Rewards credit cards are everywhere, offering everything from cash back on groceries to points for travel, and perks you didn’t even know existed. Used wisely, these cards can stretch your budget, unlock benefits, and even improve your credit over time. Knowing how to use a rewards credit card for maximum gain is key to success.
However, there are some concerns. Despite the appearance of getting something for nothing, or very little, the reality is that careful consideration is necessary to avoid pitfalls related to rewards cards.
If you’re new to the world of rewards credit cards or looking to get into the game, it all starts with qualifying for the best card for your spending and knowing how to use it to your advantage once you have it, while avoiding overspending, of course.
Let’s walk through how to start, how to evaluate which type of card might be best, and how to use the right one for the greatest benefit possible.
How to Use a Credit Card Responsibly
Before you apply for a rewards card, especially one with an annual fee or complex points structure, you’ll need to master the basics of credit card use. There are endless resources describing how to manage credit cards and debt in general. The Office of Financial Readiness provides excellent online tools.
In basic terms, here’s how to use a credit card responsibly:
- Always pay your full balance on time. Rewards aren’t worth it if you’re paying interest on your purchases.
- Keep your credit utilization low. Try to use less than 30% of your available credit, while less than 10% is ideal.
- Set up autopay for at least the minimum payment. This helps you avoid missed payments and late fees, even if you forget. You can always make additional payments throughout the month to make up any difference.
- Don’t try to open too many cards at once. Every application triggers a credit inquiry, which will temporarily affect your score. Not only will this lower your approval odds, but if you do get approved with a lower score, you’ll likely have to pay a higher APR if you do carry a balance.
Responsible credit use is the first step to accessing and using a rewards card for maximum gain. Learning this will not only protect your financial health, but it will also open the door to better cards in the future.
Many of the best rewards credit cards require good to excellent credit scores. If you’re still building credit, start with a no-annual-fee card or secured card first. Then, upgrade once your score improves. Our overview of the best credit cards for good credit is a good jumping-in point if you’re score hasn’t yet reached the excellent level.
If you’re already carrying credit card balances, obtaining a personal loan or a debt consolidation loan can often help the situation. However, if you choose this route, consider changing your spending habits in the future to avoid paying high interest on multiple credit cards.
Related Article: Upgrade Vs Upstart Personal Loan Comparison
Types of Rewards Credit Cards
Not all rewards cards are created equal. The Federal Deposit Insurance Corporation simply states, “Knowledge of card programs provides the best rewards.” Knowing what the various types of rewards and redemption programs are, along with a few details, can help you strategically choose the best option for you.
Here are the most common types, along with what they offer:
- Cash Back Cards: These give you a percentage of your spending back as a statement credit or bank deposit.
- Points-Based Cards: Earn points that can be redeemed for travel, gift cards, or merchandise.
- Travel Rewards Cards: Often partnered with airline or hotel brands, these cards earn miles or travel credits.
- Rotating Category Cards: Offer higher rewards on specific spending categories (like gas or groceries) that change periodically, often quarterly.
- Flat-Rate Rewards Cards: Provide the same rewards rate on all purchases, great for simplicity.
How to Choose the Right Rewards Card
Your goal is to choose a card that fits your real-life spending, rather than trying to match your spending to a new card just for the rewards. This approach often fails and can be expensive.
There are hundreds of rewards cards out there, so there’s no need to compromise or change your spending habits. Whether you mostly buy groceries, fill up your gas tank, book flights, or make big-box purchases, there’s a card designed to reward that exact behavior. However, it may take some searching.
When choosing your card:
- Look at your last 2 to 3 months of spending. What categories appear most often?
- Decide if you want cash back, travel points, or other perks.
- Consider whether you want a simple card with automatic spending categories or if you’re willing to track categories for more significant returns.
- Be careful to double-check the credit score approval requirements before applying. It’s easy to wander towards cards with better rewards when shopping, only to find out they’re beyond your approval reach.
- If your chosen provider offers a soft-inquiry pre-approval tool, use the opportunity to check your approval odds before formally applying and accepting a hard inquiry on your credit report.
Related Article: Upgrade Credit Card Reviews: Which One Is Right for You?
Are Premium Rewards Cards Worth the Annual Fee?
Some premium rewards cards come with annual fees of $95, $395, or even $695. So how can you tell if one is actually worth it?
Start by looking at what you get in return. High-end cards often include:
- Travel credits (like $300 annually toward flights or hotels)
- Airport lounge access
- Global Entry/TSA PreCheck fee reimbursement
- Purchase protection and travel insurance
- Elite hotel or airline status
- Higher points multipliers on travel or dining
If you’ll use even a few of these perks regularly, the math often works out. But if you don’t travel or won’t use the benefits, skip the high fee and choose a solid no-annual-fee card instead.
Maximize Credit Card Rewards Without Overspending
The biggest trap with rewards cards is thinking you’re “saving money” when you’re actually just spending more. Here’s how to use a rewards credit card for maximum gain and without getting into a financial pinch.
- Use your card for planned purchases only. Groceries, gas, utilities, and stuff that’s already in your budget.
- Stack rewards with promotions. Think cashback portals or store rewards on top of your card points. For instance, if you already buy a product regularly, and your credit card issuer is offering a deal on the same item if you use your card, buy it through their partnership for extra savings.
- Redeem rewards wisely. Travel cards often offer better value per point when used for flights or hotels instead of gift cards. Additionally, if your credit card provider offers travel deals or extras on its website, you’ll often find solid deals there.
- Never carry a balance. Interest cancels out the value of your rewards quickly.
- Always remember that earning rewards is not an excuse to shop or buy extra items. Buying extra things just to earn a small reward almost never results in a net gain for your budget.
Common Mistakes to Avoid With Rewards Cards
How to use a rewards credit card also means knowing how not to use them. Even experienced rewards card users can fall into these common pitfalls. Work a clear strategy and pay attention to all of the variables to make the most of your earnings potential.
- Avoid chasing sign-up bonuses (balance transfers or cash back after spending) without a payoff plan.
- Remember to review and activate quarterly categories on rotating cards
- Redeeming points for low-value options. For example, statement credits are usually 1-for-1 transactions, where redeeming points for a gift card or merchandise usually involves a lower ratio.
- Overusing cards and not being able to pay off the balance each month.
- Letting rewards expire due to inactivity.
5 Great Cards to Consider
Ready to start earning? These cards represent a solid mix of accessibility, rewards, and approval requirements. They’re the best we’ve found at the mid-range level, and each appears in our overview of the best credit cards for good credit.
Capital One Quicksilver: Best for simplicity and less stringent approval requirements. Earn 1.5% cash back on every purchase, with no annual fee and no rotating categories.
Citi Custom Cash Card: Best for maximizing 5% category rewards. Automatically earns 5% cash back on your top eligible spending category each billing cycle (up to $500/month).
Upgrade Life Rewards Card: Best for everyday household spending. Earn unlimited 3% back on groceries, gas, and other necessities, while earning 1% back on everything else, with no fees and flexible payment options.
Synchrony Plus World Mastercard: Best for flat 1% cash back. A straightforward card with steady rewards and no annual fee.
Chase Sapphire Preferred: Best for flexible travel rewards. Earn up to 5x points on travel, plus significant rewards on other purchases. A generous sign-up bonus is also often available for qualified applicants.
