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You hear credit cards are bad so you don’t use them, right? What if we told you they could be good when used in the right context? What if you could build an even better credit score if you had reward credit cards as a personal finance tool? 

It’s true, reward credit cards can be a great way to build and keep a good credit score. Even better, they pay you rewards just for spending money. But you have to know how to find the right card and how to use them right so you don’t get in over your head in debt.

What are Reward Credit Cards? 

Reward credit cards, as the name suggests, are credit cards that pay you rewards when you use them. They usually pay rewards for specific types of purchases. For example, you may have a credit card that pays you for grocery purchases or for dining out and another that pays rewards for any travel purchases. 

Each reward credit card pays rewards differently too. Some strictly pay your rewards as a statement credit and others pay it as cashback, gift cards, or as travel rewards. Each card pays a different level of rewards too. 

What Types of Reward Credit Cards are There? 

The sky’s the limit when it comes to the types of reward credit cards. The most common types include the following. 

Cash Back Reward Credit Cards 

Cashback reward credit cards allow you to earn cashback for certain purchases. The amount of cashback you earn is placed in your rewards account until you hit the threshold required to cash out. You tell the credit card company how and when you want to cash out your rewards, putting you in control. 

Most cash back credit cards offer a flat rate reward for any type of purchase. Some cards, however, pay in tiers, paying you more cashback for purchases in certain categories while paying a flat rate in all other categories. For example, you might earn 4% back on grocery purchases and 1% cashback on all other purchases. 

Miles Reward Credit Cards 

If you’re an avid traveler, a miles reward credit card may be a good option. With each purchase you earn miles, usually noted as 2x, 3x, or 4x your purchase. For example, if you spend $1,000 at 2x miles, you’d earn 2,000 miles for the purchase. 

Your miles accumulate in an account for you to redeem when you travel. You can often redeem the rewards in your travel loyalty accounts, but you’ll get the most benefit by booking your travel through your credit card company’s travel department. 

Points Reward Credit Cards 

Points reward credit cards are like cash rewards cards, but you get points instead of cash. Once you accumulate enough points, you can redeem them for prizes, such as cashback, gift cards, or other merchandise.  

How do Reward Credit Cards Work? 

Reward credit cards work just like any other credit card. You spend based on your credit limit and pay your bill either in full or at least the minimum payment by the due date. 

The rewards accumulate according to the card’s terms. Most post the cashback, points, or miles to your account within 24 to 48 hours. Read your credit card’s fine print to determine the terms regarding how to earn rewards and redeem them. 

It’s important that you keep up with your credit card payments, though. If you read the fine print on your card, you’ll likely see that if you default on the card, you could give up your rewards.  

How do you Qualify for Reward Credit Cards? 

The one downside of reward credit cards is they are a little harder to qualify for than other credit cards. Most credit card companies want someone with great credit for their reward credit cards. They are rewarding you for proper use of your credit card and if you have bad credit, you may not use the card responsibly. 

You don’t need perfect credit to apply, and every credit card company has different qualifying requirements, but it will work in your favor if you have great credit, stable income, and a low debt-to-income ratio. 

Your DTI is a measurement of your monthly income to your monthly debts. The more debt you have the harder it will be for you to pay your credit card balance in full which could make it harder to qualify for a reward credit card. 

This doesn’t mean you won’t qualify for a reward credit card if you don’t have perfect credit or a low debt to income ratio, but you may pay higher rates or get fewer rewards. If you don’t have the ideal financial situation, you can take a credit card that offers fewer rewards until you improve your credit and qualify for a better reward. 

How Should you use Reward Credit Cards? 

Knowing how to use reward credit cards the right way is key. Like any credit card, you should only charge what you can afford to pay off, but here’s how to maximize the benefits of your credit cards paying rewards. 

1. Find out the reward tiers 

Some credit cards pay a flat percentage for every purchase and others pay different rewards for different categories. 

If you have more than one credit card, find out what they pay for each category. Earmark the cards that pay the highest rewards for the most common categories you spend, such as groceries, dining out, or travel, and use them for those specific costs. 

2. Determine if you must activate categories

Some credit cards have rotating categories. Read your card’s fine print to find out if this is the case. If it is, you may have to activate the categories you want to use to get the rewards. 

3. Choose the card with the rewards you’ll use

If you have a cashback card and a travel reward card but know you won’t travel anytime soon, you’ll benefit more with the cashback card.  

4. Only charge what you can pay in full

The point of getting rewards for using your credit card is to make money. If you carry a balance or charge more than you can afford, the interest you’ll pay will offset any rewards. Typically, the rewards aren’t worth it if you’ll pay interest. 

5. Redeem your rewards on time 

Each reward has a different expiration. Make sure you accumulate enough rewards to meet the cash out threshold and that you can cash them out before they expire. Some rewards don’t expire, but most do. 

How to Choose the Right Reward Credit Cards 

A quick Google search will show you that you have many choices when it comes to a reward credit card. Here’s what to consider when choosing the right card for you. 

Annual Fee 

Most reward credit cards have an annual fee. Make sure the cost makes sense and that you’ll earn more rewards than the annual fee costs. For example, if the annual fee is $95, make sure you can earn over $95 for the year to make the card worth it. 


If you don’t always pay your credit card balance in full, pay close attention to the APR. The interest rate you’ll pay will increase the cost of your purchase. It’s not worth carrying a reward credit card if the interest will cost more than what you earn. 

Reward Categories 

Make sure the reward credit card pays for the categories you spend the most. Flat rate credit cards usually pay the lowest rates and aren’t worth it. Instead, look for cards that focus on the categories you spend the most. 

Promotional Periods 

Some reward credit cards have promotional periods. For example, they may pay an inflated reward for a few months, but then the reward decreases for the rest of the time you own it. If you have a large purchase planned and the promotional period will help you earn more rewards, then it may be worth it. But if you’re looking for a credit card that will pay a level amount of rewards all the time, look for a card without a promotional period. 

Key Takeaway 

Find the best reward credit card that pays the highest rewards for where you spend the most money. Make your credit card work for you and pay you just for buying what you normally buy!

This article is provided by EveryIncome.