Will you redeem your points for luxury travel or to visit Grandma? Each use will maximize a different type of reward. If you are looking for a flexible travel currency, Chase Ultimate Rewards will transfer to over a dozen travel partners in addition to their ability to be redeemed directly for travel.
In general, you will get the most value out of your points redeeming them for luxury travel if you earn miles directly with an airline or transferable points that can be transferred to an airline partner. For instance, a business class flight may cost four or five times the amount of an economy flight in dollars, but in miles only costs twice as much.
With the example above, you would receive only about 0. Other types of points, like Southwest Rapid Rewards points, are worth a fixed value, so no matter how you redeem them you can rest assured knowing that you got the most value for your points.
A travel rewards credit card awards points or miles for your purchases that you can use either directly for travel or, in some cases, transfer to travel partners. You earn points or miles as you make purchases on the card, then redeem the points or miles when you are ready to travel.
Occasionally, with some lesser known partners, you may need to call the credit card company to make the transaction. What you can do with credit card rewards will depend on the type of rewards you have. If you have miles or points with a specific airline or chain, you will be able to redeem for trips with that vendor or its partners.
If you have flexible points, you have more options. Typically, credit cards do not have a limit to how many points you can earn. That said, there may be limits on how much spending will qualify for a category bonus.
Purchases over that amount will earn 1 point per point. The value of flexible rewards points, like Chase Ultimate Rewards , will depend on the type of card you have and how you use the points.
In general, you can expect a minimum of 1 cent in value from most types of points, with some uses yielding 1. The value of an airline mile or hotel point will depend on the type.
Not all points are created equal. In the same vein, Hilton Honors points average 0. Other airline or hotel point values will vary with each booking. The value of a point will vary with each redemption. Rewards cards in general, including travel credit cards , typically require good to excellent credit.
There are three types of rewards credit cards. The first is a card that is offered through a specific airline or hotel chain that allows you to earn rewards towards awards with that company or its partners. The second is flexible rewards credit cards. Flexible cards offer you the ability to transfer to a number of different travel partners in addition to being able to redeem miles directly for travel.
Finally, you have cards that allow you to redeem rewards for statement credit, sometimes for a specific category such as travel, or that offer cash back rewards you could then use on whatever you would like. I cover what's going on in the news and how it affects your bottom line.
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Kelly Anne Smith. Forbes Advisor Staff. Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. Read more. Find The Best Credit Card. Click Here To Apply Now. Forbes Advisor created additional star ratings so that you can see the best card for specific needs. This card shines for this use, but overall the star ratings may differ when compared to other cards. Welcome Bonus 60, points.
Regular APR Why We Picked It. Earn high rewards on several areas of spending Transfer points to travel partners at rate Many travel and shopping protections. This is just one scoring method and a credit card issuer may use another method when considering your application. These are provided as guidelines only and approval is not guaranteed.
Redeem cash back in any amount, any time. Rewards never expire. Use your rewards at Amazon. No annual fee. Discover will automatically match all the cash back you've earned at the end of your first year! Perks are what you get simply for carrying the card — and depending on the card, perks can deliver even more value than rewards.
Travel cards, in particular, are known for their perks. Automatic credit for travel expenses. Several general travel cards will reimburse hundreds of dollars a year in travel expenses. This might apply to any travel purchase, or to specific expenses such as airline fees or Uber rides. Learn more about travel credits. More and more cards are paying you back for the application fee for these trusted traveler programs, which help you get through airport security and customs more quickly.
Learn more about trusted traveler programs , and see which cards offer reimbursement. Airport lounge access. The biggest airlines American, Delta, United all offer high-end, high-annual-fee credit cards that get you into their airport lounges when you travel, and some lower-fee airline cards offer discounted or limited access. Several general travel cards get you into lounges in worldwide networks such as Priority Pass. American Express even has its own lounge network. Learn more about cards with lounge access.
Free checked bags and priority boarding. Exclusive to airline cards, these perks make travel a lot easier because you don't have to stuff everything into a carry-on to avoid a bag fee, and you don't have to fight for overhead-bin space because you're among the first to board the plane.
The checked-bag perk alone can easily pay the annual fee on some cards. Learn more about free checked bags. Free nights and other amenities. Credit cards issued by hotel chains offer perks that general travel cards can't match.
Some of them give you one free night a year, which can make up the cost of the card immediately. Other benefits include free breakfast, free internet and early check-in or late check-out. Rewards cards make purchases work harder for you. Earning rewards on every dollar you spend is like finding change in your couch cushions every day. They allow you to travel more often, or more luxuriously, at a discount.
Travel rewards credit cards can make it possible to sit in first class, upgrade to a suite or skip the long security line. They can help protect you if your vacation falls apart. Many travel cards will compensate you if your bags get lost, your flight gets significantly delayed or canceled, or you have to cut your trip short because of a family emergency or illness. Many also offer coverage for your rental car.
