How Does A Rewards Credit Card Work?

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How does a rewards credit card work?

A rewards credit card offers you rewards when you use it, such as points, cash back, or miles you can exchange for travel, cash back, gift cards, or merchandise.

Rewards points can be an excellent way of benefiting from your everyday spending. But it’s important to spend within your means and understand how rewards programs work, to avoid building up unwanted debt.

How do rewards credit cards work?

When you have a rewards credit card, you may be able to earn points for every dollar you spend and for certain actions, such as setting up Bill Pay or enrolling to receive e-statements.

If you’re considering a rewards credit card, think about how you plan to use the card and what rewards you’d like to earn. Rewards credit cards are usually designed for specific types of spending, such as everyday expenses or travel.

Here are some examples of how this could work:

Points:

You may earn a flat reward point rate on most purchases, such as 1 point for every $1 spent, and a higher rewards rate on purchases made in select categories, such as travel or groceries. Those categories might be fixed for the life of the card or rotate on a quarterly or annual basis. It’s important to understand how points are awarded so you can best match your card choice to your spending habits.
Cash back:

These credit cards give a percentage of cash back on what you spend. For example, if you spend $100 and your card pays 2% cashback, you’ll earn $2. Cash back cards may also offer higher rates of cash back in select categories. These cards typically pay cash back into your bank account or as a statement credit on a monthly or annual basis.
Miles:

If you’re a frequent flyer, it may be worth considering a co-branded airline credit card. This type of card allows you to earn miles on all your purchases, which you can then use for flights, seat upgrades, and other travel-related expenses. Using the card may also help you build up your loyalty status with the airline. Hotel co-brand cards offer similar features and benefits.

If you’re interested in getting a credit card with us, take a look at our Elite Credit Card and Premier Credit Card. Terms and conditions and eligibility criteria apply.

Things to consider before applying for a rewards credit card

As they offer rewards, these type of credit cards may have fees and interest rates that could be higher than others.

Before you take out a rewards credit card, you should be confident you can repay your balance in full each month, as well as any annual fees that may be included. Otherwise, you could end up paying more in interest and fees than you earn in rewards, as well as damaging your credit score.