What to know about credit card rewards structures


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One of the benefits of having credit cards is the rewards they allow you to accumulate. And that’s highlighted in a new GOBankingRates survey, which found more than one in four Americans say card rewards are the most important factor in choosing a card. But keep track of them and understand how each of them works can be tricky to navigate as the reward structures aren’t always straightforward.

In addition to those who say rewards are the most important factor, 15% of Americans say their primary purpose for using their credit card(s) is for rewards and perks, survey finds. .

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Meanwhile, the survey also showed that 9% of Americans say they don’t compare credit cards before choosing the best option. But understanding what benefits a credit card offers and which one is best for you, although it takes time, can be very rewarding.

“Consumers are certainly sensitive to both upfront costs and higher interest rates when it comes to choosing a new credit card. Either way, rewards, cashback opportunities, and other “what interests me” features aren’t far behind in terms of priority. They have become a de facto ‘currency’ in our culture and are highly valued,” said Bobbi Rebell, CFP, author of Launching Financial Grownups and personal finance expert at Score.

Rebell added that consumers need to be realistic about whether they will use their credit cards for perks or to take out high-interest loans – which is effectively what happens if you’re not in able to pay your balance in full on time.

“If they’re confident they’ll pay off the balance in full each month, it often makes sense to choose a card that has the most valuable benefits for them,” she added.

Rewards credit cards usually offer cash back, miles or points. Let’s take a look at the different reward structures offered by credit cards.

Cash back

A cash back credit card means you can earn rewards on your purchases, often including everything from meals to travel to groceries.

As Experian explains, a cash back credit card is pretty easy to figure out. For example, if your cash back card offers 2% cash back on purchases, you will earn $2 in rewards for every $100 you spend. Additionally, Experian notes that all cash back credit cards allow consumers to redeem rewards for cash, either by check, credit statement, or wire transfer.

Consumers should prioritize interest rates over chasing rewards, said Ted Rossman, senior industry analyst at CreditCards.com. He noted, however, that if you can pay in full to avoid interest, the rewards are great.

“Most people prefer cash back because it’s very simple, straightforward and universal. Who couldn’t use more money, right? Especially with inflation so high, Rossman said, “you can buy money back into your bank account or as statement credit, paying yourself back for things you would have hopefully bought anyway.

Another key point of cash back credit cards is that consumers should be aware of several criteria including reward caps, how much cash back you earn, where you can earn it, and alternative repayment options. available, according to Vadim Verdyan, head of consulting operations at albert.

Many cash back cards will offer promising rewards, like 6% cash back at all supermarkets, for example, “[b]but they will have a limit in the fine print that says something like, “Up to the first $5,000 spent, then 1% cash back on all remaining supermarket purchases,” Verdyan said.

When it comes to how much cash back you can get and where to earn it, he recommends avoiding cards that only offer cash back at specific merchants or retailers.

“Choosing cash cards that are more general and offer more rewards for categories of necessity like groceries, gas, and restaurants will likely work better in the long run,” Verdyan added.

Refund cards are best for consumers who want simple returns that can be used for anything, he says. These are also popular with people who are just starting their credit journey, as many have no annual fees and still offer good rewards, he added.

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Some credit card rewards come in the form of points you earn when you make purchases in certain categories.

“With a rewards credit card, you may be able to earn 1 point for every dollar spent. Your rewards credit card may also offer more generous points redemption options such as 2 to 5 points for every dollar spent in travel, restaurants and other categories such as department stores, grocery stores and more,” Chase Bank said on its website.

Cards that offer general points as rewards tend to be the most versatile type of card, as you can redeem those points for travel, cash back or specific items from an online rewards catalog, said Albert’s Verdyan, adding that the way you earn points is very similar. any other type of reward.

However, the difference to watch out for comes when redeeming them, Verdyan noted.

“Some companies may have better redemption offers when used for travel or specific items, but others may have worse redemption offers for those things. For example, points redeemed for travel may have a 1.5x multiplier, cash back points can have a 1x multiplier and specific merchant points can offer a 0.75x multiplier, all from the same card,” he said.

Point rewards are generally best for someone who wants the most flexible option, as you can redeem them for cash back, travel, or specific items, according to Verdyan.


As Chase Bank explains, there are two types of credit cards that offer airline miles: travel credit cards and co-branded airline credit cards that offer miles for use with a specific airline.

If your credit card offers airline miles as a reward, you earn miles by making purchases on the card, Chase explains, while for co-branded airline credit cards, you typically earn additional or bonus miles by booking and by making purchases directly with the partner airline. .

According to The Motley Fool, the best airline credit cards offer 1 reward mile per dollar spent as well as bonus credit card miles on select purchases. Keep in mind, however, that the basic guideline for valuation is that each air mile is worth 1 penny, the Motley Fool added.

“Each airline and credit card rewards program has different methods of redeeming credit card miles. This means that the miles you earn through airline rewards programs have a different value,” according to the Motley Fool.

Experts note that for these rewards, consumers should be aware of blackout dates, travel benefits, spending categories and transfer options.

“Some travel cards offer great reward options, but don’t allow redemption during the most popular travel dates. A lot of cards don’t have one, so that’s an important factor to check before applying,” Verdyan said.

Additionally, a key point is that some travel cards offer many additional travel benefits, including discounts – or free vouchers – for TSA PreCheck, Global Entry and airport lounge access, which are increasingly becoming more popular.

“Look for travel cards that offer more than rewards and regular redemptions,” Verdyan said.

Verdyan added that some travel cards, such as those offered by airlines, sometimes offer very high rewards when you spend on that specific airline and mediocre rewards for everything else.

“When choosing a travel card, make sure it’s a more general card that pays the best rewards on everyday expenses and necessities like groceries and gas to get the most out of your expenses,” he recommends.

Finally, consumers should be wary of transfer options, as many travel cards have begun to allow customers to transfer miles or points to external travel partners.

“For example, an airline card might allow you to transfer points to a hotel chain it partners with, which can be beneficial if those hotels also offer redemption multipliers when you transfer miles to them. So that can be a very beneficial feature to have, and it also gives you more flexibility to redeem those miles,” Verdyan said.

Cards that offer miles are best for someone who travels often because you cover the costs of your flights and earn status with specific airlines if you travel enough.

“That said, travel cards are generally better suited for someone with a bit more discretionary spending, because you can’t use the points for anything other than travel,” Verdyan said.

More from GOBankingRates

Methodology: GOBankingRates surveyed 1,003 Americans ages 18 and older nationwide between September 19 and September 20, 2022, asking them twelve different questions: (1) Which of the following is most important to you when is it about choosing a new credit card? ?; (2) How do you manage your credit card bill each month? ; (3) Do you know your credit score? ; (4) At what age did you receive your first credit card? ; (5) For what main purpose do you use your credit card(s)? ; (6) Do any of the following statements apply to you? (Select all that relate to it); (7) Which credit card fees do you hate the most? ; (8) How many credit cards do you have? ; (9) What is the current total amount of your credit card debt? ; (10) How long do you think it will take to pay off your credit card debt? ; (11) Have you already reached the credit limit of your credit card? ; and (12) Have you ever charged any of the following to your credit card? Select everything related to it:. GOBankingRates used PureSpectrum’s survey platform to conduct the survey.

This article originally appeared on GOBankingRates.com: What to know about credit card rewards structures

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