This all comes at no additional cost to you. Rewards cards typically have higher APRs. That means credit card debt will cost you more over time. Annual fees add up, especially if you carry multiple rewards cards.
They require a fair amount of mental energy. Some people relish the challenge of maximizing every purchase and piecing together a complicated, yet heavily subsidized, vacation itinerary. Others have zero interest in memorizing which card to use at gas stations, which to use at grocery stores, and which to use at restaurants.
If you want rewards with little effort, a flat-rate cash back card or a travel card with a straightforward rewards program no fancy transfers to airline partners or complicated redemptions will make jumping into the pool of rewards cards warm and inviting. Put all your ordinary expenses on the card , including monthly bills, to rack up rewards more quickly. Be careful to never overspend just for rewards. Consider using complementary cards to extract maximum rewards for your spending.
For example, one card might offer high rewards for restaurant spending, while an airline card gives you free checked bags and a third card gives you a nice rate on all other spending. If you have a card with a sign-up bonus, consolidate spending on that card until you earn that bonus.
Redeem your rewards in the way that delivers maximum value. With travel cards, you usually get a better redemption rate when you redeem for travel expenses than you would if you opted for cash back.
Cash-back cards, meanwhile, may give you the highest redemption rate for statement credit, but a lower rate if you redeem points for gift cards.
Some rewards can be transferred to travel partners, such as airlines and hotels, at a valuable rate. Learn what the options are and what your rewards are worth. Access to airport lounges means free snacks and a more relaxing space in which to wait for your flight. Rewards cards come in a variety of flavors to fit different consumer preferences and spending patterns.
This roundup highlights the best cards in each particular category, but there may be a better card for you. Find other great cards in our specialized roundups:. Best cash-back credit cards. Best general travel credit cards. Best airline credit cards. Best hotel credit cards. Best premium credit cards. Best cards for restaurant rewards. Best cards for grocery rewards. Best cards for gas rewards.
NerdWallet's Credit Cards team selects the best rewards credit cards based on overall consumer value, as evidenced by star ratings, as well as their suitability for specific kinds of consumers, including both those seeking cash-back rewards and those interested in travel rewards. Factors in our evaluation include annual and other fees, rewards rates, the earning structure for example, flat-rate rewards versus bonus categories , redemption options, bonus offers for new cardholders, introductory and ongoing APRs, and other noteworthy features such as airline or hotel perks or the ability to transfer points.
Learn how NerdWallet rates credit cards. For example, if your card earns 1. How you use the points or miles depends on the card. Common redemption options include travel, gift cards and merchandise. With most rewards cards, you can see your accumulated earnings on your monthly statement or through your online account portal, and you can decide when and how to redeem them. You may also be able to have your rewards deposited into a bank account or sent as a check.
For cards that carry the name of an airline or hotel brand, you typically use your rewards for free travel or upgrades. Some bank-branded credit cards let you transfer their points into airline or hotel programs. In most cases, there is no limit to how many points or miles or how much cash back you can earn with a credit card. Some cards do limit how much spending is eligible for bonus rewards — that is, higher rewards offered in specific categories — but after you hit that limit, you still earn rewards at the base rate.
How much each point or mile is worth depends on the card that issued it and how you redeem it. In some programs, points are worth 1 cent apiece regardless of how you redeem. In others, you might get 1 cent per point when redeeming for travel and 0.
Airline miles could be worth anywhere from less than 1 cent to more than 5 cents apiece depending on how many miles you need to earn a free flight and how much that flight would have cost if you were paying cash. Hotel points are similarly variable in value. The best rewards credit cards typically require good to excellent credit for approval.
Good credit is generally defined as a credit score of or better. However, there are some decent rewards-bearing cards for people with fair credit and even bad credit. Keep in mind that credit scores are only one factor in your application. Every issuer has its own criteria for approval. Typically, credit card rewards are not taxable.
That's because the IRS generally considers credit card rewards as discounts or rebates, not income. Show summary. Best Rewards Credit Cards. Our pick for Travel rewards — flat-rate rewards.
Add to compare. Apply now. Annual fee. Recommended Credit Score. See your approval odds. Why We Like It. Product Details. Pros You earn 5 points per dollar spent on hotels and car rentals booked through Capital One Travel and 2 miles per dollar spent on all other purchases. Cons If you're loyal to a particular airline or hotel chain, you may get more value from one of that brand's own cards.
Cons There's a foreign transaction fee, common among cash-back credit cards. Our pick for Cash back — families groceries, gas, commuting, streaming. Pros This card offers industry-leading rewards at U.
See if you qualify for a better offer with Chase: Get Pre-Qualified. Our pick for Travel rewards — bonus categories. Cons If your spending is more focused specifically on either dining OR groceries, then other cards with higher rewards rates in one of those categories may be a better fit.
