Illustration for article titled Choosing From The Three Types Of Reward Credit CardsPhoto: How To Find The Right Reward Card For You (Shutterstock)

Before deciding on an award credit card, you need to decide what type of award card you would like to receive as there are three main categories to choose from: cashback, points or miles. To help you make a choice, take a look at each category here so you can choose the best option based on your spending habits.

How reward cards work

We have come to the point where almost all credit cards offer an incentive or reward for use, usually in the form of cashback, travel miles, or points that can be redeemed on an online shopping portal operated by the credit card company.

Many cards also offer an introductory bonus which, at least recently, can have a redeemable value of up to $ 1,500 – assuming you spend up to a certain amount on the card, usually within the first few months of opening your account. These welcome bonuses are the foundation of many of the behaviors that you see from credit card lovers. Some cards may also offer 0% interest in the first year of the card as an enticement.

Cash back rewards

Cash back credit cards pay you back a percentage of your purchases either as a bank statement balance or with a check or bank deposit. There are two types of cashback cards: flat rate and tiered cards. With flat rate cards, you usually receive a 1-2% discount on all purchases made on the card. Tiered cash back cards, on the other hand, limit their juiciest rewards to spending in a handful of categories, from online shopping to travel to dining, with different percentages on each, usually in the 2-3% range, with at least one category is closer to 5% cashback.

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If you’re the type of guy who sets and forgets and doesn’t travel or eat out a lot, a flat rate card is probably your best bet. The only problem with tiered rewards is that if you want to maximize your rewards, you must actively manage your expenses. Because of this, users often have dedicated cards for travel or online purchases. Personally, I forgot to update an older card’s bonus category and missed out on simple rewards just for not paying attention. However, if you’re committed, you can get more value out of a tiered card as the cashback percentages tend to be higher.

Illustration for article titled Choosing From The Three Types Of Reward Credit Cards


There are two main types of cards that offer awards in miles: airline co-branded cards and, less commonly, general travel cards that are not tied to a specific airline. When you use these cards to spend on certain categories such as travel, you’ll earn airline miles (the average airline mile is 1.3 cents on spending). according to Value Penguin) instead of points or a cashback percentage. These miles can then be redeemed for a flight ticket. However, with many cards you can also redeem miles for cashback credit or other goods.

Airline-specific cards are more restricted in terms of earning and redeeming points than general travel cards. However, you’re less likely to incur annual fees, some of which are closer to $ 500 for premium travel cards (which also offer other perks like free checked baggage, seat upgrades, priority boarding, or lounge access).

To make the obvious clear, these cards are ideal for heavy travelers, especially if you already fly a lot for work. Unless you intend to travel often, stick with points or get money back.


Point-based cards are a bridge between the cash-back model and general travel cards and offer the greatest flexibility in redeeming whether it is travel tickets, cash balances, gift cards or goods purchased through an online shopping portal. Like tiered cash-back cards, point-based cards often offer bonus points based on different shopping categories such as gasoline or travel.

It is usually a good idea to aim for a 1: 1 value, which means one point is worth a penny. Since many merchant partners can offer significant discounts on some of their items, this type of card will appeal to you if you enjoy the thrill of finding a great deal online. Otherwise, if you don’t mind the hassle of managing your points, a cash back card may be your best option.