

Points rewards are a huge draw for those consumers who like getting something extra out of their spending. They are ideal for smart shoppers who want to wring every last drop from their rewards. 

And if you don’t mind the extra work, transferring points to a travel program unlocks some real treasures that extend your points even further.

For the curious and adventurous, points rewards are the key to the treasure chest. Yes, you may have to do some digging to find the best way of using them. Still, the payoff can be well worth your while — especially if you enjoy traveling or splurging on something special now and then.

Miles

Travel miles are the ticket if you have a bit of wanderlust. You earn these rewards every time you swipe or tap your card. When you’ve amassed enough, you can cash them in for flights, hotel stays, or other travel perks, which makes miles rewards a favorite for jetsetters.

There’s a big difference between miles from co-branded cards versus those earned via general-purpose travel cards.

• Co-branded credit cards: Co-branded credit cards lock you into a specific airline or hotel chain, with added benefits such as free checked bags or priority boarding. 

• General travel credit cards: General travel credit cards let you use miles with many travel partners, offering flexibility in how you use your earned rewards. These miles rewards are tailored for road warriors and frequent flyers who enjoy stretching their travel dollars further. 

If you are always thinking about your next trip, these cards can definitely help you get there faster and cheaper. Plus, the perks that come with miles cards can make your traveling experience much smoother and more enjoyable. 

For the restless adventurer, miles rewards are like having a passport to the world. Whether you are flying across the country or staying at an exclusive hotel, your rewards can help you travel in style without busting your budget.

Differences Between Points, Miles, and Cash Back Rewards

Points and miles are often tied to specific travel programs, while cash back offers straightforward, unrestricted rewards. Moreover, point and mile values vary depending on how you redeem them, in contrast to the fixed value and easy usability of cash back rewards. 

Here is a summary of the differences between the three types of reward cards:

You may want to own multiple types of cards. This arrangement helps you maximize your rewards by expanding the number of categories that receive bonus rates.

Taking care of the rewards you’ve earned is much like tending to a vineyard to ensure the grapes don’t wither. Keeping tabs on the rewards you’ve accrued while knowing exactly the right ways to cash in will help you maximize your efforts. 

After all, you don’t want to miss the rewards you’ve worked so hard to collect simply because you weren’t paying attention.

Track Your Earned Rewards

The first thing to do is track your rewards. If you don’t, well, they can slip right through your fingers. These days, thanks to the availability of tracking tools, keeping tabs can be a snap via online portals, mobile apps, or simply checking your credit card statements. 

These channels monitor the rewards you have already earned and those that will become available on the next award date – usually your statement date. 

Now, if there is one thing you don’t want to overlook, it’s pesky expiration dates, especially for miles rewards.

Miles can disappear if not used in a timely manner, so you need to remain vigilant. Don’t let your hard-earned rewards vanish into thin air because you missed a deadline.

Co-branded miles are rather like wild mustangs — they’re likely to run off if you don’t keep a close eye on them.

I think reward expiration is repellant and a real black eye for a loyalty program. Loyalty should run both ways, and stealing miles you’ve already earned is treason. A few airlines even demand ransoms – these sidewinders let you reclaim expired miles if you cough up some money. It’s like a desperado holding up a stagecoach for a sack of gold. Shame on you!

On a more positive note, you can use apps like Award Wallet or MaxRewards to monitor your reward balances and expiration dates. Some of these apps analyze your spending and show you ways to maximize your rewards.

The right tools can make a big difference in squeezing the most value from your rewards rather than letting them slip away. A little bit of effort now can lead to big payoffs later on, so don’t fall asleep at the switch.

Redeem Rewards Wisely

You always want to get the biggest bang for your buck when redeeming your rewards. You wouldn’t sell your best steer for a pocketful of beans, Jack, so stay sharp and don’t squander your rewards on low-value redemptions — focus on best practices to help you wring every bit of value from your hard-earned rewards.

Remember: All rewards are not created equal. Cash back has fixed values, so what you see is what you get. Points and miles have different values depending on the various ways you redeem them. For instance, travel redemptions may have a higher value compared to gift cards. That’s why it pays to do your homework and find out the best redemption options for the kinds of rewards you collect.

Another thing you’ll want to do is watch out for any changes in your rewards programs. Sometimes, companies change the rules, and you definitely want to know about that. It behooves you to check your email for updates so you always know the options that yield the most value.

Finally, be careful with redemption pitfalls. From missing out on bonus opportunities to redeeming at a low value, certain money-wasting mistakes can set you back. Here’s a quick rundown of some common pitfalls and how to dodge them:

• Redeeming for Gift Cards: Gift cards typically offer lower redemption value, so opt for travel or cash-back redemptions instead.
• Ignoring Bonus Categories: If you don’t check your rewards categories and balances, you may miss out on categories with higher redemption value. Always check if your points or miles have bonus categories for better value.
• Redeeming Points for Merchandise: Merchandise redemptions may provide poor value, so stick to cash back or travel redemptions to make the most of your points.
• Missing Expiration Dates: Don’t let rewards expire before you use them. Use apps to track expiration dates and set reminders.

