Best rewards credit cards and how points can be redeemed for travel, cash back or gift cards

Everyone has bills to pay, but why not get some money back for those expenses? That’s where rewards credit cards come in. 

Rewards credit cards allow users to earn points, cash back or miles for the money they spend on a day-to-day basis. It’s that simple. What is not as simple is choosing a rewards credit card because there are so many options. 

Some credit cards are more general and simply give an amount of cash back for the money spent using the card, others are a lot more specific, like credit cards for airlines, vacation destinations and hotels.

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It isn’t one size fits all when it comes to rewards credit cards because choosing the right card depends on how you spend money. For example, there are certain cards that are great for frequent travelers and others that are an excellent choice for those who want to redeem their points for cash back or restaurant gift cards.

Here is some more information on popular rewards credit cards and an overview of how these kinds of cards work.

1. What are credit card rewards?
2. How do credit card points work?
3. What can you redeem with credit card rewards?
4. What are the major credit card companies with rewards?

1. What are credit card rewards? 

Credit card rewards come in one of three forms. You can either earn cash back, points or miles depending on the card you have.

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The amount of rewards you earn depends on the card you have. If you have a card with no annual fee, the amount of rewards you get is going to be lower than if you had a card with an annual fee involved. It’s important to look at the fine print of every card to make sure there are no hidden fees.

A cash-back credit card is exactly what it sounds like. You are able to earn a percentage of cash back in your pocket for the money that you spend. Each credit card gives a different amount of cash back. A lot of these cards don't have any annual fees involved.

A points-based credit card works a little bit differently. Some credit cards give you points for the money you spend. You can then choose how you will spend these points. Some common ways to spend points are getting cash back, using them for gift cards and for travel. There are also some places that allow you to buy items with certain credit card points, like Amazon.

Then there are miles. These are accumulated with travel cards, especially airline cards. If you have a card with which you are earning miles, you can use those miles that you have earned to buy airline tickets.

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2. How do credit card points work?

Credit card points are accumulated over time based on your spending. Those points can then be redeemed for a whole slew of things. 

How many points you earn and what you can use those points for is going to differ depending on the card you have. Some points can be redeemed for hotel stays, airline flights or gift cards for different retailers and restaurants. Different amounts of points are earned for every dollar that is spent with the card.

To get a full understanding of how points are earned and what they can be used for, check the terms of your card.

3. What can you redeem with credit card rewards?

The range of what you can get with credit card rewards is wide, depending on your card and how many points you have.

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You can use your points every month to get yourself a small gift card, or you can save them up over time to use them for something bigger like a free flight or even a free vacation. 

Some rewards credit cards are very general and points can be used for many different things while some are more specific. There are cards, like the Chase Disney credit cards, with which you earn points that are (for the most part) reserved for Disney-related purchases. So, in theory, if you’re a Disney fan, you could save up your points over the years and eventually have a lot of your vacation paid for through the spending that you do anyway. Royal Caribbean is another example of a vacation card.

Most airlines and hotels like Marriott and Hilton also have their own cards. If you find yourself a frequent flier of a certain airline or have a hotel you prefer to stay at, you could look into these cards where you can use your points toward flights and stays.

4. What are the major credit card companies with rewards?

Some major credit card companies with rewards are Chase, Capital One, American Express, Wells Fargo and Discover.

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These companies have many different cards. Some have no annual fee to pay while some have massive ones, so make sure to examine the fine print before applying for a card.

Two of Chase’s popular rewards credit cards are the Chase Freedom Unlimited card and the Sapphire Preferred card. 

The Chase Freedom Unlimited card has no annual fee. This card rewards users with 5% back on travel, 3% back on dining, 3% back on drugstore purchases and 1.5% back on all other purchases. These points never expire, so you can save them up for as long as you want.

The Sapphire Preferred card has a $95 annual fee. With this card, you can earn 5x total points on travel purchased through Chase Ultimate Rewards and 2x points on other travel purchases. You also earn 3x points on online grocery purchases, 3x points on dining and 3x points when you stream movies. On all other purchases, you get 1 point per $1 spent.

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Wells Fargo has the popular Active Cash card that has a $0 annual fee. With this card, you earn 2% back on all purchases. You can then use these rewards for purchases made on the card, redeem it as credit, buy gift cards or redeem for cash.

The Capital One Venture Reward card has a $95 annual fee and is good for travelers. People using this card earn two miles per dollar on every purchase, five miles per dollar on hotels and rental cars and earn two free lounge visits each year. This is an example of a miles-based credit card since you can use the miles you earn toward a vacation.

A last popular card is the Discover card with which you earn 5% back each month on purchases at different places each quarter. This means that each quarter there is a different category where 5% cash back is earned. Some quarters might be grocery stores, others could be gas stations. All other purchases earn the user 1% cash back. You can then redeem your rewards at any time as cash, gift cards or even directly on Amazon.

Even though these are some examples of popular cards, there are many others out there that are worth giving some thought, depending on your spending habits.