Cons Keeping track of the changing bonus categories, and remembering to opt in to them every three months, can be a hassle. Redeem cash back in any amount, any time. Rewards never expire. Use your rewards at Amazon. Our pick for Road trips. Cons If you spend a lot on groceries, dining and streaming, you can find cards with richer rates.
Points never expire. Terms and conditions apply. Our pick for Cash back — maximum customization potential. Pros A rotating category card with a twist: You pick your bonus categories. Cons Rotating category cards involve work, and this one adds an extra layer of effort because you have to pick your categories each quarter. No Annual Fee. Our pick for Cash back — high flat rate. Cons Other cards offer higher cash back percentages in specific categories.
To earn cash back, pay at least the minimum due on time. Cons Unlike some other dining cards, there are no bonus rewards for "entertainment" spending like movies, sporting events, live music, theme parks, etc. No Annual Fee Points never expire Terms and conditions apply.
Cons Activating and tracking the bonus categories can be a hassle. Our pick for Airline credit card. Pros You'll earn 2 miles per dollar spent on Delta purchases, at restaurants and at U. Enjoy your first checked bag free on Delta flights. Our pick for College students. Our pick for Hotel credit card. World of Hyatt Credit Card.
Pros You earn 4 points per dollar spent with Hyatt, 2 points per dollar on an array of common spending categories see the product details tab , and 1 point per dollar on other spending. You may also have the option of redeeming points for credit on your statement, just like cash back.
The card issuer sets the rewards rate that applies on your card. There are two basic kinds of rewards structures:. Flat rate. You get the same rewards rate on all spending done with the card, regardless of what you spend money on.
You might get 2 points per dollar on all purchases, or 1. Bonus rewards. Bonus rewards are awarded based on where you buy something, not what you buy.
Every merchant is assigned a category code ; if your card pays bonus rewards at grocery stores, for instance, you'll earn those rewards any time you pay at a merchant with a category code that identifies it as a supermarket or grocery store. Many credit card users carry multiple cards with bonus rewards in different categories, plus a flat-rate card for purchases that fall outside those categories.
The rewards you earn on your card are stored in a rewards account that you can access when you log into your card account online or, often, from the issuer's mobile app. Some issuers credit your rewards account for a purchase almost immediately. In other cases, your rewards account will update when your billing cycle closes and the issuer prepares your credit card statement, so it can take several weeks for rewards from any particular purchase to show up in your account.
The rewards process works like this:. You make a purchase with your credit card. The issuer calculates your rewards. If you have a card that earns bonus rewards, the issuer looks at the category code of the merchant where you made your purchase and then applies bonus rewards as necessary.
Otherwise, the issuer just calculates your rewards based on the flat rate. The issuer credits your rewards to your account. As mentioned, it could take anywhere from a few days to a few weeks for the rewards to show up. You redeem rewards by logging into your account online. Cash-back redemptions are pretty straightforward. Redeeming points or miles might involve booking travel through an online tool similar to Orbitz or Expedia. Every card is different. When you borrow money from a bank, you usually have to pay interest, which is the cost to you of using the bank's money.
Credit cards are unusual in that there is a way to avoid interest entirely. Most cards offer a "grace period" : If you pay your balance in full on each statement — meaning you don't roll over any debt from one month to the next — you won't be charged interest. If you carry debt, though, you'll be charged interest. Interest works like this:.
Your card issuer sets your interest rate. In general, the better your credit, the more likely you are to qualify for lower rates, but credit card interest rates tend to be significantly higher than rates on other consumer debt. Your interest rate is listed on your credit card statement.
It's expressed as an annual rate, but in most cases it is charged on a daily basis. So if your interest rate is When your billing cycle ends, your issuer calculates how much interest you owe. Your interest charge is based on your daily balances and your daily rate. The interest charge is included in your next month's minimum payment. Credit card interest generally does not compound — meaning, it does not get added into your balance.
You have to pay your full interest cost each month. Read more about minimum payments. Credit card companies offer different kinds of cards to meet different consumer needs. Some people put a lot of money on their cards every month and then pay them off immediately; those people benefit from a card that returns a portion of their spending in the form of rewards.
Others tend to carry a balance from month to month; they're better served with a card that offers a low ongoing interest rate. Still others are working to improve their credit; issuers have cards designed for those people, too. Here are the major types of credit cards. These cards "pay you back" for a portion of your spending by giving you cash, points or miles. See our roundup of the best rewards credit cards of for a range of options for different types of users.
Or look into specific types of rewards cards:. Cash-back credit cards give you, well, cash, which you can use to reduce your balance or, in some cases, have deposited in a bank account or sent to you as a check. See our best cash-back credit cards of General travel credit cards give you points that you can use to pay for travel.