I’d hate to see you settle for less than you deserve. So, go milk those rewards for all they’re worth. 

Transfer and Combine Rewards 

One of the best options for redeeming maximum value involves transferring or combining rewards. Some cards let you transfer points or miles to other loyalty programs. And, if done properly, you can end up with more value. It’s a little like trading horses — you want to make sure you get a good deal, not a lame nag.

Be careful with transfer ratios, as these are subject to much variation. Try to transfer your rewards where they are most useful. 

A particularly savvy move is to consolidate rewards from separate cards issued by the same company. For instance, if you hold several Chase Ultimate Rewards cards, you may be able to gain value by moving your points to one of their Sapphire cards.

But beware of the loopholes and limits involved. Some programs have restrictions on transferring points, or you may actually lose value, so you have to be very careful about how you pool your rewards. 

Pay attention to the fine print in your cardmember agreements. The last thing you want to do is think you’re getting somewhere only to realize you’ve lost value in the process. In the end, the key to getting the most out of your rewards is using your noggin. 

Whether you’re transferring, combining, or redeeming, take the time to plan your moves carefully. If you play poker, you already know the right strategy can turn a good hand into a winning one. 

Be like the rancher who makes sure the cattle drive gets to market with every steer on board. Of course, your job — to maximize your rewards — requires a lot less physical effort. Still, you don’t want to let any profit slip through your fingers after you’ve done the work. 

Be smart with your reward cards, and you can turn everyday spending into a well-earned payoff. 

Choose the Right Card 

Different credit cards will benefit you depending on your lifestyle, so you need to find one that matches your spending habits. 

Here’s what you want to look for:

• Rewards Structure: Cash back, points, or miles — whatever your pleasure. You need to choose which reward will work best for you. You can select one card that provides more value for your money or diversify by owning multiple cards that together cover all the bases.

• Interest Rates: If you are the kind of person who carries a balance, then a card with a high APR will eat up your reward money very quickly. If you cannot pay it off every month, then find a low-rate card.

• Annual Fees: Many of the top rewards cards charge annual fees. If you can get enough rewards back to offset this fee, then the card may be worth it. If you are a big spender, a premium card may justify the yearly fee. If not, don’t fret; there are many no-fee rewards cards that will give you a fair shake.

• Signup Bonuses: Like the housewarming gifts you receive when you roll into a new town, some cards offer attractive signup bonuses. Hit the initial spend threshold, and you’ll rack up rewards from the start.

When it’s time to compare cards, line ’em up! Use online tools and informative articles (like the ones on CardRates.com) to compare the best options side by side. 

Be sure to read the card agreement’s fine print so you know exactly what you’re getting. The more informed you are, the more likely you are to select the card with the biggest jackpot.

Spend Strategically

Spending intelligently with your card is like planting seeds in nutrient-rich soil. You look for the best ways to spend your money to get the biggest yield — from your crop or your card’s rewards program.

First, use your card for your day-to-day stuff: groceries, gas, and rent. These are things you’ve gotta pay for anyway, so you might as well get rewards for doing so. But don’t go hog wild by spending more than you can pay off every month, or those interest charges will wipe out your rewards.

The fact that your card offers extra rewards in certain categories doesn’t mean you should spend more than you normally do just to rack up points. Mind your budget and let any rewards come organically from your normal spending.

Every time you go out of your way to spend with the sole intention of earning rewards, you may be digging yourself into a hole. 

Rotating categories reward cardholders with bonus cash back for purchases made with different merchants each quarter.

Pay special attention to cards with quarterly rotating bonus categories. They offer higher rewards in categories that rotate every three months. Perhaps you get 5% back on groceries during the spring or 3% on gas during the summer. 

My tip: Be sure to activate your category each quarter and shape your credit card spending to take advantage of seasonal rewards. 

For example, if groceries are the bonus category, use your rewards card for all of your grocery shopping during that quarter. Next quarter, you may be better off using a different card with bonus rewards at the supermarket.

And keep an eye out for special, limited-time deals. Lots of card issuers will partner with some merchants to offer extra rewards for spending done during a specific period of time. These deals can be a welcome boost if you are in the right place at the right time.

Leverage Bonus Categories

Take advantage of those bonus categories, and you’ll see your rewards stack up like bales of hay. Many cards offer extra rewards in certain spending categories. If you know how to work these to your advantage, you can really boost your earnings.

Reward categories can be flat or tiered. We’ve already discussed a particular type of tiered reward — the quarterly rotating bonus. Flat reward cards are like a steady stream. They pay a fixed rate on all spending, typically between 1% and 2%. 

