Are credit card rewards worth it?

Yes, credit card rewards are worth it if you pay your credit card bill in full each month. So you won’t be charged credit card interest on your purchases.

The benefit of rewards is that they allow you to get value back on every qualifying purchase, just because you pay by credit card. Here’s a simple way to look at it: If you had the ability to get 2% back on your groceries, gas, and other bills, without any effort on your part, it would make sense to take this deal. With rewards credit cards, you can get just that.

However, you only earn if you do not receive interest. That’s why it’s so important to always pay your bill in full each month and only buy what you can afford.

LEARN MORE: How does credit card interest work?

The Argument Against Credit Card Rewards

If you avoid interest charges, credit card rewards are like free money. So why do some experts make rewards seem like a bad thing?

The biggest criticism of credit card rewards is that they incentivize spending money. It’s easy enough to overspend with credit cards and end up in debt. When you earn points or cash back, it’s even more tempting to make that big impulse purchase that you really shouldn’t.

I’ve never been a fan of that line of thinking. You are missing out on something beneficial to you because of a worst-case scenario that is 100% avoidable.

Sure, credit card rewards incentivize spending more, but you’re still in full control of what you spend. If you have a budget and track your spending, you can get all the benefits of credit card rewards without interest or credit card debt.

What about annual fees?

Another criticism I see all the time is that these rewards aren’t free, as some rewards cards have annual fees.

It’s not really an argument. There are rewards cards with an annual fee, but there are also many cards that earn rewards and don’t charge for them. If you’re not interested in paying for a card, stick to no annual fee credit cards.

COMPARE CHOICES: Best No Annual Fee Credit Cards

Cards with an annual fee tend to have more benefits, so it’s not like you’re paying a fee for nothing either. For example, I have credit cards with annual fees, but that’s because I did the math and I know they save me a lot more than they cost.

LEARN MORE: Are your annual credit card fees worth it?

How rewards credit cards work

If you’re interested in rewards credit cards, the first step is to learn how they work. A rewards credit card earns rewards, which can be cash back, points or miles, when you use it to pay for purchases. These rewards are linked to your credit card account and you can redeem them with the credit card company.

There are all kinds of rewards card types to choose from, and we’ve covered the most popular ones below.

Cash Back Credit Cards

Cash back credit cards earn cash rewards on purchases. If your card earns 2% cash back, then $1,000 of qualifying purchases is worth $20. Most card issuers allow you to use cash back as a statement credit to reduce your credit card bill. Some of them also allow you to transfer money to your bank account or request a check.

Many consumers love cashback cards, and for good reason. They are easy to understand and do not require much time or knowledge from the cardholder.

COMPARE TOP CHOICES: Best Cash Back Credit Cards

Credit cards with travel rewards

Travel rewards credit cards earn points or miles on purchases. You can redeem these rewards for travel expenses.

LEARN MORE: How do credit card points work?

When looking for a travel credit card, you have several options. There are airline credit cards that allow you to earn credit card miles with a specific airline. There are also hotel credit cards that allow you to earn loyalty points with a hotel chain.

Finally, there are more versatile travel credit cards. Some of these rewards allow you to earn rewards that you can redeem at a flat rate, such as $0.01 per point, for travel purchases. Others have transferable rewards that you can send to airline and hotel partners as part of that card’s rewards program. These include American Express Membership Rewards cards and Chase Ultimate Rewards cards, among others.

It takes a little longer to learn the ins and outs of travel cards compared to simple cash back cards. If you like to travel, this could be time well spent. Travel rewards can help you travel for free with credit card points, and these cards often offer additional travel benefits.


Bonus Category Credit Cards

Bonus category credit cards earn more in specific spending categories. You can find cards that earn bonus rewards on groceries, gas, dining, and more. There are both cash back cards and travel credit cards with bonus categories.

Cards with bonus categories can help you maximize credit card rewards if a large portion of your regular spending is concentrated in certain areas. For example, families often benefit from credit cards for gas and groceries, as these correspond to their normal spending habits.


Should You Get a Rewards Credit Card?

If you have a good credit rating and you always pay off your card’s full statement balance each month, a rewards credit card is a great choice.

The best credit cards, including the best rewards cards, are almost always for people with good credit, a FICO® score of 670 or higher. If your score falls within this range, you could get a quality rewards card that will save you money, either through cash back or credit card rewards points.

COMPARE TOP CHOICES: Best credit cards with rewards

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