Unlike cards tied to specific airline or hotel loyalty programs, these cards offer a great deal of flexibility. You can use their rewards on airlines, hotels and other expenses. See our best travel credit cards of Airline credit cards carry the name of a specific airline.
When you use them, you earn miles that you can redeem for free flights or upgrades on that airline. These cards don't offer a lot of flexibility in terms of how you can use your rewards, but they really pack in value with exclusive perks — free checked bags, priority boarding, airport lounge access and more.
See our best airline credit cards of Hotel credit cards carry the name of a specific hotel group, and they earn points that you can redeem for hotel stays. As with airline cards, the perks can be fantastic — a free night every year, automatic upgrades, elite status and so on. See our best hotel credit cards of You'll often pay a fee for the transfer, but the interest savings can be substantial. See our best balance transfer credit cards of These cards are best for those who expect to carry debt from month to month.
These cards are designed specifically for college students who are just getting started with credit. The application process takes into account the fact that young people are unlikely to have a long credit history or a high-paying job.
Be aware, though, that simply being a college student is not enough on its own to qualify. See our best college student credit cards of These cards are designed for entrepreneurs and small-business owners.
Their rewards and perks are tailored toward businesses, and they offer perks like free cards for employees and tools to track expenses. They're a step below corporate cards, though; when you apply, the issuer takes your personal credit history into account. See our best small business credit cards of If you're still building your credit or rebuilding it after a misstep , you'll want to hold off on applying for these cards until your score improves.
However, banks have designed cards specifically for people working to improve their credit. Getting one of these cards and using it responsibly can go a long way toward your goals:. Credit cards for fair credit are intended for those with credit scores roughly in the range of , sometimes also referred to as "average" credit.
See our best credit cards for fair credit of Credit cards for bad credit are intended for people with scores of less than The best credit cards for bad credit are secured cards, which require you to put down a cash deposit which is refunded to you if you upgrade or close the card in good standing. There are "unsecured" cards for bad credit that don't require a deposit, but they tend to charge high fees.
See our best credit cards for bad credit of Secured credit cards, as mentioned above, require a refundable security deposit, which is usually equal to your credit limit. The more you deposit, the higher your credit limit. The deposit protects the issuer in case the cardholder doesn't pay their bill, so these cards are usually easier for people with lower credit scores to qualify for. Be aware that some secured cards are available to people with no credit or a thin credit history but not to people with damaged credit.
See our best secured credit cards of Rather than rely solely on credit scores and other traditional methods of determining creditworthiness, the companies behind these cards may look at the applicant's income, assets, even their educational background and job category. See the best alternative cards for no credit for If you're a beginner to credit cards, see our step-by-step guide to choosing a credit card.
It starts by helping you figure out what cards you can qualify for, then walks you through deciding what kind of card best fits your needs.
The process in short:. Check your credit. The higher your credit score, the more likely you are to qualify for the best cards. NerdWallet offers free access to credit scores. Decide on a broad card type. If your credit score needs work, get a card designed for building or mending credit.
Otherwise, choose between a card that will give you rewards for your spending or one that will save you money on interest. Narrow your choices. If you want a rewards card, do you prefer cash back or points, and how much effort are you willing to put into managing your rewards? Do you need to do a balance transfer? Are you a student or a business owner who could benefit from a specialized card? Apply for a card that gives you the best overall value. Every credit card delivers value in its own way, through its own unique combination of features.
And there are trade-offs involved. If you want rewards, for example, you'll probably have to accept a higher interest rate. If you want high-value perks, you'll likely pay an annual fee. If you want a low interest rate and no fees, you shouldn't expect much else from the card.
Here are the main points of comparison when looking at credit cards. Some people are dead-set against paying a fee just for the privilege of carrying a credit card. But paying an annual fee is worth it in certain circumstances.
For example:. To earn significantly better rewards rates. To unlock valuable perks, such as airport lounge access or free checked bags. To get a card when you might not otherwise be able to, such as by avoiding a credit check. With any annual fee, the math comes down to whether the value you get from the card exceeds the dollar amount you pay. Still determined not to pay? See our best credit cards with no annual fee of Depending on what you plan to do with the card, you'll want to take these other fees into account:.
Balance transfer fee. This is a charge you pay to move debt from one card to another. See our best credit cards with no balance transfer fee of Foreign transaction fee.
If you travel internationally, getting a card that doesn't charge this fee is a must. See our best credit cards with no foreign transaction fee of Cash advance fee. Using your credit card to get cash is expensive. You'll usually pay an upfront fee, the interest rate for cash advances is often higher than for purchases, and in many cases, grace periods don't apply to cash advances, so you start paying interest on them immediately.
A few cards don't charge a fee for cash advances. Some cards don't allow advances at all. Late fees and returned-payment fees. These fees can be steep, but they are avoidable.
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