Tiered bonus categories offer different reward rates for given categories. For example, a card may provide 3% cash back at restaurants, 2% at gas stations, and 1% on all other eligible purchases. You want to use that card every time you’re sitting down to a meal at a restaurant and every time you fill the tank. 

But here’s where a little finesse pays off. You can get a separate fuel credit card that pays 5% at your favorite gas station. That’s the one you use when fueling up. If you know which type of bonus your card offers, you can plan your spending so you always reap the maximum rewards.

A signup bonus is a card’s golden handshake. You see, some cards offer a fat bonus if you spend a certain amount in the first three months after opening the account. All too often, folks are swayed by that shiny signup bonus and wander down the wrong path by spending more than they can afford. Make sure the spending requirement is something you can meet without straining your budget. 

A good rule of thumb is to only look at cards with signup bonuses that return at least 10% of your spending requirement. For instance, if you must shell out $3,000 in the first three months, you should expect a bonus reward of at least $300. 

Once you earn your signup bonus, your everyday spending becomes the key to unlock rewards.

Knowing about the popular rewards credit card programs helps you pick the one with the best rewards opportunities. Each of these big issuers has different strengths, and choosing correctly can maximize the value you’ll derive from your spending.

Whether you want to travel, save on expenses, or simply enjoy some perks, it’s good to know how the big reward programs work so you can harvest rewards from the best pastures.

Chase Ultimate Rewards

The Chase Ultimate Rewards program is among the cream of the crop in the world of rewards – and for good reason. You’ve got flexibility, value, and a ton of options at your fingertips. Whether it’s travel, cash back, or gift cards, Chase Ultimate Rewards has you covered.

You have the option to earn points via everyday purchases, and you’re entitled to bonus points in various categories, such as dining and travel, based on which card you have. When it’s time to redeem, you can use your points for travel via the Chase Travel portal, cash them out as cash back, or transfer them to partner airlines and hotels for added value.

Chase Travel occupies the central role in the Ultimate Rewards program, serving as a gateway to some of the best travel deals. You can book flights, hotels, and rental cars via the portal to earn elevated bonus rates.

When it’s time to redeem your points, they will be worth more than cash back or gift cards if you use them at the Chase portal to book travel. Even better, Chase Sapphire cards boost your reward values when you redeem your points through Chase Travel. 

Capital One Rewards

The no-nonsense Capital One Rewards program rounds offer a straightforward earning proposition. It’s a no-frills program that doesn’t mince words. It is plain, simple, and to the point.

For example, you don’t have to worry about rotating categories to keep track of — that’s not Capital One’s bag. The program favors a simple reward system. 

When it’s time to redeem, you’ll find the process is absolutely painless. You can use your points to book travel, get statement credits, or shop on Amazon, among other options. This flexibility is one of the biggest selling points for Capital One.

The issuer offers choices ranging from no-annual-fee cards to premium cards with additional services such as entry into airport lounges. Whether you are a frequent traveler or just somebody who wants a good all-around card for basic needs, there’s probably a Capital One offering that will fit you like a glove.

American Express Membership Rewards 

Think of American Express Membership Rewards as the Cadillac of rewards programs. It is option-loaded and built for those who appreciate the finer things in life. It’s one of the very few programs that offer not just value but prestige and a way into some really top-shelf experiences.

Earning points with Amex is pretty flexible. Depending on your card type, you may get bonus categories like dining, groceries, or travel. The Membership Rewards program has some of the broadest redemption options. You can use points for travel, statement credits, or gift cards. Or you can transfer your points to various loyalty programs. 

Perhaps the biggest perk with Membership Rewards is the ability to transfer points to Amex’s airline and hotel partners, which can unlock some serious value if you are savvy about booking flights and hotel stays. 

Sometimes American Express will offer transfer bonuses that give you even more value when moving points to select partners.

Citi ThankYou Rewards 

The Citi ThankYou Rewards program is solid and gives a lot of flexibility for those who desire choices. It’s not as spiffy and glamorous as some other rewards programs, but it offers good value from sensible credit cards. 

With Citi ThankYou Rewards, you earn points through everyday spending. As with the other programs, you can earn bonus points in certain categories, depending on the card. You can transfer points to a slew of airline partners — oftentimes at a 1:1 ratio — which is a huge benefit for frequent travelers. 

Citi makes point redemption easy. You can use your points for travel, statement credits, and even bill payments. Another great thing about the program is that it lets you earn the most bonus rewards on your biggest spending category each month. The program helps your spending pay off, from travel to everyday expenses.

Rewards credit cards are like finding that extra biscuit in your lunch pail — just a little something extra that makes your day a bit sweeter.

Every time you swipe your card, you’re not just paying for what you’re buying; you’re accruing points, miles, or cash back to earn more value. So saddle up and start earning a bonus by shopping with a rewards card.